Annual Recurring Revenue / Marketing Terms Annual Recurring Revenue Annual recurring revenue, often abbreviated as ARR, is a key financial metric used by subscription-based businesses to measure predictable revenue earned from customers over a one-year period. ARR reflects the value of all active recurring contracts normalized to a yearly basis, making it easier to track growth, forecast revenue and assess long-term business health. This metric is especially relevant to SaaS companies, membership platforms and nonprofits that rely on annual commitments. To calculate ARR, multiply the monthly recurring revenue (MRR) by 12. For example, if a customer pays $500 per month for a software subscription, their ARR is $6,000. ARR includes only committed and recurring revenue streams. It excludes one-time fees, usage-based charges, onboarding costs or variable renewals. Some businesses also segment ARR by customer type, product line or geography to better understand which areas are driving sustained revenue. Tracking ARR growth over time helps identify churn risk, renewal trends and upsell opportunities. ARR is more than a finance metric. It informs strategic decisions across sales, marketing, product and investor relations. A rising ARR can signal strong product-market fit and customer loyalty, while stagnant ARR may highlight retention or pricing issues. Because it reflects recurring value, ARR is often used by investors and leadership teams to evaluate business stability and scalability. For mission-driven organizations with subscription or sponsorship models, ARR can also support long-term planning and donor stewardship. By focusing on consistent revenue streams, ARR provides a clear picture of financial performance and helps organizations grow with confidence.