Annual Recurring Revenue
Annual Recurring Revenue (ARR) is the predictable yearly revenue a subscription business expects from its active contracts, normalized over a twelve-month period. It is the headline growth metric for SaaS companies selling annual or multi-year subscriptions, giving investors and leadership a clean view of recurring scale.
ARR is the annualized counterpart of MRR, for a pure subscription business, ARR simply equals MRR multiplied by twelve. Like MRR, it excludes one-time fees and is often segmented into new, expansion, contraction, and churned ARR to show what is driving the trajectory of the recurring base.
A common pitfall is counting non-recurring revenue, such as professional services or one-off implementation fees, inside ARR, which overstates the durable revenue base. ARR is most useful for annual-contract businesses; companies with mostly monthly plans tend to lead with MRR instead.
Last updated: 14 June 2026