“Needed sleep” is just a timer
Randell
Hi Bobby Tromm, The “Sleep Needed” alarm uses your Time in Bed against your Sleep Needed to determine the wake-up time. However, it doesn’t detect when you actually fall asleep in real time. This is because sleep stage data, including the moment you fall asleep (First sleep stage data), isn’t available to the app until after the sleep session ends, or when your Apple Watch logs it to Apple Health.
It is recommend turning on the alarm only when you're about to sleep.