TL;DR: Cursor reached $1 billion ARR faster than any B2B software company in history—in just 24 months with ~300 employees. That’s $3.3 million in revenue per person. They built on VS Code (no learning curve), achieved a 36% freemium conversion rate (vs. industry 2-5%), and grew to 2.1 million users without spending on ads. The catch? They currently spend 100% of revenue on AI API costs, but their proprietary model “Composer” may change that. Here’s the full breakdown.
Last updated: February 20, 2026
What is Cursor?
Cursor is an AI-powered code editor built by Anysphere. It’s essentially VS Code with AI superpowers—autocomplete that understands your entire codebase, multi-file editing, and an “Agent mode” that can build features autonomously.
The product launched in 2023. By November 2025, it hit $1 billion in annual recurring revenue.
For context, here are the previous speed records for reaching $1B ARR:
- Slack: 5 years
- Zoom: 4 years
- ChatGPT: 2 years
Cursor did it in 24 months while remaining a ~300 person company.
The Numbers That Matter
Revenue Trajectory
The growth curve is unlike anything enterprise software has seen:
| Date | ARR |
|---|---|
| January 2025 | $100M |
| April 2025 | $300M |
| June 2025 | $500M |
| November 2025 | $1B |
Revenue doubled approximately every two months in the first half of 2025. That’s not a typo.
Valuation & Funding
Cursor raised $2.3 billion in Series D funding at a $29.3 billion valuation in November 2025. Total funding now stands at $3.3 billion from:
- Accel
- Coatue
- Thrive Capital
- Andreessen Horowitz
- NVIDIA
Jensen Huang (NVIDIA’s CEO) called Cursor his “favorite enterprise AI service.” Google invested despite having their own AI coding tools. Microsoft employees use it despite Microsoft owning GitHub Copilot.
Team Efficiency
With ~300 employees generating $1B ARR, Cursor achieves approximately:
- $3.3 million revenue per employee
- Compare to traditional SaaS: $200-400K per employee
- Compare to ElevenLabs: $825K per employee
That’s 8-16x more efficient than typical SaaS companies.
Who Pays for Cursor?
The revenue breaks down into three segments:
Individual Developers ($370M / 37%)
- Pro plan: $20/month
- Ultra plan: $200/month for power users
- Over 1 million individual paying developers
- Mostly freelancers, indie hackers, and side-project builders
Team Plans ($336M / 34%)
- $40/user/month
- Includes SSO, admin controls, centralized billing
- Major customers: Shopify, OpenAI, Midjourney, Stripe, Uber, Adobe, Spotify
- ~700,000 team seats deployed
Enterprise ($290M / 29%)
- Custom pricing ($500-$1,000/user/year)
- Compliance features, audit logs, dedicated support
- 50%+ of Fortune 500 companies use Cursor
- Customers include NVIDIA, Google, and yes—Microsoft teams
The Profitability Paradox
Here’s where it gets interesting. Despite generating $1 billion, Cursor isn’t profitable.
Multiple sources report they spend approximately 100% of revenue on AI API costs from Anthropic (Claude) and OpenAI (GPT-4).
The rough math:
| Category | Cost |
|---|---|
| AI API costs | ~$1 billion (100% of revenue) |
| Employees (~300) | ~$75 million |
| Infrastructure | ~$25 million |
| Other | ~$50 million |
| Total | ~$1.15 billion |
That’s a $150 million annual loss despite the billion-dollar topline.
One user reportedly burned nearly $4 in AI costs just creating a simple to-do list. The economics are brutal when every API call costs real money.
The Path to Profitability
Cursor’s plan centers on proprietary AI models:
In October 2025, they launched Composer—their first in-house coding model. According to Cursor:
- Runs 4x faster than competing frontier models
- Trained on 1 billion+ lines of code generated by Cursor users daily
- Specifically optimized for multi-file, multi-step coding tasks
If proprietary models work, AI costs could drop from 100% of revenue to 30-40%. Combined with price increases and more enterprise customers, profitability becomes realistic.
They also launched Bugbot (debugging tool) as a $40/user/month add-on, creating new revenue streams.
How They Grew Without a Sales Team
Cursor reached $100 million ARR without spending money on ads or building a sales team. All growth came organically.
1. Built on VS Code
VS Code has 70% market share among developers. Cursor forked it, meaning:
- Zero learning curve
- All existing extensions work
- Familiar interface
Developers could switch in 5 minutes.
2. Exceptional Freemium Conversion
Cursor achieves a 36% freemium conversion rate. Industry standard is 2-5%.
The free tier includes unlimited basic autocomplete plus 50 premium model requests monthly. That’s enough to get developers hooked, but not enough for serious work.
3. Word of Mouth
Developers talked about Cursor on:
- Twitter/X
- Hacker News
- YouTube tutorials
The product was genuinely better than alternatives, so users promoted it for free.
4. Perfect Timing
ChatGPT launched November 2022 and proved developers wanted AI coding help. Cursor launched in 2023 as the first AI-native IDE. They caught the wave at exactly the right moment.
Cursor vs. GitHub Copilot
The comparison tells an interesting story:
| Metric | Cursor | GitHub Copilot |
|---|---|---|
| Total Users | 2.1M | 20M |
| Paying Users | 1M+ | 1.3M |
| ARR | $1B | ~$2B |
| Individual Price | $20/mo | $10/mo |
| Team Price | $40/mo | $19/mo |
Cursor has fewer users but higher ARPU (average revenue per user). Their credit system extracts more value from power users who consume lots of AI compute.
Also, Cursor is a complete IDE while Copilot is a plugin. Owning the entire workflow lets them monetize more.
The Competitive Landscape
Despite the strong position, serious competition is coming:
GitHub Copilot
Microsoft owns it. 1.3 million paying users. 90% of Fortune 100 companies. They could bundle it free with GitHub/VS Code.
Claude Code
Launched May 2025. Already $500M run rate. Made by Anthropic—the same company powering Cursor’s AI. Vertical integration advantage.
Windsurf
$82M ARR by July 2025. $30/month (cheaper than Cursor). OpenAI acquired it for ~$3 billion, validating the threat.
Cognition AI (Devin)
$400M raised at $10.2B valuation. Focused on fully autonomous software development.
What This Means for AI-Native Companies
Cursor exemplifies a new kind of software company:
1. Small Teams, Massive Output
300 people doing the work that would have required 3,000+ at a traditional company. AI handles routine tasks; humans focus on high-leverage decisions.
2. Negative Margins Can Still Win
Cursor loses money on every customer while racing to $30B valuation. The bet: AI costs will drop faster than revenue, and proprietary models will create moats.
3. Developer Trust > Marketing
Cursor built trust by making something developers genuinely love. No sales team. No ads. Just a product so good people can’t shut up about it.
4. The Data Flywheel
Every Cursor user generates training data for Composer. As the model improves, more developers join, generating more data. Competitors can’t easily replicate this.
What’s Next for Cursor?
Analysts project:
| Year | Projected ARR |
|---|---|
| 2026 | $2-3 billion |
| 2027 | $4-5 billion |
| 2030 | $10-15 billion |
A potential IPO in 2027-2028 at $80-150B valuation is realistic if margins improve.
Three scenarios:
- IPO (40% probability): Go public once profitable
- Acquisition (30% probability): Microsoft, Google, Meta, or Salesforce buys them
- Independence (30% probability): Continue as private company backed by current investors
Key Takeaways
- $1B ARR in 24 months is the new speed record for B2B software
- $3.3M revenue per employee shows what AI-native efficiency looks like
- 36% freemium conversion proves product-led growth still works
- 100% of revenue on AI costs is sustainable… if you have billions in funding
- Proprietary models are the path to profitability
- Fortune 500 adoption happened without a sales team
Cursor isn’t just a code editor. It’s a proof of concept for how companies will be built in the AI age: small teams, massive leverage, and data flywheels that competitors can’t copy.
FAQ
Is Cursor free to use?
Yes. The free tier includes unlimited basic Tab autocomplete plus 50 premium model requests monthly. It’s enough to try the product, but serious developers upgrade.
Why is Cursor better than GitHub Copilot?
Cursor is a complete IDE, not a plugin. It handles multi-file edits, has Agent mode for autonomous coding, and integrates AI more deeply into the workflow. The 36% conversion rate suggests developers agree it’s better.
Is Cursor profitable?
No. They spend approximately 100% of revenue on AI API costs. However, their proprietary Composer model may reduce costs significantly.
Who owns Cursor?
Cursor is built by Anysphere, founded by MIT AI researchers. They’ve raised $3.3B from top-tier investors and are valued at $29.3B.
Does Cursor work with all programming languages?
Yes. It supports all languages VS Code supports since it’s built on the same foundation.
Can Cursor replace junior developers?
The “Agent mode” can build complete features across multiple files autonomously. It’s augmenting developers rather than replacing them—but the line is blurring.
Cursor is rewriting the rules for what’s possible with a small team and AI leverage. Whether they maintain their lead against Microsoft and Anthropic remains to be seen—but the playbook they’ve established will define the next decade of software companies.