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.
Use it at work
Talking about business
- We just passed $5M in ARR.
- Our goal is to double ARR this year.
In a board update
- ARR grew 12% this quarter.
- Most of our new ARR came from enterprise deals.
In an interview
- What's the company's ARR right now?
- How fast is ARR growing year over year?
Don't say this
ARR measures only predictable, repeating revenue. One-time or irregular fees are not part of ARR calculation.
Don't mix it up
| Term | What it is | Who writes or uses it | When |
|---|---|---|---|
| ARR | Yearly recurring revenue | Finance, leadership | Annual contracts |
| MRR | Monthly recurring revenue | Finance, leadership | Monthly plans |
| revenue | All money earned, recurring or not | Finance | Any period |
Practice
Try it
4 quick exercises
1. You are reporting company financials. Which is the most professional way to present annual subscription revenue?
2. If our monthly recurring revenue is $500,000, then our _______ is $6 million.
3. Which sentence uses ARR incorrectly?
4. Rewrite this using ARR: 'All the money customers pay us every year for subscriptions comes to about $8 million.'
Say it out loud
Phrase 1 of 3
"We hit $10 million ARR last quarter."
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More about ARR
Real examples(3)
- in a business review meeting
"Our current ARR is $3.2 million, up from $2.1 million last year."
- in an investor pitch
"We're 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%."
More mistakes(2)
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).
- ✕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(3)
- ARR noun
"The company announced record ARR of $25 million."
- ARR growth noun
"Year-over-year ARR growth was 45%."
- ARR target noun
"Our ARR target for next fiscal year is $8 million."
Often used with(5)
- ARR growth · Used to describe percentage or absolute increase in annual recurring revenue over time.
- total ARR · Used to refer to the complete annual recurring revenue figure from all subscriptions.
- hit/reach ARR target · Verb phrase meaning to achieve a specific ARR goal.
- ARR run rate · The projected ARR based on current monthly revenue trends.
- increase/grow ARR · To expand the annual recurring revenue through new customers or upsells.
Similar words(2)
- recurring revenue · More general term; ARR is the annual version of this concept.
- subscription revenue · Similar concept but may include both annual and monthly figures; ARR specifically refers to annualized projection.
Opposites(2)
- one-time revenue
- non-recurring income
Questions(6)
- What is the full form of ARR?
- ARR stands for Annual Recurring Revenue. It represents the predictable yearly revenue a company expects from subscription customers, calculated by multiplying Monthly Recurring Revenue (MRR) by 12.
- What does ARR mean in software engineering?
- ARR stands for Annual Recurring Revenue. It is the total revenue a SaaS or subscription company expects from its customers over one year, based on active subscriptions. It is calculated by taking Monthly Recurring Revenue (MRR) and multiplying by 12.
- How do you use ARR in a sentence at work?
- You use ARR when discussing company financials, growth targets, or investor metrics. For example: 'We achieved $5 million ARR in our first year,' or 'Our ARR growth rate is 40% annually.' It is typically used in investor pitches, board meetings, and business reviews.
- Is ARR formal or informal?
- ARR is formal business terminology. It is used in official financial reports, presentations to investors, and executive meetings. While it is an abbreviation, it is the standard professional term in SaaS and subscription industries.
- What is the difference between ARR and total revenue?
- ARR measures only recurring subscription revenue projected over 12 months. Total revenue includes all income sources, such as one-time fees, professional services, and irregular sales. ARR provides a clearer picture of predictable, sustainable business growth.
- How is ARR different from MRR?
- MRR (Monthly Recurring Revenue) is the predictable monthly subscription revenue, while ARR is the annualized version. ARR is simply MRR multiplied by 12. Companies track both metrics to understand revenue at different time scales.
