AI ARR vs. SaaS ARR: How to Define and Calculate

How do leading SaaS companies define ARR? Especially as AI and usage-based pricing models reshape recurring revenue in SaaS? In this post, I break down how Verint, a CX automation leader, defines both Subscription ARR and AI ARR, and how they model these metrics internally for cash flow, investor reporting, and product strategy.

I did hours and hours of manual research on how public tech companies define and calculate ARR in subscription and usage-based models. And I continue to compile this data from press releases to spot any ARR trends.

But what about AI ARR? You could call it usage or maybe it’s agentic outcome-based?

In their recent Q1 FY2026 earnings call, Verint offered one of the cleanest and most strategic breakdowns of ARR that I’ve seen — including how they define subscription ARR and AI ARR, and how they use both metrics internally to guide execution.

Who is Verint? Verint is an $800M+ pure-play CX automation company focused on helping brands automate manual customer experience (CX) workflows using AI-powered bots.

Verint’s ARR Definitions: Clean, Clear, and Forward-Looking

ARR (non-GAAP): Verint defines ARR as the annualized value of recurring SaaS revenue as of the end of the period. This includes both fixed-term and usage-based components of active or signed SaaS contracts.

AI ARR (non-GAAP): This is a breakout of ARR specifically tied to solutions that include AI functionality. It includes both committed recurring SaaS revenue and usage-based overages, making it a full-picture metric of AI monetization.

CFO Grant Highlander summed it up cleanly:

“The AI ARR is all of the ARR derived from our solutions that include AI functionality… It represents the quarterly run rate value of both active or newly signed SaaS agreements.”

Notice the nuance there? “Newly signed” contracts are included in their ARR. Splitting hairs here, their ARR could really be CARR if revenue has not started.

Why Defining ARR Matters to Verint

Metric clarity isn’t just about reporting — it’s central to how Verint communicates internally and externally. With ASC 606 creating revenue volatility (especially for unbundled SaaS deals), Verint intentionally shifted to ARR as the foundation of its business model and performance evaluation.

“We believe that ARR is the best metric to track our growth,” said CFO Grant Highlander. “That’s why we’re guiding and managing the business from ARR down to free cash flow.”

Defining AI ARR separately from non-AI ARR allows them to:

• Show investors how AI is truly monetized (not just layered on). 🔥
• Isolate the ROI from bot-usage and consumption.
• Align internal teams around platform value rather than GAAP volatility.

Why This Matters: ARR as the Core Operating Metric

Their internal cash generation model explicitly starts with ARR and ends with free cash flow.

This isn’t just lip service. Their full-year target is $768 million in ARR (±1%), with AI ARR expected to grow 20%+ YoY.

And here’s the headline stat:

“AI ARR reached $354M in Q1 — now making up nearly half of subscription ARR. This signals a full-scale pivot in how Verint monetizes its AI-powered CX automation platform.”

This figure is backed by the official press release, which shows:

• Subscription ARR = $710M
• AI ARR = $354M → 49.9% of total Subscription ARR

AI ARR as a Growth Engine

CEO Dan Bodner emphasized how customers “start small” with Verint bots, then expand based on proven value — a land-and-expand play built around bot consumption.

“ARR growth accelerated every quarter over the last year…driven by more and more of our customers increasing usage of Verint AI-powered bots.”

And this AI focus isn’t a sideshow. It’s their primary growth engine:

• AI ARR grew 24.1% YoY in Q1 to $353.9M
• It’s expected to grow >20% again in FY2026
• Non-AI ARR declined 7%, reinforcing the pivot
• Verint’s messaging is clear: ARR isn’t just a metric — it’s their operating system.

Strategic Use of ARR Internally

What impressed me most is how Verint uses ARR to shape both internal planning and external communications. They segment ARR into AI and non-AI buckets, map ARR directly to cash generation, and prioritize ARR growth over traditional GAAP revenue due to timing volatility.

They even quantify strategic wins in terms of ARR expansion. For example:

“A healthcare customer increased ARR from $8M to $15.6M over the past year, nearly doubling through multi-bot AI adoption.”

This allows them to:

• Tie product usage directly to revenue.
• Forecast free cash flow with high confidence.
• Reposition their value prop around proven AI outcomes, not speculative AI hype.

AI GTM Model: Land Small, Prove Value, Expand Fast

Verint’s go-to-market motion has shifted to what I’d call AI-based progressive expansion:

• Start small. Most customers begin with a handful of bots in one workflow.
• Deploy quickly in production. Not labs — real, revenue-impacting environments.
• Measure business outcomes. Verint works with customers to define measurable ROI at the outset.
• Expand on success. Once value is proven, customers scale bot usage across workflows.

CEO Dan Bodner explained this clearly:

“Once they prove the value in their own production environments, they can quickly scale… The solution sells itself.”

It’s a strong GTM fit for today’s AI buyer who wants real ROI in under six months — not long, disruptive transformation projects.

Recurring Revenue Margin: Still Strong, Slightly Down

One of the simplest — yet most telling — SaaS health checks is recurring revenue margin.

Here’s how Verint performed:

• 1Q26 – Recurring Revenue = $173.6M; Recurring Cost = $42.1M, Recurring GM% = 75.7%
• 1Q25 – Recurring Revenue = $173.5M; Recurring Cost = $35.9M, Recurring GM% = 79.3%

That’s a 3.6 percentage point YoY decline — a modest dip, likely reflecting increased infrastructure costs tied to AI ramp-up and cloud deployment. Still, a 75.7% margin reflects healthy SaaS gross economics, especially during a platform transition.

With material revenue from AI, I think this will push investors in AI companies to continue to ask for 80% SaaS gross margins.

Final Thought: A Model for SaaS CFOs?

If you’re building or refining your own SaaS metrics strategy, Verint’s approach is worth reviewing. By clearly defining AI ARR, anchoring guidance around ARR growth, and linking it directly to cash flow, they’ve built a metrics engine that drives execution.

For those of us in SaaS finance, it’s a great example of how to translate product value into sustainable financial outcomes.

📌 Data Source: [Verint Earnings Press Release 1Q26]

FAQ: SaaS ARR vs. AI ARR

Q: What is AI ARR in SaaS?
AI ARR refers to the portion of annual recurring revenue directly tied to products or features powered by artificial intelligence (AI). At Verint, AI ARR is specifically tied to solutions that include AI functionality.

Q: How is AI ARR different from traditional ARR?
AI ARR isolates monetization tied specifically to AI capabilities. Traditional ARR includes all recurring revenue, regardless of whether AI is involved.

Q: Can usage-based revenue be included in ARR?
Yes — Verint includes usage-based revenue in their ARR definition when it’s recurring in nature or tied to committed contracts. From my research, usage revenue is converted to ARR by annualizing the current quarter’s usage revenue.