INFA

What is the churn rate and net new ARR, and how sustainable is the 28% growth rate?

Created August 06, 2025 at 08:13 PM

Short answer

Metric	Figure from the release (or best‑available estimate)
Churn rate	Not disclosed in the excerpt. Typical enterprise‑SaaS churn at Informatica‑scale is in the 5 % – 9 % range (annualized).
Net‑new ARR	Not disclosed directly. With a 28 % YoY increase in Cloud Subscription ARR, net‑new ARR can be approximated as “total ARR growth – ARR lost to churn.” If we assume a 7 % churn (mid‑point of the range above), net‑new ARR would be roughly 21 % of the prior‑year ARR (i.e., 28 % growth = 21 % net‑new + 7 % churn).
Sustainability of the 28 % growth rate	Plausible in the short‑term but will become harder to maintain at the same pace as the base expands. The growth story is under‑pinned by: • Strong AI‑driven product differentiation (CLAIRE AI, IDMC platform). • Broad market tailwinds (data‑centric digital transformation, AI‑enabled analytics, regulatory data‑governance pressures). • Increasing “cloud‑first” buying patterns among enterprise customers. Nevertheless, long‑term sustainability will depend on: – Continued expansion of the addressable market (e.g., multi‑cloud, data‑fabric, generative‑AI use cases). – Retention of existing customers and controlling churn as the install base matures. – Competitive pressure from other AI‑enabled data‑management vendors (Snowflake, Databricks, AWS/GCP native services). – Macro‑economic factors (IT spend cycles, enterprise budget constraints). In practice, a mid‑single‑digit to low‑double‑digit YoY ARR growth trajectory (10 %‑15 %) is more typical once the company reaches a larger scale, while 20 %+ growth is achievable in niche, high‑velocity segments or during a “launch‑phase” of a major AI‑centric product upgrade.

1. What the release actually tells us

Key headline: “28 % year‑over‑year increase in Cloud Subscription ARR.”
No explicit churn or net‑new ARR numbers were included in the portion of the Business Wire release you provided.
The release does say the company “exceeded midpoint expectations across all key revenue and profitability metrics,” implying that both growth and retention metrics were solid, but the exact percentages are omitted.

Because the precise churn rate and net‑new ARR are not published in the excerpt, we have to rely on industry benchmarks and a back‑of‑the‑envelope calculation to give a reasonable picture.

2. Estimating churn and net‑new ARR

2.1 Typical churn for a mature enterprise SaaS vendor

Company type	Typical annual churn (enterprise contracts)
Early‑stage, SMB‑focused SaaS	10 % – 15 %
Mid‑stage, mixed‑focus SaaS	8 % – 12 %
Large, enterprise‑focused SaaS (e.g., Salesforce, ServiceNow, Informatica)	5 % – 9 %

Informatica’s product set (IDMC, CLAIRE AI) is sold primarily to large enterprises on multi‑year contracts, so historical guidance and analyst estimates for similar vendors place its annualized churn in the 5 %‑9 % range.

Take‑away: If you need a single figure for scenario modelling, 7 % is a reasonable midpoint estimate.

2.2 Translating the 28 % ARR growth into net‑new ARR

ARR growth can be expressed as:

[
\text{ARR Growth} = \text{Net‑new ARR (new bookings)} - \text{ARR lost to churn}
]

Re‑arranging:

[
\text{Net‑new ARR} = \text{ARR Growth} + \text{ARR lost to churn}
]

Assuming a 7 % churn (annualized) and a 28 % YoY ARR increase:

Metric	Calculation	Result
ARR growth (reported)	28 % of prior‑year ARR	+28 %
ARR lost to churn (estimated)	7 % of prior‑year ARR	–7 %
Net‑new ARR (estimated)	28 % + 7 % = 35 % of prior‑year ARR	≈ 35 %

Because “ARR growth” already net‑of‑churn, the net‑new ARR that the sales organization actually added (new bookings) would be roughly 35 % of the prior‑year ARR.

If Informatica’s Cloud Subscription ARR at the end of Q2 2024 was, for example, $1.0 billion, the numbers would look like:

Item	Amount
Prior‑year ARR (Q2 2024)	$1.0 bn
ARR added from new bookings (net‑new)	≈ $350 m
ARR lost to churn	≈ $70 m
Resulting ARR Q2 2025	$1.28 bn (28 % growth)

These are illustrative; the actual dollar amounts can only be derived from the full earnings release or the company’s SEC filing (Form 10‑Q).

3. How sustainable is a 28 % YoY Cloud Subscription ARR growth rate?

3.1 The “base‑effect” reality

Compound growth is harder as the base gets bigger. Going from $500 m to $640 m (28 % growth) is materially easier than expanding $4.0 bn to $5.12 bn.
As Informatica’s ARR base expands, the same absolute dollar amount of new bookings represents a smaller percentage increase.

3.2 Drivers that could keep the momentum alive

Driver	Why it matters for Informatica
AI‑infused data‑management (CLAIRE AI)	Customers increasingly want AI‑assisted data cataloging, quality, and governance. Informatica’s claim of “AI‑powered” IDMC gives it a differentiated value proposition.
Multi‑cloud adoption	Enterprises are moving workloads across AWS, Azure, GCP, and private clouds. Informatica’s platform is cloud‑agnostic, making it a “one‑stop” data‑fabric layer.
Regulatory & compliance pressure	GDPR, CCPA, upcoming AI‑regulation, and industry‑specific data‑privacy mandates push firms toward better data governance—core to Informatica’s addressable market.
Cross‑selling & expansion	Existing customers often start with a single data‑integration use case and later add data‑governance, master‑data‑management, and data‑quality modules. Expansion ARR tends to have higher retention and lower churn.
Partner ecosystem (consultancies, system integrators)	A strong channel network accelerates land‑and‑expand cycles, especially in large enterprises with long procurement processes.

If these trends remain strong, double‑digit (10 %‑15 %) YoY growth is realistic for the next 2‑3 years, with occasional spikes to 20 %+ when a major product upgrade (e.g., a new CLAIRE AI version) is released.

3.3 Headwinds that could slow the pace

Headwind	Potential impact
Intensifying competition – Snowflake, Databricks, and the native data‑services of AWS/Azure/GCP are adding AI‑driven data‑catalog and governance layers. If they win mindshare, Informatica’s share‑of‑wallet may erode.
Macroeconomic slowdown – A recession or prolonged IT‑spending freeze would curb new SaaS contracts and push customers to defer upgrades.
Customer maturity – As the existing install base matures, organic expansion (upsell/cross‑sell) rates typically decline, and churn may edge higher if renewal negotiations become tougher.
Channel dependence – Heavy reliance on large systems‑integrator partners can introduce lag in sales cycles and expose revenue to partner‑specific budget cuts.
Product‑innovation cadence – Maintaining a clear, differentiated AI roadmap (e.g., next‑generation generative‑AI data‑prep) is crucial. If innovation stalls, growth can plateau.

3.4 A realistic medium‑term outlook

Time horizon	Expected ARR growth (YoY)	Rationale
FY 2025 (next 12 months)	25 % – 30 % (still close to Q2’s 28 %)	Strong momentum from Q2 earnings, continued rollout of CLAIRE AI updates, and a healthy pipeline of enterprise renewals.
FY 2026	15 % – 20 %	Base expands; growth shifts to a mix of new‑logo acquisition in emerging markets and expansion in existing accounts.
FY 2027+	10 % – 15 %	Market matures; growth increasingly driven by AI‑enabled use‑cases (e.g., generative‑AI data preparation) and by strategic partnerships rather than pure acquisition.

Bottom line: While a 28 % YoY increase is achievable in the current quarter thanks to fresh AI‑centric demand, maintaining that exact percentage long‑term is unlikely without significant new market penetration or a breakthrough product evolution. A sustained double‑digit growth trajectory is a more credible target.

4. What to watch for (next data points)

Full earnings release / Form 10‑Q – The complete filing will list the exact Cloud Subscription ARR, ARR churn, net‑new ARR, and ARR expansion/re‑contraction metrics. Those numbers let you calculate precise churn and net‑new rates.
Guidance on FY 2025/2026 ARR – Management’s forward‑looking statements will reveal whether they expect the 28 % pace to continue, slow, or accelerate.
Customer win‑rate and new‑logo pipeline – Look for disclosed “new logos” or “net new ARR” figures in the Management Discussion & Analysis (MD&A).
Product roadmap updates – Any announced enhancements to CLAIRE AI or new AI‑driven modules (e.g., generative‑AI data‑fabric) can act as growth catalysts.
Competitive moves – Monitor announcements from Snowflake, Databricks, and the major cloud providers; a large‑scale AI data‑management offering from a competitor could compress growth margins.

TL;DR

The news release does not give the churn rate or net‑new ARR.
Using industry averages (≈ 7 % churn) and the stated 28 % YoY Cloud Subscription ARR growth, we can estimate net‑new ARR to be roughly 35 % of the prior‑year ARR (i.e., new bookings ≈ 35 % – 7 % churn = 28 % net growth).
A 28 % growth rate is possible in the short term because of strong AI‑driven demand and a still‑expanding base, but as the ARR base gets larger, sustaining that exact percentage will be challenging. Expect a steady double‑digit growth path (10 %‑15 % YoY) over the next two to three years, with occasional spikes if major AI product enhancements or new market wins occur.

For an exact, company‑provided churn and net‑new ARR figure, consult the full Q2‑2025 earnings release or the SEC Form 10‑Q filing.