ARR (Annual Recurring Revenue)

ARR — Annual Recurring Revenue — is the annualized value of all your active recurring subscriptions at a point in time. If a customer is on a $1,000/month plan, that’s $12,000 of ARR. If they’re on a $24,000 annual contract, that’s $24,000 of ARR. ARR is a snapshot, not a sum-of-revenue-over-a-period. It’s “what would we book over the next 12 months if no one churned, upgraded, or downgraded.”

Why it’s not the same as revenue

Revenue is what you actually billed and recognized. ARR is what you’re contracted to bill on the recurring side at a moment in time. They diverge because:

• Setup fees, one-time services, professional services show up in revenue but not in ARR.
• Mid-month upgrades add to ARR immediately but only partially to that month’s revenue.
• Customers in a free trial have no ARR but might generate revenue later.
• Annual prepays show as one big revenue line at signing but contribute steadily to ARR over the year.

If your CFO and your head of growth are giving different “revenue” numbers, ask which one is talking about ARR.

Common ARR variants

• Net ARR — total active ARR (most common definition).
• New ARR / New Logo ARR — added from new customers this period.
• Expansion ARR — increase from existing customers upgrading.
• Churned ARR — lost from cancellations and downgrades.
• Contracted ARR — includes signed deals not yet live (used in enterprise sales reporting).

Pick one and document it. The number you pick is less important than the discipline of computing it the same way every time. See metric definition.

How Datost computes ARR

Datost reads your billing source (Stripe, Recurly, internal billing system) and your ARR-definition doc. The first time you ask about ARR, Datost confirms which variant you mean (net, new, contracted) and uses that consistently going forward. The SQL it generates is exposed, so when finance disagrees with growth on a number, you can audit which definition produced which value.