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ARR vs MRR: definitions, formulas, and how to convert

ARR vs MRR explained: what each metric means, the formulas (MRR*12 and ARR/12), and common pitfalls.

Written by MetricKit EditorialReviewed by MetricKit Editorial ReviewUpdated 2026-05-25
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Part of this topic
ARR guide: meaning, formula, MRR, bookings, and growth

Use the topic guide when you need the broader ARR workflow, not just this specific sub-question.

Try it in a calculator

ARR vs MRR Calculator
Conversion example (MRR $200k; ARR $2.4M)
Opens the calculator with this scenario

Definition (quick)

  • MRR (Monthly Recurring Revenue) is monthly recurring run-rate.
  • ARR (Annual Recurring Revenue) is the same run-rate annualized (usually MRR * 12).
  • Both are run-rate snapshots, not recognized revenue.

Formulas

ARR = MRR * 12

MRR = ARR / 12

When ARR and MRR do not match

  • You mixed one-time fees/services into one metric but not the other.
  • Numbers are from different dates (MRR moved since last ARR snapshot).
  • Definitions drifted (active base, refunds/credits, what is 'recurring').

How to use each metric

  • Use MRR for monthly momentum and decomposition (new/expansion/churn).
  • Use ARR for scale comparisons and many efficiency metrics (burn multiple, magic number).
  • Always pair run-rate with retention (NRR/GRR) so growth is durable, not leaky.

QA checklist

  • Confirm ARR and MRR are taken on the same snapshot date.
  • Exclude one-time fees and usage spikes from both metrics.
  • Reconcile ARR to MRR by customer or plan to find definition drift.
  • Document the recurring revenue definition in dashboards.

FAQ

Is ARR the same as annual revenue-
Not always. ARR is a recurring run-rate snapshot. Annual revenue is recognized over a year and can include one-time items.
Should ARR always equal MRR * 12-
If both are defined as recurring run-rate and measured at the same point in time, yes. If they don't match, check definitions and timestamps.

More in saas metrics

ARR guide: meaning, formula, MRR, bookings, and growth
A practical ARR guide covering meaning, formula, ARR vs MRR, bookings vs cash, net new ARR, waterfalls, and how to use ARR without misleading yourself.
MRR: what it means (and how to track it cleanly)
A guide to MRR: definitions, what to include/exclude, and how to decompose MRR changes over time.
ARR growth rate: how to measure recurring momentum
A practical ARR growth guide: compute period growth, CMGR, and annualized growth (CAGR) from start and end ARR.
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ARR waterfall: reconcile starting ARR to ending ARR (net new ARR) →