New Annual Contract Value
The annualized value of newly signed customer contracts in a period — each contract's total value divided by its term in years.
◆ Currency
Formula
Built from
What it measures
New ACV is the annualized value of newly signed contracts: take the total economic commitment (TCV) each new customer makes over their contract term and express it as an annual run-rate. You are measuring the size of new-customer deals on a common annual basis, independent of whether they committed for 1 year or 3 years. One-time fees, services, and usage overages are excluded — only recurring subscription value counts.
Why it matters
New ACV is how sales leadership and finance judge the quality and size of your new-customer wins. A rising New ACV means your go-to-market engine is landing bigger deals or longer commitments — both strengthen the forecast and improve unit economics. Investors read New ACV alongside new-logo count to tell whether growth comes from more logos or larger logos, a distinction that drives valuation. It is also the new-business half of the ACV story, feeding Total ACV and your bookings-to-revenue bridge.
How to read it
Track New ACV monthly or quarterly and always compare it to plan and to prior-period cohorts, never as a lone number. Rising New ACV with growing customer count is textbook healthy growth — bigger and more numerous deals. Flat New ACV with flat customer count signals stagnation. Flat New ACV with rising customer count means you are winning more but smaller deals (higher velocity, lower value). Declining New ACV while customer count grows is a red flag for pricing pressure or competitive encroachment. Always decompose a move into its drivers: did average TCV change (larger contracts) or did term length change (shorter commitments)? Both move the needle, and they call for very different responses.
What good looks like
Good
New ACV rising quarter over quarter, outpacing inflation and reflecting larger deal size or longer customer commitments upfront.
Watch
New ACV flat or slipping slightly — pressure on deal size or term length; check whether pricing is holding or sales is trading value for close velocity.
Bad
New ACV declining sharply; new-customer deals are materially smaller than prior quarters, pointing to lost pricing power or market contraction.
Watch-outs
- Forgetting to divide by term. New TCV and New ACV get used interchangeably by mistake; dividing by term is what normalizes contracts of different lengths onto a common annual scale, and skipping it makes long deals look oversized.
- Mixing new and renewal or expansion deals. A customer renewing or buying a second product when they already have an active subscription is not New ACV — that is renewal or expansion ARR. New ACV counts only first-time customer acquisitions.
- Annualizing through a ramp without adjusting. A 2-year deal that starts at 50% list and ramps to 100% should carry the average annual value over the term, not the final-year rate, or you overstate the ACV on signing.
- Ignoring cohort mix. Enterprise new deals can dwarf SMB self-serve deals; a shift in cohort composition (moving upmarket or losing it) will move the New ACV trend even when individual deal health is unchanged.
Worked example
Hypothetical
Your sales team closes three new-customer contracts in Q2: a 24-month deal worth $120K TCV, a 12-month deal worth $60K TCV, and a 36-month deal worth $180K TCV. The New ACVs are $120K ÷ 2 = $60K, $60K ÷ 1 = $60K, and $180K ÷ 3 = $60K. Total New ACV for Q2 is $180K — three equal annual-value wins, even though their upfront commitments ranged from $60K to $180K.