Annual run rate

An annual run rate takes a business's results over a short recent period, usually the latest quarter or month, and scales them up to a full year. A business that brought in $10 billion of revenue last quarter is running at a $40 billion annual run rate, four quarters at the latest quarter's pace.

Companies use run rates most often for a fast growing business or a newly launched product line, where a full year of reported results would understate how big it already is. A business that tripled in size over the past twelve months would show a trailing annual figure dragged down by its smaller early quarters, while the run rate reflects its current scale.

That same feature is also its weakness. A run rate assumes the latest period repeats for a full year, which overstates the picture when the latest quarter was seasonally strong, boosted by a one time deal, or simply the high point before growth slows. Read a run rate as a snapshot of current pace, not a forecast, and compare it against trailing twelve month figures and the trend across several quarters before leaning on it.