SaaS Metric
Annual Recurring Revenue (ARR)
Definition
Annual recurring revenue (ARR) is the normalised value of recurring subscription revenue expressed over a year: ARR = MRR × 12. It counts only predictable, recurring contract value — excluding one-time fees, services and usage overages — and is the headline metric for enterprise-focused SaaS.
Formula
ARR = MRR × 12
Benchmark
There is no single ARR benchmark; growth rate matters more. Efficient scaling SaaS often targets ARR growth alongside an NRR above 110% and reasonable burn.
ARR vs. total revenue
ARR includes only recurring contract value. One-time setup fees, professional services and variable usage that is not contractually recurring are excluded. This is what makes ARR a measure of predictable, durable revenue rather than total billings.
For businesses with mostly monthly plans, MRR is the natural unit and ARR is just MRR × 12. Enterprise businesses with annual contracts often lead with ARR because it matches how they sell.
Frequently asked questions
How is ARR calculated?
ARR = MRR × 12. It is the annualised value of recurring subscription revenue, excluding one-time fees, services, and non-recurring usage.
Is ARR the same as revenue?
No. ARR counts only recurring contract value. Total revenue (GAAP) also includes one-time fees, professional services, and usage that is not contractually recurring, so the two figures usually differ.
Related metrics
Monthly Recurring Revenue (MRR)
Monthly recurring revenue (MRR) is the normalised, predictable subscription revenue earned each month. Learn the MRR formula, its movement components, and how it relates to ARR.
Net Revenue Retention (NRR)
Net revenue retention (NRR) measures recurring revenue kept from existing customers including expansion. Learn the NRR formula, what 100%+ means, and SaaS benchmarks.
Expansion Revenue
Expansion revenue is additional recurring revenue from existing customers via upgrades, seats and cross-sells. Learn how it drives net negative churn and NRR above 100%.
Track this automatically
Connect Stripe and RetentionLens computes ARR for you — with cohorts, trends and churn-risk scoring. Start on the free tier.
Benchmarks are general SaaS ranges and vary by segment, stage and business model. Last reviewed 2026-05-30.