# Run Rate, ARR and Revenue Multiples ## Run rate Current revenue annualised: the latest month (or week) multiplied up to a year. A $65B run rate means the most recent period, if repeated for twelve months, would produce $65B. It is a snapshot of pace, not a year of booked revenue. For usage-based AI businesses, where revenue depends on token volume, run rate can swing quickly in either direction. ## ARR (annual recurring revenue) Strictly, the annualised value of contracted, recurring subscriptions. In AI the term is often used loosely to mean run rate, including usage revenue that is not contracted. When comparing companies, check which one is being quoted. ## Revenue multiple Valuation divided by revenue (usually ARR or run rate). It shows how much investors pay per dollar of current revenue, and therefore how much future growth is priced in. Example from the article: a $35B valuation on roughly $300M of ARR is about 115x. The same calculation for a lab valued at 20x its run rate implies investors expect far less growth from the larger base, or see less risk. > [!note] Reading a high multiple > A very high multiple on small revenue can mean expected hypergrowth, scarcity of listed exposure to a theme, strategic or national-champion premium, or a liquidity event (such as a listing) that investors are positioning for. It rarely means the current business justifies the price on its own. Related: [[VC Moc]], [[7 Powers]]