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ARR (Annual Recurring Revenue)

The yearly value of a company's active subscription contracts.

FundamentalsIntermediate

Definition

ARR annualizes recurring subscription revenue, leaving out one-time fees. It is a headline metric for software-as-a-service companies because it shows how large and how fast-growing the predictable revenue base is.

Formula

ARR = monthly recurring revenue x 12

Watch out for

Companies define ARR differently. Check whether it includes usage fees, pilots or contracts not yet started.

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