cust.co / Glossary / Annual Recurring Revenue (ARR)

Annual Recurring Revenue (ARR)

Annualized value of subscription revenue, calculated as a snapshot of current monthly subscription run rate × 12.

Also known as: ARR, Run Rate

Definition

ARR is the annualized value of all active subscriptions at a point in time - current MRR × 12. Distinct from GAAP revenue (ARR is forward-looking; revenue is historical). The headline metric in B2B SaaS reporting. Public companies report ending ARR each quarter. NRR is computed against ARR cohorts.

Formula

Sum of all annualized subscription contracts × current run rate

Related terms

Net Revenue Retention (NRR) →Monthly Recurring Revenue (MRR) →Remaining Performance Obligations (RPO) →

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