[GTM glossary](/glossary.txt) Expansion ARR

GTM Strategy & SaaS Metrics

# Expansion ARR

In short

Expansion ARR is the increase in annual recurring revenue (ARR) from customers who were already paying at the start of a period. It includes upgrades, added seats or usage, and additional products, and excludes new customers.

It is a component of the ARR bridge, alongside new ARR, churned ARR, and contraction. Expansion ARR shows how much growth comes from the installed base rather than from new logos.

## How to calculate expansion ARR

Add up the annualized recurring value of every increase from existing customers in the period. Do not count one-time fees.

Say a customer moves from 20,000 to 30,000 ARR after adding seats, and another adds a 5,000 module. Expansion ARR for those two is 10,000 + 5,000 = 15,000. These numbers are illustrative.

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## Where it sits in the ARR bridge

Expansion minus contraction and churn, divided by starting ARR, forms net revenue retention. A company with strong expansion can grow even if few new logos arrive.

* **New ARR:** From first-time customers.
* **Expansion ARR:** Increases from existing customers.
* **Contraction:** Reductions from customers who stay.
* **Churned ARR:** Lost customers.

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## Expansion ARR vs. expansion revenue

Expansion ARR is an annualized recurring figure at a point in time. Expansion revenue is the revenue actually recognized from those expansions over a period and may include usage-based amounts that vary.

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## How to grow expansion ARR

### Find healthy, growing accounts

Look for accounts with rising usage, new teams, or hiring. These are most ready for more seats or products.

### Map the account

Identify other teams or subsidiaries not yet using your product and add contacts there.

### Align pricing with value

Make tiers and usage limits so that growing customers naturally move to higher plans.

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## Common mistakes

* **Mixing in new logos:** Keep new and expansion clearly separated.
* **Counting one-time fees:** Only recurring value belongs in ARR.
* **Ignoring contraction:** Gross expansion can hide downgrades.

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## Expansion ARR FAQs

**What is expansion ARR?**

Expansion ARR is the additional annual recurring revenue gained from existing customers in a period, through upgrades, added seats or usage, and extra products. It excludes revenue from brand new customers.

**How do you calculate expansion ARR?**

Sum the annualized recurring increases from customers who were already paying at the start of the period. Include upgrades, added seats, and cross-sold products. Exclude one-time fees and revenue from new customers.

**What is the difference between expansion ARR and new ARR?**

New ARR comes from customers who are buying for the first time, while expansion ARR comes from customers who already pay and increase their spend. Separating them shows how much growth is driven by the installed base.

**How does expansion ARR affect net revenue retention?**

Net revenue retention adds expansion ARR to starting ARR and subtracts contraction and churn. Strong expansion can lift it above 100 percent, meaning the existing customer base grows even without new customers.

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## More related phrases

* [Account expansion](/glossary/account-expansion.txt)
* [Monthly recurring revenue](/glossary/monthly-recurring-revenue.txt)
* [Committed monthly recurring revenue (CMRR)](/glossary/committed-monthly-recurring-revenue.txt)

## Similar phrases

* [Net new ARR](/glossary/net-new-arr.txt)  
Net new ARR is the change in annual recurring revenue over a period: new customer and expansion ARR, minus churned and contracted ARR.
* [Expansion revenue](/glossary/expansion-revenue.txt)  
Expansion revenue is the additional revenue a company earns from existing customers through upsells, cross-sells, added seats, or higher usage.
* [Upselling](/glossary/upselling.txt)  
Upselling is the practice of persuading an existing customer to buy a higher-tier, larger, or more capable version of what they already use or are buying.
* [Net revenue retention (NRR)](/glossary/net-revenue-retention.txt)  
Net revenue retention (NRR) measures how recurring revenue from existing customers changes over time, including upsell, downgrades, and churn.
* [Annual recurring revenue (ARR)](/glossary/annual-recurring-revenue.txt)  
Annual recurring revenue (ARR) is the yearly value of the subscription revenue a company expects to keep earning from its current customers.