Monthly Recurring Revenue (MRR) vs Annual Recurring Revenue (ARR)
MRR and ARR both measure predictable subscription revenue, but at different time horizons. MRR gives you a real-time pulse on the business while ARR is the standard yardstick for valuation and annual planning. Both are essential SaaS KPIs — the right one to lead with depends on your billing model and audience.
At a Glance
Monthly Recurring Revenue (MRR)
Predictable revenue normalized to a monthly amount
Annual Recurring Revenue (ARR)
Predictable annual revenue from subscriptions
Key Differences
- MRR is monthly; ARR is the annualised view (MRR × 12).
- MRR reacts immediately to new bookings and churn; ARR smooths those movements.
- ARR is preferred by investors; MRR is preferred by operators.
- Multi-year prepaid contracts should be spread across the contract term before feeding either metric.
When to Use Each
Use Monthly Recurring Revenue (MRR) when…
Use MRR for day-to-day operations: tracking expansion, contraction, and churn in real time. It is the core metric for monthly billing businesses and growth dashboards.
Full Monthly Recurring Revenue guide →Use Annual Recurring Revenue (ARR) when…
Use ARR for board reporting, investor decks, and benchmarking. It normalises multi-year and monthly contracts onto the same scale and is the standard for SaaS valuation multiples.
Full Annual Recurring Revenue guide →Formulas
MONTHLY RECURRING REVENUE (MRR)
MRR = Sum of Monthly Revenue from All Active Subscriptions
Number of Subscribers × Average Revenue Per User (ARPU)ANNUAL RECURRING REVENUE (ARR)
ARR = Monthly Recurring Revenue × 12
Average Contract Value × Number of CustomersCharts
Monthly Recurring Revenue (MRR)
Annual Recurring Revenue (ARR)