When Snowflake, a vendor of data analytics software, went public in 2020, one of the most important metrics it gave investors was net revenue retention (NRR).
At that time, NRR stood at 158%, which meant that the company’s base of existing customers from the previous year had increased its total spend by 58%. Wall Street loves this metric because it shows that more revenue was generated at little additional cost.
Snowflake’s net return on investment (NRR) decreased to 131% in the January quarter of this year, which is still strong by industry standards but suggests a slowdown in new expenditure. A more cautious approach from the firms, governments, and other bodies they serve—whether the purchasers are IT, marketing, or finance departments—is creating a trend that is spreading throughout the cloud software industry for previously rapidly expanding companies.
Jamin Ball, a partner at tech-focused investment firm Altimeter Capital, stated on social media site X on Friday that “the median net retention for the software universe has been steadily declining the last few quarters.” “Increased pressure on attrition (as businesses strive to replace point solutions with platforms) and harder upsells have made net retention decline, Ball continued.
Source (CNBC)
