What is ARR (Annual Recurring Revenue)?
Turkish: ARR
ARR shows the annual recurring portion of subscription revenue, tracked in SaaS for growth, pricing, and forecasting decisions.
What is ARR?
ARR (Annual Recurring Revenue) is the contracted revenue that is expected to repeat each year in a subscription business. One-time setup fees, consulting work, and usage overage charges are usually excluded; the metric focuses on recurring subscription value.
How Is It Calculated?
The simplest calculation is MRR x 12. If monthly recurring revenue is $100,000, ARR is roughly $1.2 million. Annual prepayments, discounts, contract start dates, upgrades, and cancellations can affect the calculation, so ARR reports often separate new ARR, expansion ARR, contraction ARR, and lost ARR.
ARR is not the same as cash flow. A customer may pay upfront for a year, while ARR describes the yearly repeatable revenue capacity of the subscription base.
Business Use
SaaS companies use ARR for sales targets, investor reporting, capacity planning, and customer-segment analysis. MRR shows shorter-term movement, while churn is essential for understanding how much ARR is being lost.
A useful ARR analysis looks beyond the total number; it examines which plans are expanding, where cancellation risk is increasing, and how price changes affect renewals.
Related Terms
Churn rate measures the share of customers or revenue lost in a period, showing retention health in subscription businesses.
MRR (Monthly Recurring Revenue)MRR measures the recurring monthly portion of subscription revenue, showing how new sales, expansion, contraction, and churn affect SaaS growth.
Usage-Based PricingUsage-based pricing ties customer spend to consumed resources, events, or transaction volume instead of a fixed plan alone.