New Relic (NEWR) Q4 2023 Earnings Call Transcript

New Relic (NEWR)
Q4 2023 Earnings Call
May 23, 2023, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Hannah, and I will be your conference operator today. At this time, I would like to welcome everyone to the New Relic fourth quarter fiscal year 2023 earnings conference call. [Operator instructions] It is now my pleasure to introduce your host, Ingo Friedrichowitz, senior vice president of investor relations and corporate finance.

Thank you. You may begin.

Ingo Friedrichowitz -- Senior Vice President of Investor Relations and Corporate Finance

Good afternoon, and welcome to our fourth quarter and fiscal year 2023 earnings call. On the call with me are Bill Staples, our chief executive officer; and David Barter, our chief financial officer. On our investor relations website, you can find the earnings press release and the investor summary slide deck, which is intended to supplement our prepared remarks during today's call. In addition, an audio replay of this call will be available on our website, ir.newrelic.com, in a few hours.

During today's call, we will make forward-looking statements, including about our business outlook and strategies, which we based our predictions and expectations on as of today. Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors in our fiscal year 2023 Form 10-K on file with the SEC. Also, during this call, we will discuss certain non-GAAP financial measures. Unless otherwise noted, all of the expense and profitability metrics discussed on today's call are non-GAAP results.

We have reconciled those to the most directly comparable GAAP financial measures in our earnings release. These non-GAAP measures are not intended to be a substitute for our GAAP results. And with that, I'd like to turn it over to Bill.

Bill Staples -- Chief Executive Officer

Thank you, Ingo. I'm pleased with our fourth quarter results and execution, ending our fiscal year 2023 on a strong note. 2022 tested nearly every company's agility and focus amid economic uncertainty, inflation, and market volatility. Thousands of New Relics around the world rose to the occasion and delivered consistent year-over-year revenue growth at the same 18% levels as prior year.

We also made steady progress against our strategy to pioneer our categories first true consumption business model. In Q4, over 80% of our revenue came from our consumption business, growing at 55% year over year in total and over 30% year over year, excluding the benefit of migrations. This demonstrates just how competitive our new platform and business model is in the market today. The product team defined the year through innovation, delivering many market-leading launches, including Data Plus our premium data SKU, a major user experience upgrade, and vulnerability management, just to name a few.

They also got a quick start to this fiscal year with a brand new unified APM, infra, and logs experience, and were first to market with an OpenAI monitoring solution and observability-first generative AI assistant, which is already defining the modern observability experience for the next decade. To be able to deliver that breadth of innovation while simultaneously driving an 8 point gross margin improvement over the course of the year is astounding and illustrates New Relic's world-class engineering. The whole company executed an impressive shift toward profitable growth, delivering durable double-digit operating income this quarter, ending the year at a new high watermark for the company with 26 million of operating income in Q4. Consistent year-over-year revenue growth, first to market innovation, increased margins and profitability, with so much distraction in the world today, there are not many companies who are closing the year on such a positive note.

I'm very grateful for such terrific customers and all the hard work across the company, which made FY '23 a terrific year. Let's now dive into how our go-to-market execution unfolded this quarter. We once again saw strong new logo growth in the fourth quarter, adding more than 800 net new paid platform customers, a rate which is significantly ahead of many other competitors in our category. As you know, New Relic's a success in growing new and paying customers is a result of our unique and efficient product-led growth motion, which starts with a perpetual free tier that allows customers to use the product and fall in love with it at their own pace, and then pay with a credit card as they begin to scale usage.

We then naturally offer them additional discounts under contracts as they decide to commit annual or multi-year budgets to New Relic. Our free tier now reflects more than 41,000 active customers, and it includes engineers and teams and organizations of all sizes, including government, large enterprise, digital natives, and entrepreneurs in every segment and vertical. These free tier customers, together with our 16,000 paid customers, constitute a customer base of more than 57,000 actively engaged organizations, making New Relic the most ubiquitously adopted observability platform. Let me share a couple of examples of large new logo land, where we drove head-to-head wins versus leading competitors.

First, we closed an agreement with a leading telecommunications provider to standardize on New Relic. This customer was using a host-based pricing model competitor, but experienced overages, which constrained them from getting all the capabilities needed to achieve full stack observability. Second, a leading Wall Street rating agency signed a six-figure savings plan with New Relic after their prior observability vendor was not able to achieve the customer's uptime and reliability to even after spending 5x more than originally planned. With New Relic, this customer now has access to more than 30 capabilities in one platform with better cost scaling to enable the agency to achieve their business goals.

We are winning new customers through our growth engine and industry-leading rates, as well as new strategic logos who are standardizing on New Relic. These wins also reflect the economic reality that expenses matter. And customers are increasingly focused on getting the best ROI for their observability investments, making New Relic a leading choice. Let's turn to our customer base.

It's important to remember that we tend to land small through our efficient PLG sales motion and then expand in the ensuing quarters. As a result of this motion, the majority of our growth in any given quarter comes from our customer base. In the past few quarters, we've been focused on helping customers expand their contracts in situations where their consumption exceeds their contractual commitments. Equally, given economic pressures, we've been helping customers consolidate their tools and provide support to assist their cloud and digital transformation initiatives as each continues to be a top priority even in the current environment.

Let me share just a few examples of how our customers are expanding with us. First, a leading North American retail store chain almost doubled their annual commitment this quarter with New Relic. They have been a long time customer and decided with this renewal to replace their log solution with New Relic logs, as the retailer is rolling out additional instrumentation at their point of sales. Second, a global cloud-based communications leader has materially increased their already large commitment to an eight-figure multiyear commitment.

A key driver for this expansion has been the customers standardization on OpenTelemetry, which makes it easier for them to ingest more data from different systems. New Relic was a natural choice for them given their commitment to OpenTelemetry standard and being a leading contributor in the category. Third, a leading financial services company increased its commitment to New Relic by more than seven times. As this financial services company is going through a digital transformation of their front office, they needed to consolidate their various monitoring tools to gain comprehensive insights to ensure high uptime and reliability.

New Relic's platform does exactly that. And fourth, a global business application provider more than doubled its commitment with New Relic upon shifting from a subscription contract to a consumption contract. This shift delivered more value to the customer, unlocking the entire all-in-one platform. While we are pleased with our customer base expansions, we are not immune to cloud optimization trends, which, for us, takes the form of user and data optimization.

In the fourth quarter, beyond the expected seasonal pattern which we anticipated and guided toward this quarter, we saw optimization happening in two specific cohorts. First, while we have made steady progress at reducing the gap between consumption and commitment, we continue to see optimization most often occurring when customers are consuming far ahead of their commitment. Second, while we saw steady consumption growth across all spend and cohorts, optimization tends to be more pronounced this quarter with our largest spending customers where the largest budgets are set. For example, we were proud to be part of supporting one of the largest online entertainment companies who had a seasonal high over the holidays, reaching nearly 30 million in annualized consumption run rate, but then scaled down usage and drove optimization closer to 10 million annualized consumption during the quarter.

They remain a healthy happy customer of New Relic and appreciate their ability to scale usage on demand and pay only for what they use and avoid peak rate penalty billing, which is standard practice by our competitors. We work with our customers during such optimizations as we believe this deepens the partnership and allows us to grow faster as customers emerge from their optimization efforts. As seen in our strong RPO growth over the last several quarters, customers have opened up room to expand their consumption as their business is ready. We view the current climate as an excellent time to serve customers well and win increased market share.

Next, I'd like to highlight some of the recent hallmark innovations on our all-in-one platform. We've strengthened our technical note in multiple areas. First, in generative AI, as I mentioned earlier, we were first to market with our announcement of New Relic Grok, the industry's first observability assistant, which will dramatically simplify users' access and ability to derive insights from telemetry data. We were also first to market in our category with MLOps and first to introduce support for monitoring OpenAI GPT, allowing customers to simultaneously track performance and cost metrics in real time.

Second, our infrastructure capability has become even more competitive with deep integration to our market-leading APM capabilities so that engineers can truly achieve full-stack visibility at one-third the cost of competitors. This allows us to build on key wins with Capital One, Confluent, and others who moved off leading infrastructure-focused competitors. And third, we are reaching more developers with launching New Relic CodeStream for all core coding languages. CodeStream delivers insights into software performance, in line with code inside leading developer tools like VS Code, Visual Studio, and IntelliJ, empowering more developers to quickly identify issues before they hit production and accelerate engineering velocity.

We're excited to share more about our platform advantages and a future innovation roadmap at analyst day this Thursday. Let's first shift to the road ahead. We're operating in a segment with persistent secular tail lens, digital transformation, cloud migration, as well as increased technical complexity, now including generative AI, which is driving an explosion of new applications that also need observability. In the short term, cloud optimizations remain a fact of life.

But in the medium to long term, I'm confident the observability will continue to grow in our consumption business model, which is rooted in customer success and the promise of paying only for what you use. We'll continue to strengthen, as Gartner already recognizes, becoming the leading customer-preferred way of doing business. In FY '23, we successfully grew our consumption business from 56% to 76% of total revenue and exited Q4 at more than 80%. We consider a customer part of our consumption business when they adopt not only our user and data pricing, but also sign up for one of our modern consumption-buying programs with incremental usage billed automatically and revenue recognized on usage.

We've been very successful with these migrations and now plan to accelerate our completion of the migration in the next four to six quarters. Completing the migration of our subscription base will have two benefits to the business. First, it unlocks growth potential with customers, as indicated in the example I provided earlier. Second, it also means that at the end of that shift, we only have one business model, consumption, which will cost less to operate and helps us focus on the complexity of the business.

We're excited to share more about this plan and additional metrics to help you understand and model the consumption business going forward. We hope to see many of you in person at the event this Thursday and welcome everyone who can't join in person to tune into the live stream. Before turning it over to Dave, I would like to share a few thoughts on growth and our medium- to long-term prospects. I'm incredibly excited about our business.

Bookings and consumption growth in Q3 were quite strong. In Q4, we saw booking strengths. And many customers increased their consumption in line with prior quarters. We also saw increased optimization by large and hot customers, who are naturally focused on efficiency and, thereby, offsetting otherwise healthy growth.

Consumption growth came back in March, but the optimization trends limited the rebound through April. We are continuing to focus on what we control and be prudent as we enter the new fiscal year. We will continue to book deals with new and existing customers and close the gap between consumption and commitments. But as with other consumption businesses, we empower customers to decide the timing of their usage.

And we must work hard every day to deliver value in order to recognize the revenue they committed to us over the lifetime of their annual or multiyear contract. We also control our pace of innovation and our operational excellence, and continue to raise the standards of excellence. We will simplify our business and lower costs by accelerating the exit of our legacy subscription contracts over the next four to six quarters. This is faster than we contemplated at the start of the calendar year.

This is because we see the opportunity to end this year a meaningfully more efficient and profitable company poised for accelerating growth with a subscription business largely shed. We will continue to define our market with leading innovation. Generative AI is a tremendous opportunity for us to dramatically simplify observability and achieve our goal of making the practice ubiquitous for every engineer and team. Our continued investments in delivering a unique and fully integrated APM and logs and infrastructure experience build on our simple all-in-one platform message.

During these economic times, there's no better way for customers to achieve the efficiency efforts they seek while also increasing their top line and improving the productivity of their engineers. I believe our business was designed to perform in tough times. While we may not always see it immediately in our revenue, I believe we're well positioned to take market share and position our company for meaningful growth and profitability. Dave, with that, I'll turn it over to you.

Dave Barter -- Chief Financial Officer

Thank you, Bill. We exceeded the top end of our guidance for revenue and operating income. Our revenue was $242.5 million, an increase of 18% from a year ago. Operating income was $26.1 million, representing a margin of 10.7%.

This excludes the restructuring charge book in the quarter to write off our excess real estate. Our earnings per share was $0.42 cents on a diluted share count of 70.2 million. Consumption represented more than 80% of our revenue in the quarter. We're pleased with the continued growth of new customers, customer-based expansions, and the shift of customers from cloud subscriptions to consumption.

We now have approximately 12,000 customers on our consumption business model, up more than 35% from a year ago. Cloud optimization and the seasonal pattern of consumption did impact our Q4 results. As expected, consumption did declined seasonally below the peak realized in December. However, while consumption did expand in March, it was not until April that we climbed back to the December peak.

In the end, the depth of the pullback in consumption and the time it took to return was longer than we expected when we provided our prior guidance. The counterpoint to this trend was the level of customer commitments. During Q4, RPO increased by 14% year over year, driven by a healthy number of customer-based expansions. We're pleased with the growth in contractual commitments.

We remain encouraged about future growth, knowing how many customers who expanded with us in December, and March quarters are not yet consuming in line with their contractual commitments. Furthermore, customers who had been consuming at elevated levels have come down to healthier levels. We believe these two factors position the company for growth in the coming year. Turning to profitability, we're pleased with the company's progress.

Gross margin climbed to 79%, up 1.4 points over last quarter and 8 points compared to last year. This reflects our own cloud optimization initiatives and architectural enhancements. Our cost of revenue continues to decline while we grow our business and invest to expand on Microsoft Azure and to retire data centers. Our engineering team is not finished with their optimization.

They expect to capture more efficiency in the coming year while expanding our cloud footprint to new hyperscalers and regions. During the fourth quarter, we also took steps toward ensuring we could produce durable double-digit margins. As we communicated in March, we eliminated by a restructuring charge our excess real estate. Over 65% of this charge was noncash in nature.

During the quarter, we also planned our product investment and our sales investment for the coming year. We expect that we will continue investing approximately 25% of revenue in R&D. including the portion we're required to capitalize. We're excited for the upcoming product releases.

The new platform investments in generative AI, logs, and infrastructure will provide significant value to our consumption customers. We believe our product-led growth model, combined with graduating customers to a sales-led motion, will enable us to scale the company with greater efficiency. Overall, we believe that increased growth margin, combined with sales and G&A efficiency, will lead to a meaningful improvement in profitability and durable double-digit margins. Let's shift to the balance sheet.

We ended the fourth quarter with $880 million in cash, cash equivalents, and investments. As we indicated on our last earnings call, we used $500 million of our cash on hand to repay the convertible note that came due on May 1st. As of last week, we now have more than 425 million of cash equivalents and investments. We believe the company is in a strong cash position.

We are not currently interested in or pursuing additional financing at this time that would dilute our shareholders. We believe the business will continue to generate improving levels of free cash flow. It's our expectation we will generate free cash flow of approximately $150 million and end the fiscal year with approximately $500 million or more of cash, cash equivalents, and investments. While still in the early days, profitability and cash flow are starting to become a clear strength of our business.

We believe both measures will continue to step up. With that, let's move on to the guidance for Q1 and full fiscal year 2024. As we develop the guidance for the coming year, two factors influenced our thinking. First, there is uncertainty in things outside of our control.

It's not immediately clear to us how the macro climate will unfold. It's not clear when cloud optimization activity is fully in the rearview mirror. These factors compel us to be prudent. And second, as Bill highlighted, New Relic is at an exciting inflection point.

We are operating a very successful consumption business with approximately 12,000 customers and $700 million of revenue. We efficiently acquire new customers and expand customer relationships. Consumption revenue has been going in excess of 30% without the benefit of migrations and over 50%, including migrations. We believe now is the time to press and to complete the transition after three years of hard work.

It will likely introduce more turn in the coming year, but we will be a better business for doing this. It unlocks profitability. We expect operating margin in the second half of fiscal year 2024 will be approximately two times compared to our profitability in the second half of fiscal year 2023. We also believe this shift unlocks growth.

Our innovation pipeline is strong. Under a consumption contract, our customers will be able to benefit from our generative AI and expanded infrastructure and logs capabilities. We're excited for the coming year. We're confident we will exit the coming year poised to deliver meaningful levels of growth and profitability.

Factoring in these points, for the first quarter of fiscal year 2024, we expect consumption revenue to grow approximately 38%, which will be offset by the contraction of our subscription revenue. As a result, we expect total revenue between $238 million and $240 million, representing growth of approximately 10% to 11%. We expect non-GAAP income from operations between $26 million and $28 million. For the full year fiscal 2024, we expect consumption revenue to grow approximately 30%, which will be offset by the contraction of our subscription revenue.

We expect total revenue between $1.02 billion and $1.03 billion, representing growth of approximately 10% to 11%. We expect non-GAAP income from operations between $145 million and $155 million. To conclude, I am pleased with our financial model and the substantial improvement. Consumption revenue has been growing at a healthy rate.

We are delivering enhanced levels of profitability and cashflow. I believe we're offering shareholders and customers a measurably better business. With the shift consumption largely behind us in the next 12 months, we expect to deliver to shareholders levels of growth and profitability in line with market leaders. We will be holding our analyst day this Thursday afternoon, May 25th, at the New York Stock Exchange.

I encourage you to attend or listen to the webcast. We're greatly looking forward to sharing new insights on our strategy, innovation pipeline, go-to-market, and financial model. There also will be a customer panel. I'm sure you'll enjoy hearing our perspective on observability and the emerging trends.

With that, let's open up the call for questions. Operator?

Questions & Answers:

Operator

[Operator instructions] The first question is from the line of Rob Oliver with Baird. You may proceed.

Rob Oliver -- Baird -- Analyst

Great. Hi. Thank you, guys, for taking my questions, Bill and David. David, this first one's for you.

I appreciate the color you gave around how you contemplated that top-line guidance for '24. But I'd like to probe that a little bit, if I may. You know, number one, which would you say is more of a factor here? Is it sort of macro, which clearly there's some uncertainties? Or is it the latter point, too, which you mentioned, which is -- you know, sounds like there's going to be some churn. Is that churn factored in on the subscription side in addition to the normal migrations to consumption? And then, the last part of it is, you know, are there anything in the coming product portfolio that is in the guide currently, or is that incremental?

Dave Barter -- Chief Financial Officer

Rob, thanks so much for the question. I think churn is certainly contemplated, and I'll even go a step beyond that to say churn is contemplated at levels above what we've seen before. I think we're at that point where we know the residual customers pretty well. I think we have an idea of how it will unfold.

We think the migrations will be kind of clustered, if you will, in Q2, Q3, in the latter part of March. But I think we got an idea of how this will unfold. And so, that certainly weighs on my mind, having been involved with business model transitions before. So, that's kind of the first thing that certainly influence my thinking.

And then, of course, certainly, being in the consumption model, which is over 80% of our revenue, we look at consumption on a day-by-day basis. So, we know, we kind of looked very carefully at how we exited March, how we began April. And then, again, we've planned, I think, pretty carefully with our go-to-market team around how we expect consumption to work in the current environment, knowing the cloud optimizations that have taken place, and then our thesis on the cloud optimizations that could occur in the future. In regards to the second part 

Rob Oliver -- Baird -- Analyst

Yup. Sorry --

Dave Barter -- Chief Financial Officer

How about I follow it, Rob?

Rob Oliver -- Baird -- Analyst

Yup, Sorry, go ahead.

Dave Barter -- Chief Financial Officer

I think there was a second question around product. But let me -- before I go into that, did I answer the first part of your question?

Rob Oliver -- Baird -- Analyst

You did. Yup. Thank you. I appreciate that.

Dave Barter -- Chief Financial Officer

OK. And then, in terms of the second part, I think maybe what you're alluding to would be generative AI or maybe some of the enhancements that have come out on infrastructure or logs. We are not -- let me say it this way, we're excited about what those represent for customers, but we haven't specifically modeled them in terms of what they could specifically contribute to our consumption revenue.

Rob Oliver -- Baird -- Analyst

Got it, thanks. And then, if I may, just one quick follow-up for Bill. Thanks, David. Bill, just, you know, you guys, obviously, ton of progress that you've made since you arrived.

I was looking at the slide, you know, percentage of customers now with full plus capabilities, you know, getting toward 90%. So, clearly people, you know, taking more of the full New Relic platform. You mentioned how, you know, you guys tend to land small. Can you talk about that move from land to increase usage? You know, how does this typically play out, given the strength you guys have had in sort of enterprise expansions? Is there usually a lag period where we sort of see that consumption start to pick up as people get more comfortable with the solution? Thank you.

Bill Staples -- Chief Executive Officer

Yeah, good question, Rob. And this is one of the topics we're going to unpack more on Thursday at our analyst day. We've been talking about this event since I think the November earnings call. So, long in the making, and we've got both our product and go-to-market leaders that will talk specifically about how we land and expand.

But in short, I'll share. It's really been exciting to see, not only have we transitioned the business from subscription to consumption, unified our platform, backend and frontend, but we've really grown a new and vibrant, healthy, deeply engaged customer base over the last couple of years. You can see in the investor supplemental just how quickly new customers are coming into the platform. And as you mentioned, they start small with us as they come through the free tier and then add their credit card.

And then, really the pace at which they grow is nurtured through two things. First, through product-led growth motions in the product, we nurture experiences, which naturally lead to them instrumenting more and sending us more data, as well as adding more users. The rate at which they do that is obviously dependent on their business needs. Some go faster than others.

And we pick up signals from the product usage itself to then connect them with humans in the form of ISRs, who can help them get a contract, but then secures additional discounts and maybe an annual budget for them to work off of, or actually accelerate into our enterprise sales teams where they can get additional technical services and attention from our enterprise sellers, depending again on their total addressable spend or the total opportunity within their company or organization. And so, we're feeding off those product signals as soon as we see opportunity there connecting them with humans and then accelerating the growth into larger customers over time. We see -- in terms of timing, we see that can happen sometimes within one to two quarters. Other times, it takes customers a few quarters to fully mature into a sales-led organization for us.

Rob Oliver -- Baird -- Analyst

Thank you, guys. See you Thursday.

Operator

Thank you, Mr. Oliver. The next question is from the line of Kingsley Crane with Canaccord. You may proceed.

Kingsley Crane -- Canaccord Genuity -- Analyst

Good afternoon. Thanks for taking my question. So, one for Bill, one for Dave. Bill, appreciate the comment on being first to market with generative AI with Grok.

How should we think about the business impact of Grok in the near term? Is this improving customer experience? And then, what is the pathway for this to drive consumption?

Bill Staples -- Chief Executive Officer

Yeah. Exciting topic. I'm sure your newsfeeds like mine are filled with lots of excitement about what generative AI holds for each of us collectively and individually. I believe New Relic really sets ourselves up well for the emergence of generative AI, which thrives on large data sets.

As you know, we talk about it all the time. We're the only observability platform to truly have a unified platform where all data types and data sources can be ingested and stored and accessed with one API and one query language. So, in the short term, the opportunity for customers who want to take advantage of this technology is to bring us more data. It increases data consumption, obviously, and can help them then unlock those insights more quickly as we build out our generative AI capabilities.

One of the reasons we've been able to be first to market is this unified data platform, an all-in-one model that we've been innovating the last couple of years. It allowed us to be first to market an MLOps solution, the first to support OpenAI GPT monitoring, and the first to introduce a generative AI assistant with New Relic Grok, which will dramatically simplify how to get insights out of telemetry data. We're excited to share more with that, in fact, potentially a live demo here on Thursday at the analyst event. So, I encourage you to tune in for that.

On the business model side and how it's going to help our business grow, it's really also uniquely aligned with the business model we put in place. Remember, three years ago when we pivoted from product-specific packaging and pricing to the platform model with users and data, we intentionally shifted the cost of data to be as low as possible to allow engineers to instrument more systems and make it easier to standardize on New Relic, offsetting less-efficient and higher-priced competitors. New Relic Grok then represents a large opportunity to increase user engagement on top of that data over time by dramatically simplifying the ability to scan and get insights from the data using natural language. So, we believe our business model actually helps capture that expansion better than competitors who are still priced on effectively host-based models that are really expensive data ingest meters.

Kingsley Crane -- Canaccord Genuity -- Analyst

That's really helpful context and certainly exciting. So, for Dave, you know, when we look at the numbers, it looks like most of the consumption growth in excess of guided total revenue growth is being driven by conversions in this next year. How should we think about a conversion rate from nonconsumption to consumption embedded in that guidance?

Dave Barter -- Chief Financial Officer

Yeah, that's a -- I'll have to figure out how we lay it out better in future slides. I think the -- maybe the best way to think about it is when we think about the exit rate of subscription, it exited around 38 million and change. It will progressively step down quarter over quarter. And what you'll see is that consumption will step up quarter over quarter.

There won't be a dollar for dollar. So, what will happen in this case is our expectation is that as people shift from subscription to consumption, there will be an initial optimization before growth occurs. And so, I'd say net-net, we're actually not looking at the shift from subscription to consumption as a near-term catalyst, but probably a longer-term catalyst as people adopt more and more capabilities. Our thesis around the core drivers, and I think we put this in the investor supplemental last year, if you were to exclude the effect of migrations, consumption was growing just over 30% in Q4.

Our thesis is this year, what you'll see in consumption is that excluding migrations, it ends up growing around 20%, plus or minus a few points. And I think that is probably the better way to think about it is that, year over year, we were -- you know, last year growing kind of in the 30s, this year will grow around 20 again, plus or minus a few. So, hopefully, that kind of helps you set up the model, both in terms of the SEC geography, but then also in terms of the core drivers and trends.

Kingsley Crane -- Canaccord Genuity -- Analyst

Makes perfect sense. Thank you.

Dave Barter -- Chief Financial Officer

OK. Super.

Operator

Thank you, Mr. Crane. Our next question is from Mike Cikos with Needham. You may proceed.

Unknown speaker

Hey, guys. This is [Inaudible] on for Mike. Thanks for taking our question. Bill, start with you.

We've picked up in the field that New Relic is specifically building momentum and credibility around OpenTelemetry use cases with developers. Can you talk to the importance of OpenTelemetry to your customers and also why other competitors aren't being more proactive and leaning into OpenTelemetry?

Bill Staples -- Chief Executive Officer

Yeah, thank you. OpenTelemetry has been something that we've been excited about for three years, actually. When I first joined, it was emerging as a cloud computing -- cloud native computing foundation project and something that I recognized as an emerging standard that would be important to our category going forward. We've been investing deeply in it.

In fact, we're one of the top contributors to this standard, which is, effectively, a data standard for telemetry data, defines a data model, and a way of sending and capturing that data which can be vendor neutral. We believe it's incredibly important because every piece of hardware, every operating system, every language, every cloud service, every device in the future, will emit telemetry data, often by default, or one config switch away. And that allows engineers to then capture the telemetry data coming off of all of those systems, all of those technologies. And the winning observability platform will be the platform that can capture that data at scale in a very efficient way and then deliver insights on that data.

So, that is what we've been focused on, not only nurturing that standard, but building the data platform that makes it possible to unlock the value of that open standard. And I think that's starting to get recognized by customers. Many customers want to embrace standards as a way of not only making it easier to adopt instrumentation and unlock it without having to go get proprietary agents and configure it separate from the technology choices they make, but also to allow them more flexibility and picking the vendor of choice that's going to give them the most efficiency, especially in this economy, and the best insights and experience. And that's exactly what New Relic's been focusing on, and I think it's starting to get recognition for it.

Unknown speaker

Awesome. That's very helpful. Thank you. And, David, can you help investors think about the anticipated pricing benefit incorporated in the guidance? And more specifically, what's the implied benefit from adoption of New Relic's Data Plus bundle?

Dave Barter -- Chief Financial Officer

Yeah, it's a great question. I think, overall, if you recall, the December renewal cohort was probably our first big cohort that started getting the benefit of the price. We saw that again in March. And we certainly factored in a structural tailwind associated with continuing to capture price this year.

Data Plus, I'd say, is -- you know, Bill, I think we'd still say it's, you know, kind of early days for Data Plus. I think we're all very pleased with the adoption. Customers are certainly getting the benefit, whether it's through vulnerability management, some of the additional features like FedRAMP, HIPAA. So, I think, overall, the Data Plus adoption is well on its way.

And again, it's one of those elements that will give us probably a structural tailwind around both price and mix over time. So, I would say we're kind of well on our way in that area.

Unknown speaker

OK, great. Thank you, guys.

Dave Barter -- Chief Financial Officer

Thanks for your question. 

Operator

Thank you. Our next question is from Fred Lee with Credit Suisse. You may proceed. 

Tim Jausovec -- Credit Suisse -- Analyst

Hi, this is Tim on for Fred. Bill, the first question for you. You recently launched a new deeply integrated infrastructure monitoring and APM solution. Could you give us concrete examples on how it is differentiated in the marketplace, especially relative to some competitors which have been marketing itself as a single pane of glass historically? And how do you expect it to impact your competitive win rates?

Bill Staples -- Chief Executive Officer

Great question. We're really excited about the new infrastructure experience that we launched. Thanks for calling that out. It was just last week.

And it's been a journey for us. We first introduced infrastructure monitoring a few years ago through an acquisition. We've been improving the experience as we move to the all-in-one platform. But this, for us, was a chance to really take it to another level.

And, really, the theme to think about is infrastructure monitoring in a silo can only get you so far. What's really valuable for engineers is understanding how that infrastructure connects to the applications and services that run on that infrastructure, and then the users and the devices that may be connecting to those applications and the total experience from, you know, that infrastructure all the way up to the end user. And that is what we've been striving to deliver in this experience that's so unique and differentiated. There's now one spot that engineers can go to see infrastructure and applications and services connected and correlated.

So, you can see, both within the APM experience that New Relic's known for as world class, the infrastructure underneath the apps and services and the health of those correlated. You can also see, from the infrastructure experience, the set of applications and services running on them and the correlation between those things. It's also a goal of ours to deliver through this experience. The ability to understand when something goes wrong in any layer of the stack, whether it's in your infrastructure or in the application, what tends to happen is engineers from all teams join the call to try to tease apart where the failures are happening.

And with this new experience, you can now see, pinpoint where the issue is, as well as the blast radius or the impact of the result and its cascading impacts on other systems that are depending on it. And last, I'd say one of the other major differentiation points is just the incremental cost and total TCO is so much better. With New Relic, the incremental cost at infrastructure monitoring per host can be two to four times less expensive with New Relic. So, for any customer that's got APM already and maybe using an alternative infrastructure monitoring solution, it's a no-brainer to add that telemetry to New Relic now to get that deeply connected experience and save money in the process.

Tim Jausovec -- Credit Suisse -- Analyst

Thank you. And then, Dave, if we look at the numbers you gave us on consumption and subscription revenue lines over the past two years and cut them, it seems like the revenue that you lost from subscription had roughly a 5% uplift as that converted into consumption. And then, on a go-forward basis, if we assume the 20% growth excluding migrations, it will imply that for next year, roughly the 120 million in revenue that you're guiding to losing in subscription revenue only converts to roughly 70 million consumption revenue. So, a much more meaningful haircut.

And so, I'm wondering, relative to the customers that were migrating off of subscription last year, the cohort of customers that will migrate over the next six to eight quarters, is there something fundamentally and structurally different about that customer cohort that has you expect higher churn rate?

Dave Barter -- Chief Financial Officer

Yeah, it's a great question. Think of it as a -- probably as a pyramid. And there is a top cohort. And I think, traditionally, out of the top cohort in any given quarter, we've had a couple of them churn.

We kind of have a middle cohort, and it tends to be five-figure contracts, and then I have a bottom cohort. And I think they're out of the top cohort. I think my term will be higher, and those are some more material contracts. I think as I press down in my middle cohort, it'll probably be in line with the average.

I think the challenge that I'll also run into, Tim, is that at my very bottom cohort, I actually have a number of people who qualify for the free tier. And what I should have called out earlier is there is, I guess, that bottom cohort is about 2,000 customers. And I think about 1,000 of those customers could potentially just use the free tier to accomplish what they want. So, I think I will have some customer count pressure, as well as some ACR pressure, as I ultimately kind of press over the next four to six quarters to complete the migration.

And I guess it's not a huge surprise from this standpoint. We've been at this for a little over three years. You kind of get to that point in any transition where you have a little bit more work to do. And I think this last wave will behave a little bit different than the prior waves, which, obviously, were the earlier adopters and the people that moved quickly.

Tim Jausovec -- Credit Suisse -- Analyst

Thank you --

Dave Barter -- Chief Financial Officer

And so, that's the reason, Tim, for being a little bit more conservative or a little bit more cautious, where these could have different performance characteristics.

Tim Jausovec -- Credit Suisse -- Analyst

That makes sense. Thank you very much.

Dave Barter -- Chief Financial Officer

Thanks so much, Tim, for the question.

Operator

Thank you. Our next question is from the line of Rishi Jaluria with RBC. You may proceed.

Rishi Jaluria -- RBC Capital Markets --- Analyst

Oh, wonderful. Thanks, guys, so much for taking my question. Appreciate all the detail on the slide deck. It's almost like a mini analyst day of its own, which is really helpful ahead of Thursday, which we're really looking forward to.

I wanted to start by asking another generative AI question. But maybe thinking about it a little bit, you know, on the secular tailwind side, right? So, right here, at Microsoft, at their user conference, they're talking about 45% improvement in developer productivity with, you know, some of the generative AI tooling out there, 46% of new code being written by generative AI. Feels like this is going to just drive up the number of applications almost exponentially. Can you talk about how you're thinking about that as a potential secular driver? And what sort of, you know, kind of investments do you want to make to be able to capitalize that and have a right to win for a good share of those workloads? And I've got a quick follow-up.

Bill Staples -- Chief Executive Officer

Yeah, great question, Rishi. As I mentioned earlier, we're very excited about generative AI, both because, as you mentioned, it's potentially a new secular tailwind. We talked about the three already. One being, you know, cloud migration and the growth of public cloud, another being digital transformation.

And the third being technical complexity. And one way to think about generative AI is it's another new technology layer to adapt and incorporate into applications. You could also think about it, like you said, as a fourth driver, because it's driving a wave of not only enhanced applications, but new applications that engineers need observability on. It's why we wanted to be first to market to provide monitoring for generative AI-based applications with OpenAI's GPT.

We were first to provide the ability to look at performance of those applications and the cost associated with them. And we're setting ourselves up there because, you know, ultimately, we believe the transformative impact of generative AI will be across all industries, all segments. And so, we want to be best in class there. Like I said, though, the other really key part is incorporating generative AI into the observability experience, where our business model is actually uniquely aligned, where other competitors in the observability category monetize really on data ingest with high-priced host-based SKUs.

We monetize both on data ingest, which has been growing really well, really successfully, but also on user engagement. And we believe the power of generative AI for the observability category itself can dramatically simplify access and speed to insight. And that's why we were also first to launch New Relic Grok. And we're increasingly innovating there to unlock that vision we have of making observability ubiquitous and reaching every engineer.

Rishi Jaluria -- RBC Capital Markets --- Analyst

All right, great. Thanks. That's really helpful. And then, in the slide deck, on Slide 28, you talk about full platform adoption and usage of multiple capabilities across New Relic versus a competitor with very subtle color coding.

Wanted to get a sense maybe, if you could help us understand, how are you measuring that? And what sort of efforts have you made to just drive greater usage of, you know, multiple capabilities across the platform? Thanks.

Bill Staples -- Chief Executive Officer

Yeah, good question. You know, it's a chart, in particular, that I think reflects the strength of our all-in-one platform model. Three years ago, we foresaw this moment happening, which is the need for every enterprise to be more efficient to drive standardization of their observability practice. And we wanted to remove all the packaging and pricing barriers, which would prevent them from standardizing on New Relic.

And you can see through that chart how I think we're the No. 1 leading vendor in terms of platform adoption because more customers use more capabilities on New Relic than anyone else I'm aware of. And the way we've done that is not only remove the packaging and pricing barriers, which makes it very easy, it's product-led growth motion for an engineer who maybe came to New Relic for APM, but now, with the new integrated experience, can see inside their APM experience, the infrastructure is not yet connected. And it's one click away to connect it.

They can see the logs are not yet flowing into the application. Again, it's one click away to bring those logs in. And that makes them the expansion of customers once they come into the platform so much more quick and allows them to get more value and for us to grow our revenues. The last thing I'll say about the expansion is we also then take the signals of how customers are using the product and engaging with it and feed it into our sales organization so that they know where customers are engaging and interested and can start human conversations, again, to more quickly train and enable and unlock budgets for our customers at scale.

Rishi Jaluria -- RBC Capital Markets --- Analyst

All right, wonderful. That's really helpful. Thank you so much.

Operator

Thank you, Mr. Jaluria. The next question is from the line of Erik Suppiger with JMP Securities. You may proceed.

Erik Suppiger -- JMP Securities -- Analyst

Yeah, thanks for taking the question. First off, I'm just curious. Obviously, there's been rumors of private equity interest in New Relic. I'm curious if there are any comments that you have to respond to that.

Then secondly, can you talk a little bit about -- you had mentioned your objective to grow at market rate. I think you suggested that's 25%. Was there any comments that you were making about timing of when you intend to reach the market rate growth?

Bill Staples -- Chief Executive Officer

Yeah, why don't I take the first one? And, Dave, you can talk about the second one. Of course, we also have more on that coming up on Thursday. With the first part of your question regarding the rumors, I assume you're speaking about the Wall Street Journal article about rumors of a transaction. There are always rumors in the market.

As you can imagine, we don't comment directly on them. We're committed to acting in the best interests of our company and our shareholders as any public company would. For today's discussion we're focused on our customers and continuing to execute our value creation strategy. And that's also what we'll be focused on, on Thursday for all those who can attend.

So, I encourage you to come out and listen in.

Dave Barter -- Chief Financial Officer

Erik, and then in regards to market --

Erik Suppiger -- JMP Securities -- Analyst

Very good. Thank you.

Dave Barter -- Chief Financial Officer

Erik, in regards to market growth, I think, on Thursday, you'll also receive an updated financial model. Just to be clear, our focus is on profitable growth, and so we'll talk a lot about our roadmap and how we're going to get to rule of 40 plus. I think through this guidance, certainly, you're seeing a guide on profitability of 14 to 15. And I think as you heard in our prepared remarks, I think we know how to get to 15, and we're working on that pathway to 20.

And so, that is something that we're pretty excited about as we complete the transition of all subscription customers into consumption. We believe that we're setting up next year, you know, to be well on that path. So, our view is that we are bringing the pieces together, and we're pretty excited to watch all the pieces come together, particularly as we look forward to operating one business model.

Erik Suppiger -- JMP Securities -- Analyst

Thank you --

Dave Barter -- Chief Financial Officer

So, more to come on that on Thursday afternoon. Thanks, Erik, for the questions.

Operator

Thank you, Mr. Suppiger. The next question is from the line of Derrick Wood with TD Cowen. You may proceed.

Andrew Sherman -- Cowen and Company -- Analyst

Oh, great. Thanks. It's Andrew on for Derrick. Dave, for you on the optimizations, just wondering if you could give any more color on what you're assuming there in guidance for both of those two headwinds.

How much de-risking have you done? And how is that factored into the 30% consumption guide?

Dave Barter -- Chief Financial Officer

That's a great question. We carefully went through our customer cohorts. Obviously, I can't pledge to you that we got this perfect, but we really spent a lot of time going through the cohorts, how the optimization has taken place. I think you have our very best view looking at how we exited March, how we began April, and then how we think the game plays out.

So, I think you have our closest to the pin view on in terms of how this unfolds.

Andrew Sherman -- Cowen and Company -- Analyst

OK, great. And then, Q4, it was a big renewal quarter. Sounds like it was a strong bookings quarter. Maybe just talk about how those commitments came in relative to what you expected.

What is the growth you're seeing on average, apples to apples on renewals? How do you kind of gain more budget share there?

Dave Barter -- Chief Financial Officer

Yeah, we were real pleased with how it expanded again. I think you saw that percolate through RPO, both in terms of total, as well as in terms of current. I guess the thing that I would highlight for you and just to keep in mind on consumption is even with an expanded commitment, we still have to wait for it to happen. And so, there is a little bit of a difference with our business model, where if I were guiding on subscription, I'd be guiding up several points right now based on the bookings.

But it takes time. Similar to some of our friends in consumption, where you can take down a commitment, but it still takes time for the customer to implement and ultimately to garner value. So, once they garner value, we generate revenue. But I'm pleased, December was a good quarter and March was a good quarter end.

Pleased with the commercial execution around taking expanded commitments and setting up the business for growth.

Andrew Sherman -- Cowen and Company -- Analyst

Great. Thanks, guys.

Dave Barter -- Chief Financial Officer

Thanks for the questions. Thank you, Mr. Wood. Our next question is from Sanjit Singh with Morgan Stanley.

You may proceed.

Theo Thun -- Morgan Stanley -- Analyst

Great, thank you. This is Theo Thun on for Sanjit. I just want to build on sort of the last question. And as we're kind of thinking about bridging the Q4 results, the Q1 guide, and thinking about the usage trends sort of in the quarter, you talked a little bit about March and April.

Is there any way you could sort of contextualize that further and maybe expand that into what you see in May and sort of how that sets up with one month less in the quarter?

Dave Barter -- Chief Financial Officer

It's a great question. I think we were -- I think what we tried to share in our prepared remarks was that the seasonal component of peaking in the holidays and then coming down and hitting the trough in February, kind of, I'll say the curve kind of unfolded as expected. It was certainly deeper because we did see the cloud optimization, and that was something that was outside the seasonal element. And then, it came back through March, but we didn't hit our peak in March as we had planned.

And I think I shared in my remarks that peak actually unplanned. And as I think we shared in our remarks, that peak actually happened in April. And so, we're kind of tracking along a slightly different curvature. And that's what is really reflected in the remark, where, in Q4 and in prior year, we were looking at -- excluding migrations growing about 30% or greater.

And that's why I think we shared the remarks so we think this year will probably be closer to around 20% plus or minus a handful of points. And I think that's what we're tracking right now. Again, we're going to continue working very closely with our customers around migrating subscriptions over to consumption and just continue bringing the business model together to have one business model by the time we exit the year.

Theo Thun -- Morgan Stanley -- Analyst

OK, great. And then, just a quick one. A customer is still reducing usage toward the end of their contracts to get more in line with their commitments. Is that the dynamic you're seeing, or something to think about on a go-forward basis?

Dave Barter -- Chief Financial Officer

It is. So, we do see that pattern playing out. And that's where our focus has been shifting to multiyear contracts and also renewing customers early to avoid that type of dynamic from kicking in. And so, that is a focus area and will continue to be a focus area for the next couple of quarters.

Theo Thun -- Morgan Stanley -- Analyst

Got it. Great. Thank you.

Dave Barter -- Chief Financial Officer

Thanks so much for the questions.

Operator

Thank you. Our next question is from the line of Taz Koujalgi with Wedbush. You may proceed.

Taz Koujalgi -- Wedbush Securities -- Analyst

Hey, guys. Thanks for taking my question. I have a two-part question. You've been migrating customers now from the subscription model to consumption for almost three years.

Can you comment on when a customer moves initially from subscription to consumption? What is the initial drop in their spend? Does it really quantify what that drop looks like? And then, how long does it take in terms of, I don't know, months or quarters for them to go back to their run rate that they had on the subscription arrangement? Any anecdotes or any color given what you've seen so far in the last few years?

Dave Barter -- Chief Financial Officer

It's a great question, and I'm not sure if I have a fully satisfactory answer because the cohorts vary a lot. In general, what we'll see is that somebody has been using an extensive amount of logs, as one example, or maybe they are ingesting massive amounts of data for something to which it was a fixed price arrangement. And so, I think as they think about really how to set up observability, I think that usually results in the pullback where there is an optimization and there's an implementation around using either some of our technical advisors or a center of excellence to really instrument observability probably the right way. And that's usually what results in the pullback, from my perspective, at least, as I've engaged accounts.

And as they identify that footprint and best practices that -- recently, I saw a customer suddenly start sending and going into Prometheus, as an example, or I've seen people start to expand new capabilities and workloads. But there is a rationalization process, and I wish I had a better answer for you where I could give you an exact amount of time it takes. But it does vary cohort by cohort that, unfortunately, doesn't yield to a standard answer.

Taz Koujalgi -- Wedbush Securities -- Analyst

Got it. Thanks. And then, just a follow-up, so you're -- it looks like you'll be migrating most of your base to consumption by next year, by fiscal '24. Does that mean that this is the last year when that will get to drag on your overall growth? And then, fiscal '25 onwards, your overall revenue growth should be in line with your consumption revenue growth? You shouldn't have any drag in --

Dave Barter -- Chief Financial Officer

That's correct. Correct. I think we called out four to six quarters. But clearly, if we can wrap it all up in four quarters, that's really our preference.

So, we'll be working hard to wrap it up this year so that as we go into fiscal '25, that would be the first year where we wouldn't have that headwind. But it could take more than four quarters. But again, clearly, we're motivated.

Taz Koujalgi -- Wedbush Securities -- Analyst

OK. Got it. Thank you very much.

Dave Barter -- Chief Financial Officer

Thanks so much for the questions.

Operator

Thank you, Mr. Koujalgi. The next question is from Michael Turits with KeyBanc. You may proceed.

Michael Turits -- KeyBanc Capital Markets -- Analyst

So, multiple questions, and I'm sorry if this was covered before. But you have some stable growth and didn't seem to be seeing the effects of cloud optimization much in prior quarters, even though the big cloud guys were. And one of your, sort of, competitors was. In this quarter, certainly, Microsoft talked about starting the lap optimization and a slower rate of decel.

And your competitor also talked about usage growth rebounding. So, what's the difference in terms of your trajectory, which seemed to have been stable and this quarter got worse versus those other two who had been getting worse in the last quarter and arguably seemed to improve slightly from a second derivative perspective this quarter?

Bill Staples -- Chief Executive Officer

Yeah, thanks Michael. You know, as we thought about the guidance -- and David laid this out earlier so let me take a crack at it. As we thought about the plan for FY '24, there's really three ongoing trends that are useful to tease apart. The first is our consumption business has been growing very strongly, and it's a source of confidence for us, both from past quarters, as well as our future long-term prospects for the business.

That's not been visible to you in the past. It's now in our 10-K and in the investor supplemental. And, you know, we're excited to share that and unpack it more on Thursday as well. Second, though, and equally now visible, is the disaggregation of that from our subscription business, which has been offsetting the success we've been having with consumption and continues to drag on total company growth and profitability.

And that's why, you know, I understand so many of the questions have been, including the last one, have been around that subscription migration and the final chapter of driving that, including the prospects for increased churn. The third one and the one that you're asking around are the ongoing effects of the macro and optimization efforts. And when we talk about cloud optimization, we're talking about not only the cloud optimization that customers may be doing with their hyperscale provider, Azure or AWS or GCP, but also cloud optimization that applies to New Relic, even though we see that optimization in the long term being an opportunity for us because we've got the all-in-one model. We're the easiest for customers to standardize on, and so we can offset higher-priced competitors.

It's also an opportunity for customers to look at, are they getting value from every dollar of their New Relic spend. And we see them, in some cases, optimizing the number of users they have in the platform or the amount of data they're sending us. And that's independent, again, from their hyperscaler public cloud optimization that they may also be doing. As we looked at our FY '24 plan, we realized the right thing to do is to square these three trends with a strategy that accelerates New Relic's total company growth and profitability.

So, for FY '24, we're going to accelerate the long-term growth of the consumption business by embracing those optimization efforts and helping customers choose New Relic as the standard. We're also going to simplify and grow the consumption business by accelerating the transition of those subscription customers over the consumption at a rate that we previously hadn't anticipated so that we can have a higher growth rate total company -- a higher total company growth rate, as well as increased profitability by having one business model to focus on and grow over time. That was probably a longer answer and broader perspective on the cloud optimization question, but, hopefully, it gives you the color on how those three trends interplay in our strategy.

Michael Turits -- KeyBanc Capital Markets -- Analyst

That was very helpful. Thank you, Bill.

Operator

Thank you, Mr. Turits. Our last question is from Mark Cash with Raymond James. You may proceed.

Mark Cash -- Raymond James -- Analyst

All right, thanks. This is Mark on for Adam. Thanks for the questions. Bill, maybe building off a couple of questions you've gotten so far, there's strength in the platform adoption while there's an extra taste for higher churn that you've alluded to a few times as customers who are subs and including the top cohort.

So, where are these customers going if churning? And are these customers typically buying fewer products from you?

Bill Staples -- Chief Executive Officer

Yeah, good question. You know, in the disaggregation of the business, we talk about a total of 16,000 customers, 12,000 on consumption, about 4,000 in subscription. And Dave talked about, for those 4,000 kind of three cohorts, a small number of very large contracts, you know, a moderate number of medium-sized, say five-figure contracts, and then, 2,000 that are long-tail, small customers. And a thousand of those customers probably belong in our free tier.

So, they're not going anywhere with those -- let's start with those thousand. They're staying on New Relic. They just qualify for our free tier going forward, and it saves them money. And we have an opportunity to continue to nurture them back into being paid customers, which we believe we will do over time.

The other thousand of that long-tail customer base, frankly, exhibit a lot of behaviors of low engagement. And, you know, they may have signed up for New Relic, they're still in legacy models. They may have signed up five years ago, 10 years ago with a credit card. They don't even maybe realize they're still paying for New Relic.

And those customers, once, you know, we nurture them into the consumption model, may choose to just cancel the subscription. They no longer need the service. For the medium- and large-sized customers, as Dave said, we've had a lot of success moving those in the past. We'll continue, we believe, to have success.

But these are customers that have been in the subscription model for three years. Despite previous opportunities to move, they've often gotten very favorable pricing terms. And so, they've been reluctant to move because they know they've got a, you know, great deal where they're at. And now that the time has come to move them, you know, there's increased pressure and more negotiation that we need to do to get them into the consumption model.

Some may choose to go to competitors. Others, we see choose to go back to open source and try the post-it-your-own route. But many will stay on New Relic. We believe the majority will stay on New Relic but, potentially, with lower spend or a different pricing arrangement.

And so, that's what -- all has been factored into the guide for FY '24.

Mark Cash -- Raymond James -- Analyst

Very helpful. Thanks for all that information. And, David, if I can ask you one. I've just seen your K.

You guys published that 73% of RPOs are to be recognized within 12 months, but New Relic typically provided cRPO as a 24-month number, besides the last two filings. So, could you provide an update on the growth rate of 12-month cRPO or the value for a year-ago period?

Dave Barter -- Chief Financial Officer

So, for 12-month cRPO?

Mark Cash -- Raymond James -- Analyst

Yes.

Dave Barter -- Chief Financial Officer

Let's see if I have that in my fingertips. If not, I'll find a way to roll it into one of our other mechanisms for reporting. I think it was up 10% roughly, but --

Mark Cash -- Raymond James -- Analyst

OK, thank you, that's very helpful.

Dave Barter -- Chief Financial Officer

I think we're looking at about 600 million for March of '23 compared to about 550 for March of '22.

Mark Cash -- Raymond James -- Analyst

Great, thanks so much.

Dave Barter -- Chief Financial Officer

Yep.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Ingo Friedrichowitz -- Senior Vice President of Investor Relations and Corporate Finance

Bill Staples -- Chief Executive Officer

Dave Barter -- Chief Financial Officer

Rob Oliver -- Baird -- Analyst

Kingsley Crane -- Canaccord Genuity -- Analyst

Unknown speaker

Tim Jausovec -- Credit Suisse -- Analyst

Rishi Jaluria -- RBC Capital Markets --- Analyst

Erik Suppiger -- JMP Securities -- Analyst

Andrew Sherman -- Cowen and Company -- Analyst

Theo Thun -- Morgan Stanley -- Analyst

Taz Koujalgi -- Wedbush Securities -- Analyst

Michael Turits -- KeyBanc Capital Markets -- Analyst

Mark Cash -- Raymond James -- Analyst

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