Annual recurring revenue (ARR)
Annual recurring revenue (ARR) is the annualized value of a business's recurring subscription revenue — the run rate it would earn over a year if nothing changed. It is closely tied to MRR (often MRR × 12) and is used for longer-horizon planning and contracts. ARR is a forward run-rate snapshot, not historical annual revenue, and like MRR it excludes one-off and usage charges.
What this means
ARR is the recurring revenue a subscription business expects over a full year at the current run rate. For monthly-normalized models it is commonly ARR = MRR × 12. It is favored by companies with annual contracts, where an annualized figure maps more naturally to how customers buy than a monthly one does.
Run rate, not realized revenue
ARR is a snapshot of the present run rate projected forward, so it is not the same as the revenue actually recognized over the past or coming year — that depends on timing, churn, and new sales that have not happened yet. Like MRR, ARR counts only recurring subscription value and excludes one-time setup fees and pure usage-based charges. Because ARR and MRR are two views of the same recurring base, they should move together; a mismatch usually signals a normalization error.
- ARR ≈ MRR × 12 (annualized run rate)
- A forward snapshot, not realized annual revenue
- Excludes one-off fees and usage-only charges
How it appears in analytics and logs
An ARR figure is a point-in-time annualized run rate, not money already earned. It changes the instant subscriptions are added or lost, so it forecasts rather than reports.
Diagnostic use case
Use ARR as an annualized run-rate snapshot for subscription businesses, especially those with annual contracts, while distinguishing it from realized annual revenue.
What WebmasterID can help detect
WebmasterID measures subscriber on-site behavior via first-party events, so the signup and retention signals underpinning an ARR model are captured without third-party cookies.
Common mistakes
- Treating ARR as revenue already earned this year.
- Including non-recurring fees in ARR.
- Letting ARR and MRR diverge through normalization errors.
Privacy and accuracy notes
ARR is an aggregate revenue concept; it needs no personal identifiers. It is an educational definition, not accounting or legal advice.
Related pages
- Monthly recurring revenue (MRR)
Monthly recurring revenue (MRR) is the normalized, predictable subscription revenue a business expects each month. Annual and multi-month plans are divided down to a monthly figure so the run rate is comparable. MRR is decomposed into new, expansion, contraction, and churned components, and it deliberately excludes one-off and usage-based charges — so it is a run-rate concept, not booked or recognized revenue.
- Average revenue per user (ARPU)
Average revenue per user (ARPU) is total revenue in a period divided by the number of users in that period. It is a standard unit-economics metric for subscription and consumer products, summarizing how much revenue each user generates. ARPU depends heavily on which users are in the denominator (all users vs active vs paying) and the length of the period, and it differs from ARPPU and lifetime value.
- Customer satisfaction score (CSAT)
Customer satisfaction score (CSAT) measures how satisfied respondents are with a specific interaction, product, or experience, usually from a short rating scale. It is commonly the percentage of responses at or above a 'satisfied' threshold (for example the top two boxes of a five-point scale). CSAT is moment-specific and threshold-dependent, so the same data can yield different CSAT values under different scoring rules.
- Website observability
Track subscriber lifecycle with first-party events.
Sources and verification notes
- Stripe Docs — Recurring revenue and Billing analyticsARR as the annualized view of recurring revenue.
Last reviewed 2026-06-24. Facts are checked against primary/official sources where available; uncertain specifics are marked “Data not yet verified” rather than guessed.