ARR (Annual Recurring Revenue)
The annualized value of a company's recurring subscription revenue, the standard growth metric for SaaS businesses.
ARR is the yearly value of all active recurring subscription contracts, normalized to a 12-month basis regardless of actual billing frequency. It excludes one-time fees, services revenue, and non-recurring charges, focusing purely on the predictable, repeatable revenue base a company can count on continuing.
ARR is the primary metric investors use to size and value B2B SaaS companies, both for growth-rate tracking (year-over-year ARR growth) and for valuation multiples (revenue multiple applied to ARR). It's most meaningful for genuinely recurring subscription businesses; usage-based or highly variable revenue models often report ARR alongside other metrics that better capture volatility.
ARR = MRR x 12A company has $420,000 in monthly recurring revenue as of this month. ARR = $420,000 x 12 = $5.04M.
Report ARR consistently and conservatively — exclude one-time revenue, be explicit about how you treat multi-year contracts (annualized, not booked as a lump sum), and investors will trust your numbers far more than a company that inflates ARR with non-recurring revenue.
Is ARR the same as total revenue?
No — ARR only counts recurring subscription revenue annualized, excluding one-time fees, professional services, and other non-recurring income that might appear in total reported revenue.
Related terms
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