CARR Growth Rate
The period-over-period percentage change in contracted annual recurring revenue (CARR) from opening balance to closing balance.
◆ Percentage
Formula
Built from
What it measures
The percentage velocity of your signed contract pool, divorced from its absolute dollar size. CARR counts revenue from contracts that are signed but may not yet be live, so this rate tells you how fast forward-looking commitments are accumulating. Unlike ARR Growth Rate, which measures revenue already being recognized, CARR Growth Rate measures revenue that is contracted and on its way.
Why it matters
CARR Growth Rate is the earliest read on where ARR is headed. A signed contract becomes recognized revenue only when it activates, so a move in CARR growth this period shows up in ARR growth a quarter later. Sales and finance use it to forecast cash and to pace hiring — if CARR growth slows, ARR growth slows behind it. Boards watch it because it exposes pipeline velocity and demand before any of it hits the income statement.
How to read it
Read it as a trend against the prior period and against your ARR Growth Rate, never as a lone number. Positive growth means new and expansion contracts are outpacing the downgrades and churn baked into your contract base. CARR growth running ahead of ARR growth signals a building pipeline and future momentum; CARR growth lagging ARR growth means the engine is slowing and recognized revenue will follow it down. Decompose the move into new logo, expansion, and expected attrition to see which lever drove it.
What good looks like
Good
CARR growing month over month, led by new logo and expansion contracts, and running slightly ahead of ARR growth — a sign of a healthy pipeline feeding future revenue.
Watch
CARR growth flattening or leaning on one or two large signings; CARR growing while ARR growth softens, hinting at activation or delivery risk.
Bad
CARR flat or declining as new and expansion bookings fail to outrun expected downgrades and churn — future ARR growth is about to stall.
Watch-outs
- Confusing CARR growth with ARR growth. CARR is forward-looking (signed, not yet active); ARR is recognized (live). High CARR growth with sagging ARR growth signals a strong pipeline but real activation or delivery risk — don't read it as pure good news.
- Ignoring the churn and downgrade expectations inside CARR. Flat CARR can hide strong new bookings offset by rising expected attrition. Always decompose the waterfall before concluding that demand is weak.
- Forgetting the activation lag. CARR growth leads ARR growth by the contract start delay, so don't panic when CARR rises but ARR is briefly flat — instead, track that signed contracts activate on schedule.
- Letting one large deal distort the rate. A single big signing can swing month-over-month CARR growth hard. Use a rolling window or compare cohort-by-cohort to separate signal from batch-timing noise.
Worked example
Hypothetical
You close March with $800K CARR. In April you sign $200K of new contracts and $50K of upsell commitments, while expected downgrades trim $30K and rising churn expectations remove another $20K. Closing April CARR is $800K + $200K + $50K − $30K − $20K = $1M. CARR Growth Rate for April is ($1M − $800K) / $800K = 25%.