Monthly recurring revenue (MRR)

Monthly recurring revenue is the total monthly value of a company's active subscriptions at a given point in time. An annual contract worth $12,000 contributes $1,000 to MRR; a monthly contract worth $500 contributes $500. Multiplying MRR by twelve gives annual recurring revenue, the more commonly quoted headline figure for larger or annual-contract-heavy businesses.

MRR is usually tracked as a bridge across a period: new MRR from new customers, expansion MRR from existing customers upgrading, contraction MRR from downgrades, and churned MRR from cancellations, which together explain the net change and roll up into net revenue retention. This differs from cash collected, since a customer can be invoiced annually in advance while only contributing to MRR evenly across the twelve months they are subscribed.

MRR matters because its monthly cadence makes it more sensitive than ARR to short-term shifts, useful for catching subscriber churn or a slowing new-business trend early. The common pitfall is inflating MRR with non-recurring items, such as one-time setup fees or annual contracts recognized in a single month, which overstates the true recurring base and produces misleading trend lines.