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Business & Workplace Languageabbreviation · /eɪ.ɑːr.ɑːr/

ARR

In simple English

ARR is a critical metric in the software-as-a-service (SaaS) and subscription-based business industries. Unlike traditional revenue numbers that fluctuate based on one-time transactions, ARR measures only the revenue expected to repeat each year from active subscriptions. This metric is essential because it helps investors, executives, and teams forecast company growth and financial health. In your daily work, you will hear ARR discussed in business reviews, investor presentations, and strategic planning meetings. For example, a sales manager might say: 'We grew our ARR by 30% this quarter' or a finance director might ask: 'What is our current ARR run rate?' Understanding ARR is especially important if you work at a SaaS company, in sales, or on business operations teams. ARR is typically calculated from MRR (Monthly Recurring Revenue) by multiplying by 12, or by summing all active subscription contracts for 12 months. It excludes one-time fees, irregular revenue, and non-subscription income.

What does ARR mean in business and how is it calculated?

At a glanceCEFR B2
Commonness4/5
Versatility4/5
FormalityCasualFormalFormal
Spoken ↔ WrittenSpokenWrittenBoth
Directness ↔ DiplomaticDirectDiplomaticDirect
RegionUS and UK
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Say it like this

✓We hit $10 million ARR last quarter.
✓The goal is to double our ARR by end of year.
✓ARR growth is slowing down—we need to improve retention.

Real examples

in a business review meeting

"Our current ARR is $3.2 million, up from $2.1 million last year."

in an investor pitch

"We are targeting $50 million ARR by the end of 2025."

in a team standup

"If we close these three enterprise deals, we will increase our ARR by 15%."

Don't say this

Handle with care. ARR is specific to SaaS and subscription business models. Do not use it for one-time sales or non-subscription revenue. Avoid confusing ARR with total revenue or MRR (Monthly Recurring Revenue).

✕Our ARR includes the one-time implementation fees customers pay.
✓Our ARR includes only the recurring subscription fees; one-time fees are excluded.— ARR measures only predictable, repeating revenue. One-time or irregular fees are not part of ARR calculation.
✕We increased our total revenue, so ARR must have increased too.
✓We need to check if the revenue increase was from recurring subscriptions or one-time sales before concluding ARR increased.— ARR only reflects subscription revenue. A spike in one-time sales does not increase ARR.
✕ARR is the same thing as monthly revenue times 12.
✓ARR is MRR (from active, paying subscriptions) multiplied by 12.— Only subscription revenue counts; total monthly revenue may include non-recurring income.

Other forms

noun

ARR

"The company announced record ARR of $25 million."

noun

ARR growth

"Year-over-year ARR growth was 45%."

noun

ARR target

"Our ARR target for next fiscal year is $8 million."

Often used with

ARR growthUsed to describe percentage or absolute increase in annual recurring revenue over time.
total ARRUsed to refer to the complete annual recurring revenue figure from all subscriptions.
hit/reach ARR targetVerb phrase meaning to achieve a specific ARR goal.
ARR run rateThe projected ARR based on current monthly revenue trends.
increase/grow ARRTo expand the annual recurring revenue through new customers or upsells.

Similar words

recurring revenueMore general term; ARR is the annual version of this concept.
subscription revenueSimilar concept but may include both annual and monthly figures; ARR specifically refers to annualized projection.

Opposites

one-time revenuenon-recurring income

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Practice

Try it

4 quick exercises

Pick the most natural phrasing

1. You are reporting company financials. Which is the most professional way to present annual subscription revenue?

Complete the sentence

2. If our monthly recurring revenue is $500,000, then our _______ is $6 million.

Spot the mistake

3. Which sentence uses ARR incorrectly?

Rewrite naturally

4. Rewrite this using ARR: 'All the money customers pay us every year for subscriptions comes to about $8 million.'

Questions

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