What is Annual Contract Value (ACV)?

Published

April 22, 2026

Last updated

April 22, 2026

Definition

Annual Contract Value (ACV) is a key metric representing the average annualized revenue per customer contract. It standardizes the value of a contract over a 12-month period, regardless of the contract's total duration. For example, a three-year contract worth $300,000 would have an ACV of $100,000.

This metric is critical for SaaS and other subscription businesses to evaluate the average size of their deals and track trends over time. Unlike Annual Recurring Revenue (ARR), which reflects the total recurring revenue from all customers, ACV is an average value calculated on a per-contract basis. This distinction is important for understanding both the composition and the overall scale of a company's revenue stream.

ACV helps companies analyze sales team performance, segment customers by value, and forecast future revenue more accurately. It provides a more normalized view than Total Contract Value (TCV), especially when comparing contracts with different term lengths. It should not be confused with revenue, which is an accounting measure tied to specific performance obligations over time.

Related terms

Total Contract Value (TCV)

Contracted Annual Recurring Revenue (CARR)

Bookings

Frequently Asked Questions

What is ACV vs revenue?

ACV is a normalized metric representing a contract's annual value, used for internal planning and sales analysis. Revenue is an accounting term reflecting money earned and recognized in a specific period according to GAAP or IFRS.

Is ACV similar to ARR?

No, they measure different things. ACV represents the average annualized value of a single customer contract, while ARR is the total predictable revenue from all of your customers in a year.

Does ACV include one-time fees?

Typically, ACV only includes recurring fees and excludes one-time charges like setup, implementation, or training fees. However, the exact calculation can vary by company policy.