---
title: "What Is ARR Bridge?"
term: "ARR Bridge"
description: "An ARR bridge is a reconciliation walk from opening to closing annual recurring revenue in a period—showing how new sales, expansion, churn, and downgrades net to net ARR change."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/arr-bridge
---

# What Is ARR Bridge?

> An ARR bridge is a reconciliation walk from opening to closing annual recurring revenue in a period—showing how new sales, expansion, churn, and downgrades net to net ARR change.

An **ARR bridge** (ARR waterfall) decomposes change in [annual recurring revenue](/glossary/arr) over a quarter or year into new logos, expansion, churn, and contraction.

## How it works

Finance starts with opening ARR, adds **new ARR** from first-time customers and **expansion ARR** from upsells, then subtracts **churned ARR** (lost customers) and **contraction ARR** (same customer paying less). The closing ARR should tie to the live subscription ledger—bridges that do not reconcile invite diligence pain.

Boards compare bridges across quarters: improving expansion and falling churn signal product-market fit deepening; growth only from new logos with high churn suggests a leaky bucket.

## Why it matters

- **Founders:** Build bridges monthly so fundraising decks are not a fire drill. Segment by customer size or product line when stories differ.
- **Investors:** Bridges feed net revenue retention and CAC payback analysis—ARR alone is incomplete.
- **Operators:** Customer success owns contraction and churn lines; sales owns new and expansion.

## Common mistake

Showing gross new ARR in headlines while burying churn in a footnote. Investors normalize for net bridge quality every time.

## Related ideas

[ARR](/glossary/arr), [ACV expansion](/glossary/acv-expansion), net revenue retention, and cohort retention analysis.

## FAQ

### What is an ARR bridge in simple terms?

Start with ARR on January 1, add new customer ARR and expansions, subtract churn and contractions, and you arrive at December 31 ARR. The bridge shows each bucket that moved the number.

### Why does an ARR bridge matter?

Headline ARR growth can hide problems—high churn offset by a few whale logos. Bridges expose quality of growth and guide whether to invest in retention vs new sales.


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Source: https://venturecapitaltracker.com/glossary/arr-bridge