A key financial metric used by subscription-based or recurring revenue businesses to quantify the predictable and recurring revenue that a company expects to generate annually from its customers. ARR is calculated by annualizing the recurring revenue components of all active customer contracts, excluding any one-time fees or irregular payments. This metric provides a clear picture of the company’s financial health, growth potential, and stability, as it reflects the consistent revenue stream that can be expected each year. ARR is crucial for long-term strategic planning, investor relations, and performance benchmarking within industries that rely on recurring revenue models.