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Annual recurring revenue (ARR)

The yearly value of all active subscriptions and recurring contracts, measured on one day. It's a snapshot of the subscription business rather than an accounting figure, so each company defines it a little differently.

Simple example

A software company has 100 customers, each paying $1,000 a month. Its monthly recurring revenue is $100,000, so its annual recurring revenue is $100,000 × 12 = $1.2 million.

$100k of subscriptions each monthJFMAMJJASOND$1.2MARR× 12 months
Made-up numbers, for illustration only.

Related terms

Net revenue retention (NRR)How much more, or less, existing customers spend a year later.ChurnThe share of customers or revenue a company loses over a period.Deferred revenueMoney received for work not delivered yet.Remaining performance obligationsRevenue already signed but not yet delivered.