Annual recurring revenue (ARR)
Also: ARR
Annual recurring revenue is the yearly value of a business’s active recurring subscriptions: the run-rate of contracted, repeating revenue if nothing changed. It excludes one-time fees. ARR is the headline size metric for annual-contract businesses, while monthly-billed businesses usually watch MRR alongside it.
Formula
ARR = sum of each active subscription’s billed price, normalised to one year
How to read it
ARR and MRR describe the same revenue on different scales. Derive each from the billed period cost rather than multiplying or dividing one by twelve, or small rounding errors accumulate and the two figures stop agreeing. ARR is not recognised revenue and it is not cash collected.
In Revvly
Further reading
- ARR vs MRR: why finance teams need both, and how they connect
- ARR waterfall: how to build one and what it's actually telling you.