Companies that sell cloud software are contending with a more cautious spending environment from their existing customers.
Net revenue retention rates in cloud software are ticking down by the quarter, a sign that businesses continue to look for areas where they can cut costs.
The median net retention for the software universe has been steadily declining the last few quarters. More pressure on churn and more difficult upsells have pushed net retention downIndustrywide, the median net retention rate declined to 111% in the fourth quarter, as the number ticks down a bit each period, Ball's data shows.
At Snowflake, Chief Financial Officer Mike Scarpelli told investors last month that NRR will at some point converge with its revenue growth rate, which slowed to 36% in the latest fiscal year from 69% in fiscal 2023 and 106% the year before that. "I think that the lion's share of cost optimization has happened," Jassy said."It's not that there won't be any more or that we don't see any more. But it's just attenuated very significantly.", which sells access to data that companies can use to help drive sales, reported a dramatic drop in NRR to 87% at the end of 2023 from 116% two years earlier. That means existing customers are spending less year over year.
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