Recurring revenue

Recurring revenue is revenue a company can expect to receive again in future periods without having to win a new sale each time. Subscriptions, service and maintenance contracts, and usage fees from customers who keep using a platform are the most common forms. The opposite is one time revenue, where each sale is finished once the product is delivered and the customer has to be won back from scratch next time.

Recurring revenue matters because it makes future results easier to forecast. When most of next year's revenue is already coming from existing customers, the main questions become how many of them stay and how much more they buy, not how many new sales the company can close. Investors usually pay a higher multiple for the same dollar of profit when it comes from a recurring base, since there is less uncertainty about whether it repeats.

The label alone isn't proof of quality. Check how many customers renew, whether the existing base spends more each year (what net revenue retention measures), and whether contracts are short and easy to cancel or long and embedded in the customer's operations. Recurring revenue built on high switching costs holds up far better than a monthly plan a customer can drop in a click.