Annual Recurring Revenue (ARR)
Repeating income — often subscription-based — for one calendar year.
The formula for ARR is simple: ARR = (Overall Subscription Cost Per Year + Recurring Revenue From Add-ons or Upgrades) - Revenue Lost from Cancellations.
This number is helpful in determining future growth and revenue; it helps set realistic goals.
For subscription services like Hulu and Netflix, ARR is a key figure. While their recurring revenue is monthly (thus providing an MRR – Monthly Recurring Revenue), such companies can multiply that revenue by 12 and follow the ARR formula.Last updated: 2021/08/04