Annual Recurring Revenue (ARR) is a key metric used by subscription-based businesses to measure the predictable and recurring revenue generated from customers over a year. It provides a clear view of a company's financial health and growth potential by focusing on revenue that is expected to continue in the future. ARR is calculated by taking the total revenue from subscriptions and contracts, excluding any one-time fees or variable charges. This allows businesses to assess their performance and make informed decisions about investments, pricing strategies, and customer retention efforts.