Is ARR Growth Durable? Revenue growth is already low, but it's even weaker than most folks realize
The article argues that reported ARR growth rates mask underlying weakness by failing to distinguish between durable and non-durable revenue sources. Companies are relying on price increases, expansion ARR, and M&A rather than sustainable new logo growth, creating misleading growth metrics that lead to overoptimistic forecasts, excessive hiring, and missed targets. The author provides an ARR waterfall framework to segment revenue by durability type and emphasizes that new logo ARR deceleration is a leading indicator of future growth troubles.
Metrics in this report
4.0x
median
20%+ FCF margin, <5% revenue growth companies (Zoominfo, Zoom, Informatica, Dropbox)
5.7x
median
20%+ FCF margin, 5-10% revenue growth companies (UiPath, Tenable, Salesforce, RingCentral, Okta, etc.)
6.6x
median
20%+ FCF margin, 10-15% revenue growth companies (Workday, Wix, Veeva, Paloalto, Freshworks, etc.)
9.2x
median
20%+ FCF margin, 15-20% revenue growth companies (ServiceNow, JFrog, HubSpot, Datadog, Atlassian, etc.)
2.2x
median
<20% FCF margin, <5% revenue growth companies (Sprinklr, PayPal, Bigcommerce)
3.8x
median
<20% FCF margin, 5-10% revenue growth companies (Twilio, Paycom, Asana, Block, etc.)
4.6x
median
<20% FCF margin, 10-15% revenue growth companies (MongoDB, Elastic, DigitalOcean, Amplitude, etc.)
5.5x
median
<20% FCF margin, 15-20% revenue growth companies (Workiva, Confluent, Braze)