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The annualized value of contracted recurring revenue, commonly used by subscription businesses to measure their recurring revenue base.

ARR is the headline scale and growth measure for subscription businesses, used by boards and investors for valuation, by finance for planning and by leadership to judge whether retention and expansion outpace churn.

A SaaS company ends the quarter with $500,000 in monthly recurring revenue from active subscriptions, giving an ARR of $6 million. Its ARR bridge shows $900,000 of new ARR, $300,000 of expansion and $200,000 of churn for the quarter.

ARR is not a GAAP or IFRS revenue figure, and definitions vary on usage-based fees, discounts, signed but not yet live contracts and annualizing a single strong month. It can overstate durable revenue when churn or contraction is pending.

ARR is typically calculated as monthly recurring revenue multiplied by 12, or as the annualized value of active recurring contracts at a point in time. One-time fees, services and non-recurring usage are excluded. Movements are tracked in an ARR bridge: starting ARR plus new, expansion and reactivation, minus contraction and churn, equals ending ARR.