NRR includes expansion revenue from upsells and upgrades alongside base retention, which allows a shrinking customer base to report an NRR above 100%. The growth from a small segment of expanding accounts offsets and obscures churn happening elsewhere in the cohort.
Churn goes unaddressed while expansion revenue from a small segment creates the appearance of a healthy and growing book of business.
NRR above 100% no longer indicates a healthy customer base — it can mask accelerating churn in the majority of accounts.
NRR is at or above 100% but gross revenue retention (excluding expansion) is below 90%, or the number of active accounts is declining. A small cohort of expanding accounts is carrying the NRR figure while contraction and churn are occurring in the rest of the base.