Net Revenue Retention (NRR) is a metric that shows how much recurring revenue is retained from a starting group of customers over a period, including the impact of expansions (upsells, added usage, cross-sells) and losses from downgrades and churn. It is usually expressed as a percentage and is used by subscription and recurring-revenue businesses to measure revenue growth or decline within existing customers.
How NRR Is Calculated
NRR is calculated on a cohort of customers that existed at the start of the period.
Common formula (recurring revenue based):
NRR = (Starting ARR or MRR + Expansion − Contraction − Churn) / Starting ARR or MRR
Then multiply by 100 to express it as a percentage.
What each component means:
- Starting ARR or MRR: Recurring revenue from the cohort at the beginning of the period
- Expansion: Additional recurring revenue from the same customers (upgrades, more seats, more usage, add-ons)
- Contraction: Reduced recurring revenue from the same customers (downgrades, fewer seats, lower usage)
- Churn: Recurring revenue lost from customers who canceled completely
NRR vs NDR
NRR and Net Dollar Retention (NDR) are often used interchangeably. In practice:
- NRR emphasizes revenue retention.
- NDR emphasizes dollars retained.
Most companies calculate both the same way, using ARR or MRR from an existing cohort, including expansion and subtracting contraction and churn.
How to Interpret NRR
- NRR above 100%: Revenue from the cohort grew, meaning expansion outweighed churn and downgrades.
- NRR at 100%: Cohort revenue stayed flat.
- NRR below 100%: Cohort revenue shrank.
NRR comparisons are only meaningful when the same rules are used each time (for example, whether the metric is based on billed revenue, contracted ARR, or recognized revenue).
What NRR Includes and Excludes
Usually included:
- Subscription upgrades and add-ons
- Seat increases
- Usage-based expansion (when counted as recurring)
- Downgrades and partial cancellations
- Full churn
Usually excluded:
- Revenue from new customers acquired during the period
- One-time fees (implementation, training) unless explicitly treated as recurring
- Professional services revenue, unless part of a recurring contract
Organizations should document the exact revenue sources used so the metric is consistent across finance, sales, and RevOps.
NRR in AI-Assisted RevOps and Finance Workflows
Modern teams often automate NRR using billing, product, and CRM systems:
- Event-based revenue movement tracking: Label revenue changes as expansion, contraction, or churn using subscription events.
- Segmentation at scale: Track NRR by cohort, customer segment, plan, industry, or sales motion.
- Automated anomaly detection: Flag sudden drops caused by billing errors, discount changes, or misclassified renewals.
- Forecasting: Combine NRR trends with pipeline and renewal risk signals to improve revenue forecasts.
Frequently Asked Questions
Is NRR the same as NDR?
Often yes. Many teams use the terms interchangeably, and the calculation is typically identical.
Does NRR include new customer revenue?
No. NRR measures only the revenue change from a starting cohort of existing customers.
What is a “good” NRR?
It depends on business model and market, but higher than 100% means existing customers are expanding enough to offset churn and downgrades.
Can discounts affect NRR?
Yes. If discounts reduce recurring revenue at renewal or mid-term, they can show up as contraction and lower NRR.
Should NRR be calculated using billed, contracted, or recognized revenue?
Any can be used, but it must be defined and consistent so results are comparable over time.
