2025 SaaS Benchmarks Report by High Alpha
Contents
Introduction
Executive Summary
AI-Driven Market Rebound
Growth & Efficiency
SaaS Metrics & Trends
People
Founder Insights
Closing
Median Companies Fall Short of the Rule of 40
RULE OF 40 The Best Companies Continue to Operate Near the Rule of 40
! INSIGHTS
Rule of 40
$1-5M ARR
$5-20M ARR
$20-50M ARR
Greater Than $50M ARR
Rule of 40 performance remained remarkably consistent with 2024, underscoring that the post-reset efficiency mindset has endured. Growth is still valued more highly than profitability, but each company should evaluate the tradeoffs to optimize its own mix between the two. For comparison, public SaaS companies have a median ARR growth of 15% and free cash flow of 18% for a 33% implied Rule of 40 .
-10 0 10 20 30 40 50 60 70 80 90
Upper Quartile
80 33
35 20
41
38 30
Rule of 40 calculated as year-over-year ARR growth plus last 12 months (LTM) free cash flow margin or EBITDA margin.
Median
24
Lower Quartile
10
-3
11
15
Source: 2025 SaaS Benchmarks Report by High Alpha
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