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What is annual recurring revenue?

an - nu - al  re - cur - ring  rev - e - nue
noun


Annual recurring revenue (ARR) is a key performance indicator that provides insight into the total monetary value generated by a contracted subscription over the course of a year.

How does ARR work?

This measurement is determined by taking the recurring revenue generated by a business within a single month, often termed as Monthly Recurring Revenue (MRR) and then multiplying it by 12. This metric captures the projected revenue stream over a full year.

Annual recurring revenue serves as a powerful tool in measuring the ongoing financial trajectory of a subscription-based business. By continually monitoring ARR, businesses gain a real-time depiction of their subscription revenue accumulation rate. This, in turn, aids in assessing the enterprise's financial performance, planning for growth, and making informed strategic decisions.