New Bookings

When a company signs a contract, that is not yet revenue. The customer has merely committed to paying in the future. New Bookings count exactly these commitments: the total value of all contracts newly signed within a quarter or a year. An example: a software vendor signs a three-year contract worth 90,000 euros in January. The full 90,000 euros count as January’s New Bookings, even though the company is only allowed to recognize 2,500 euros of it per month in its books. The term originates from English and is usually left untranslated even in German business reports.

Looking ahead instead of in the rearview mirror

The reported revenue of a quarter mainly tells the story of what was sold in the past. With subscriptions, a contract is spread across months or years. Today’s revenue therefore largely stems from deals closed long ago. Anyone wanting to know what comes next has to look elsewhere.

This is where New Bookings come in. They show how well sales is performing right now, and they do so before it shows up in revenue. If new bookings rise strongly for two consecutive quarters, revenue is almost certain to follow suit. If they collapse while revenue still looks good, that is a warning sign. Analysts and investors therefore often react more strongly to this figure than to revenue itself.

One drawback: New Bookings is not a legally regulated metric. Every company defines it somewhat on its own terms. Some count the full contract value, others only the first year. Some include renewals, others count only genuine new business. Comparing two companies is therefore only possible with caution.

From signed contract to booked revenue

A deal’s journey runs through three stages. First comes the booking: the customer signs, and the company adds the contract value to its bookings. Then comes the invoice, referred to in industry jargon as billing. Only after that follows revenue, which in accounting terms is always recognized only for the period in which the service is actually delivered.

This sequence explains another metric often mentioned alongside it: deferred revenue. This is money that has already been collected but may not yet be recorded as revenue. It sits on the balance sheet as a liability, because the service is still owed. Bookings, deferred revenue, and revenue thus describe the same deal at three different points along its journey.

Also related is the term order backlog, or simply backlog. It describes the sum of all contracts already booked but not yet fulfilled. New Bookings are the inflow into this basin, revenue is the outflow from it. If the backlog grows, the basin is filling faster than it is emptying.

Where the figure shows up in quarterly reports

New Bookings is most commonly seen at cloud and software companies that sell their products on a subscription basis. SAP, for instance, regularly reports on the value of newly signed cloud contracts. Consulting firms, defense contractors, and plant engineering companies also use the metric, since their projects run over several years.

In the AI space, this figure is currently especially interesting. Providers of AI services want to show that their new products are actually being sold and not just generating attention. Large multi-year contracts with data center operators or enterprise customers drive bookings sharply upward, long before the corresponding revenue becomes visible.

Anyone reading a report on this should check two things. First: over what period does the booked contract value run? A ten-year contract sounds enormous but spreads out quite thinly. Second: is the reporting adjusted for currency effects? For international corporations, a weak dollar can significantly distort the figure.