Annual Recurring Revenue (ARR) is a metric used by businesses to measure the total amount of predictable and recurring revenue generated from subscription-based products or services over a period of one year. ARR is calculated by multiplying the average monthly recurring revenue (MRR) by 12.

In essence, ARR reflects the expected yearly revenue from ongoing subscriptions, providing insight into the financial stability and growth potential of a subscription-based business. It is a key indicator for investors, stakeholders, and management to assess the performance and sustainability of a company’s subscription model. ARR is particularly important in Software as a Service (SaaS) companies and other subscription-based businesses where revenue is generated through recurring billing cycles.