Annual Recurring Revenue (ARR) is a measure of a company’s ability to generate future revenue from its current customer base.
It is the total amount of revenue from all recurring sources that the company receives during the fiscal year, divided by the number of months in the fiscal year.
This metric can be calculated for either an individual product or for all products combined.
The ARR metric is often used to assess a company’s financial health. If ARR is growing, it means that customers are renewing their subscriptions and purchasing additional products. In contrast, if ARR declines it could indicate that customers are cancelling their subscriptions or buying fewer products.