Annual contract value (ACV)
Also: ACV
Annual contract value is the average yearly value of a customer contract, normalised to twelve months. A three-year deal is divided over its term. ACV helps compare deals of different lengths and sizes, and is mainly used for sales planning and segmentation rather than as a revenue figure.
Formula
ACV = total contract value ÷ contract length in years
How to read it
Be explicit about what is included: recurring fees only, or also one-time and usage amounts. ACV describes a contract at signing, whereas ARR describes the current state of all active subscriptions, so the two diverge as customers expand or contract.