What is Net New ARR?
The total change in Annual Recurring Revenue over a period, calculated as new ARR plus expansion ARR minus contraction and churned ARR.
Understanding the Details
Net new ARR is the annual equivalent of net new MRR, providing a broader view of revenue momentum. For companies with annual contracts, net new ARR captures the impact of new deal closings, upsells, downgrades, and cancellations over a quarter or year. It's a key metric for board reporting and investor communications because it normalises for monthly fluctuations and shows the run-rate impact of business activity. Companies often track both gross new ARR (before churn) and net new ARR (after churn) to understand both acquisition momentum and retention health. The ratio between these numbers reveals how much of your growth effort is going to backfill churn versus building net-new revenue.
How It Works in Practice
Quarterly review
Q2 net new ARR of £600K (£900K new + £200K expansion - £100K contraction - £400K churn) shows growth but highlights a churn problem.
Backfill ratio
Of £900K gross new ARR, £500K backfills churn and only £400K is true growth, revealing that 55% of acquisition effort just maintains the status quo.
Board reporting
Net new ARR accelerated from £500K in Q1 to £800K in Q3, driven by expansion revenue and reduced churn from customer success investment.
Why It Matters
Net new ARR shows whether your business is genuinely growing its recurring revenue base or just running to stand still. It's the most honest measure of SaaS growth.
What People Often Get Wrong
Net new ARR and new customer ARR are the same. Actually, net new ARR includes expansion and subtracts churn from the existing base.
Quarterly net new ARR should increase linearly. Actually, enterprise sales cycles create lumpy patterns that are normal.
Net new ARR captures all revenue growth. Actually, one-time revenues, services, and usage-based components may not be reflected in ARR.
How We Handle Net New ARR
We help improve net new ARR by addressing both sides: generating more new and expansion revenue while reducing the churn that erodes growth.
Related Terms
Common Questions
Need Help With Net New ARR?
If you'd like to discuss how net new arr applies to your business, we're happy to explain further.