Last updated: 2026-06-23

Understanding net revenue retention

Net revenue retention (NRR) measures how recurring revenue from an existing group of customers changes over a period — once their upgrades, downgrades, and cancellations are netted out, but before any new customers are counted. It answers a focused question: ignoring new sales entirely, is the business growing or shrinking the revenue it already has? Because expansion is included, NRR can climb above 100%, which separates it from churn-based metrics that only ever measure loss.

The NRR formula

NRR starts with the cohort's recurring revenue at the beginning of the period, adds expansion, subtracts contraction and churn, and divides by the starting figure:

Each term refers to the same cohort that existed at the start:

• Expansion is extra revenue from upgrades, added seats, or cross-sells.
• Contraction is revenue lost to downgrades, where a customer stays but spends less.
• Churn is revenue lost to cancellations, where a customer leaves entirely.

Revenue from brand-new customers is deliberately left out. NRR isolates the behaviour of the existing base, so growth from sales and marketing does not mask what is happening underneath.

Net versus gross revenue retention

Gross revenue retention (GRR) uses the same starting point but excludes expansion:

Because GRR never adds revenue back, it cannot exceed 100%. It represents the worst case — how much revenue survives if no customer ever expands. NRR layers expansion on top, so the gap between the two figures shows how much upgrade revenue is offsetting losses. A business with high NRR but low GRR is leaking revenue from many accounts while a few large expansions paper over the gap; high values on both indicate a stable base that also grows.

Worked example

A company begins a quarter with $50,000 of MRR from its existing customers. During the quarter, those customers add $5,000 in upgrades, reduce spend by $1,500 through downgrades, and cancel $2,500 of subscriptions.

NRR is 102%, so the existing cohort grew revenue by 2% on its own. GRR is 92%, meaning 8% of revenue was lost before expansion is counted. The 10-point gap is the contribution of expansion.

Why NRR can exceed 100%

NRR rises above 100% whenever expansion is larger than contraction plus churn. The same customers generate more recurring revenue at the end of the period than at the start, without a single new logo. This is the signature of a land-and-expand model, where customers begin small and grow their usage, seats, or product footprint over time. Sustained NRR above 100% means revenue compounds even if new customer acquisition pauses.

Interpreting the result

As a rough guide, NRR above 100% is healthy, around 110% is strong, and 120% or higher is often called world-class. Below 100% the existing base is contracting, so new sales must first refill that gap before the business grows overall. These benchmarks shift with market and customer size — products sold to large enterprises tend to post higher NRR than those sold to very small businesses or consumers — so the figure is best read alongside GRR and compared against similar companies. To examine the loss side of retention in more detail, pair this with the Churn Rate Calculator for logo and gross revenue churn.