Glossary
Annual recurring revenue
A company's yearly revenue from ongoing subscriptions or contracts, usually projected from a recent month.
Annual recurring revenue (ARR) estimates how much a company would earn in a year from subscriptions and contracts that renew, often calculated by multiplying current monthly recurring revenue by twelve. Software and AI startups use it to show growth.
ARR is not a standard accounting measure, and companies define it differently. Some include usage-based fees that can swing month to month, pilots, or contracts not yet paying. Private companies' ARR figures are usually unaudited.
ARR is a forward-looking snapshot, not revenue actually received over the past year. It also says nothing about profit.
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