ARR (Annualized Recurring Revenue, also called Annual Recurring Revenue) is the yearly value of the revenue a company expects to keep receiving from its customers on a recurring basis, such as subscriptions and contracted renewals.
ARR is usually calculated by multiplying monthly recurring revenue (MRR) by twelve, where MRR is the average monthly payment per customer multiplied by the number of paying customers. Both measures exclude one-time, non-recurring amounts such as implementation or professional service fees, hardware sales, and discounts. "Annualized" signals that the figure is a run rate projected forward from current recurring revenue rather than revenue actually recognized over the past year, which distinguishes ARR from the annual revenue reported on an 📝Income Statement.
The metric is standard in subscription and software businesses, where operators use it to build quarterly and annual plans and to compare growth across periods. Because it captures only the recurring portion of revenue, ARR is read alongside churn, 📝Customer Acquisition Cost (CAC), and lifetime value when assessing a company's 📝Unit Economics.