ARR: definition
Annual Recurring Revenue: recurring subscription revenue brought back to a yearly figure, meaning MRR multiplied by twelve.
By Mathéo Ballasse · May 23, 2026
Definition
ARR (Annual Recurring Revenue) is the yearly version of MRR. It is mostly used to talk about scale and valuation: raising funds, comparing SaaS businesses, setting a target. It only counts recurring revenue: one-off revenue (setup fees, services) is not included.
How to calculate it
ARR = MRR x 12
Why it matters
ARR is the common language when talking about SaaS size and valuation: it is what an investor looks at. Confusing it with total revenue (including one-off items) artificially inflates your trajectory and works against you during due diligence.
When to use it
It is used for annual targets and funding conversations. Concretely, you take the current month's MRR, multiply it by twelve, and check that no non-recurring revenue slipped in.
Example
An MRR of $10,000 corresponds to an ARR of $120,000.
Common mistakes
- Letting non-recurring revenue slip into it.
- Presenting it as total revenue.
- Annualizing the MRR of an exceptional month.
Don't confuse it with
- mrr: MRR is the monthly view, ARR the yearly view: it is the same recurring revenue, on a different time scale.
Related terms
Articles that use this term
Frequently asked questions
- Should services be included in ARR?
- No: ARR only counts recurring subscription revenue, not one-off revenue like setup fees or consulting.