ACV (Annual Contract Value)
ACV is how much a customer contract is worth per year. It puts deals of different lengths on the same yearly basis.
Updated October 1, 2026
ACV (Annual Contract Value) is how much revenue a customer contract brings in per year. It puts deals of different lengths on the same yearly basis, so you can compare a one-year contract with a three-year one. Sales teams use ACV to size deals and forecast revenue.
How to calculate ACV
Divide the recurring value of a contract by its length in years. Most teams leave out one-time fees.
ACV = total recurring contract value ÷ contract length in years
A $36,000 deal over three years has an ACV of $12,000. Its TCV is $36,000. A one-year deal at $12,000 has the same ACV, because both bring in the same revenue per year.
ACV vs TCV vs ARR
- ACV is one contract's value per year.
- [TCV](/glossary/tcv) is one contract's value over its whole term, including one-time fees.
- [ARR](/glossary/arr) is the yearly recurring revenue of all your active contracts combined.
Why it matters
ACV shows the typical size of the deals you close. Rising ACV means you are landing bigger accounts or growing existing ones. Falling ACV can mean a shift toward smaller customers. Track it with ARPA and bookings to see which way your sales are moving.