Annual Recurring Revenue

Annual recurring revenue (ARR) is the annualized value of a subscription business's contracted, recurring revenue at a point in time, excluding one-off charges.

ARR is meaningful only for a subscription business and is a snapshot rather than a sum of the past year; it is simply monthly recurring revenue times twelve. Its important boundary is that it counts recurring revenue only: a setup fee or one-off purchase is not part of ARR, and blending the two inflates it artificially. But the thing a web and product analytics tool must say honestly is that ARR comes from the billing and subscription system, not from the site's behavioral events; an analytics tool knows how many users are active and what they do, but not what each pays per month unless that figure is supplied by the finance system.