.svg)
Net New ARR
The change in Annual Recurring Revenue over a period, accounting for new customers, expansion, contraction, and churn.
Formula
Net New ARR = New ARR + Expansion ARR - Contraction ARR - Churned ARR
Ending ARR = Beginning ARR + Net New ARR
Definition
What is Net New ARR?
Net New ARR measures the total change in your recurring revenue over a period. It's the complete picture: new customer revenue plus expansion minus contraction and churn.
This is the metric that shows whether your business is actually growing. You can have great new sales but still shrink if churn exceeds new business.
Why Net New ARR Matters
Net New ARR is the truest measure of growth momentum. It accounts for all the forces pushing revenue up (new and expansion) and down (contraction and churn).
Tracking the components reveals where to focus. If Net New ARR is flat despite strong new sales, you have a retention problem. If it's growing slowly despite low churn, you need more pipeline.
Components of Net New ARR
Break it down: New ARR (first-time customers), Expansion ARR (upgrades and add-ons), Contraction ARR (downgrades), and Churned ARR (cancellations). Each component tells a different story.
Example
Q1 ARR movements:
- Beginning ARR: $2,000,000
- New customer ARR: $300,000
- Expansion ARR: $150,000
- Contraction ARR: $50,000
- Churned ARR: $100,000
Net New ARR = $300K + $150K - $50K - $100K = $300,000
Ending ARR = $2,000,000 + $300,000 = $2,300,000
15% quarterly growth, driven primarily by new sales.
Related Terms
Explore other financial terms and metrics
Get complete financial clarity in under 10 minutes. No more broken spreadsheets, no more QuickBooks chaos—just the insights you need to scale with confidence.
