Average Revenue Per User (ARPU)

DEFINITION of 'Average Revenue Per User (ARPU)'

A measure of how much income a business generates, given the size of its customer base. The average revenue per user (ARPU), often utilized in the technology and telecommunications sectors, helps determine the potential profitability of a firm. 

BREAKING DOWN 'Average Revenue Per User (ARPU)'

To calculate ARPU, simply divide the organization’s annual revenue by the number of people using its services.

ARPU is a useful tool to help investors determine the potential earnings growth of a company. In the technology industry, it’s not uncommon for a business to amass a large user base in its early years, but without the ability to generate substantial revenue from the average user. If investors believe the company can increase ARPU over time, they’ll be willing to pay a higher price per share.

 

 

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