What Is NRR (Net Revenue Retention)?

The calculation follows one cohort. Take every customer on the books when the window opens and add up their recurring revenue. Twelve months later, add up what those same customers pay now, including seats they added and products they bought, net of downgrades and departures. Divide the later total by the starting total. Customers who arrived during the year are excluded, which keeps the metric about the existing base only. A result above the starting level means expansion outweighed everything lost.

Investors and acquirers read it as shorthand for product stickiness, while revenue leaders lean on it when deciding where pipeline effort belongs. A company with strong net retention can grow even when new-logo sales are slow, and it can afford to land small and expand. For someone booking first meetings, that often means the opening conversation is with one team or department, with the company-wide deal as a later step.

Net retention is easy to misread because expansion can hide churn. A few large customers growing fast can lift the number while many smaller customers leave, so the figure belongs next to gross revenue retention and logo churn. Usage-based pricing adds noise because revenue moves with customer activity rather than contracts. And cohort choice matters: a monthly cohort and an annual cohort will not give comparable answers.