What is ARR and why does it matter?
ARR (Annual Recurring Revenue) is the sum of contractual, recurring revenue a subscription business expects over a year. One-off sales, setup fees and variable usage revenue are excluded — only predictable, recurring line items are counted. That's why ARR is the primary financial metric for SaaS growth, health and predictability.
Investors use ARR as both a valuation anchor and an operational KPI. Compared to monthly MRR, ARR gives a de-seasoned view and provides a more stable reference for annual planning, budgeting and goal setting. Sub-breakdowns like Net New ARR, Expansion ARR and Churned ARR reveal where growth is actually coming from.
ARR shouldn't be read in isolation. Interpret it alongside growth rate, net revenue retention (NRR) and CAC payback. Strong ARR growth becomes a sustainable SaaS business only when it is paired with healthy unit economics.