Annual recurring revenue is the value of recurring subscription revenue normalized to one year. It counts only predictable, contracted revenue, excluding one-time fees. ARR is the headline measure of scale and growth for subscription businesses.

ARR is the number investors and acquirers anchor on, but it can hide trouble. Growing ARR with rising churn is a leaky bucket filling faster than it drains, and that does not last. Read ARR alongside net revenue retention to know whether growth is durable or just outrunning losses for now.

Example:

 200 customers each pay $1,000 per month in subscriptions. ARR is 200 x $1,000 x 12 = $2,400,000.

What is the difference between ARR and revenue?

 ARR counts only recurring subscription revenue annualized. Total revenue can also include one-time fees, services, and other non-recurring income.

Does ARR include one-time fees?

 No. ARR captures only predictable recurring revenue. One-time setup or service fees are excluded because they do not recur.