What is Quarterly Revenue Growth?
408 reads · Last updated: December 5, 2024
Quarterly revenue growth is an increase in a company's sales in one quarter compared to sales of a different quarter.The current quarter's sales figure can be compared on a year-over-year basis (e.g., 3Q sales of Year 1 compared with 3Q sales of Year 2) or sequentially (3Q sales of Year 1 compared with 4Q sales of Year 1). This gives analysts, investors, and additional stakeholders an idea of how much a company's sales are increasing over time.
Definition
Quarterly revenue growth refers to the increase in a company's sales over one quarter compared to another. The current quarter's sales can be compared to the same quarter in the previous year (e.g., comparing the third quarter of year one to the third quarter of year two) or sequentially (e.g., comparing the third quarter of year one to the fourth quarter of year one). This allows analysts, investors, and other stakeholders to understand the growth of a company's sales over time.
Origin
The concept of quarterly revenue growth originated from the need for corporate financial reporting, especially in the mid-20th century, as the global economy rapidly expanded. Companies needed to report their financial status more frequently. Quarterly reports became standard, helping investors and management to understand a company's financial health more promptly.
Categories and Features
Quarterly revenue growth can be categorized into year-over-year (YoY) growth and quarter-over-quarter (QoQ) growth. YoY growth compares the same quarter from the previous year, eliminating seasonal effects. QoQ growth compares the previous quarter, reflecting short-term business changes. YoY growth is typically used for long-term trend analysis, while QoQ growth is more suitable for short-term analysis.
Case Studies
For example, Apple Inc. saw a 10% increase in revenue in the third quarter of 2023 compared to the third quarter of 2022, indicating the continued popularity of its products in the market. Another example is Amazon, which experienced a 5% QoQ revenue growth in the fourth quarter of 2023, primarily driven by the holiday shopping season.
Common Issues
Investors often overlook the impact of seasonal factors when analyzing quarterly revenue growth, leading to misjudgments about a company's actual growth. Additionally, relying solely on quarterly revenue growth data without considering other financial metrics can result in one-sided investment decisions.
