Revenue growth percentage measures how much a company’s revenue increased (or decreased) from one period to the next, expressed as a percentage. The basic formula is simple: subtract the earlier period’s revenue from the later period’s revenue, divide by the earlier period’s revenue, then multiply by 100. That single calculation works for comparing any two periods, whether month-over-month, quarter-over-quarter, or year-over-year.
The Basic Formula
Revenue Growth % = ((Current Period Revenue – Prior Period Revenue) / Prior Period Revenue) × 100
Say your business brought in $500,000 last year and $575,000 this year. Plug those numbers in: ($575,000 – $500,000) / $500,000 × 100 = 15%. Your revenue grew 15% year over year.
The formula works the same way for any time frame. If you earned $80,000 in March and $92,000 in April, your month-over-month growth was ($92,000 – $80,000) / $80,000 × 100 = 15%. And it works for declines too. If revenue dropped from $500,000 to $450,000, the result is -10%, telling you revenue shrank by 10%.
One important detail: the denominator is always the earlier period, not the later one. Dividing by the wrong number will give you a misleading result. If revenue went from $200,000 to $300,000, dividing the $100,000 change by the new figure ($300,000) gives you 33%, but the correct growth rate using the starting value is 50%.
Calculating Growth Over Multiple Years
The basic formula works well for two periods, but it falls short when you want to understand growth across three, five, or ten years. Simply dividing total growth by the number of years ignores the compounding effect, where each year’s growth builds on the previous year’s larger base. That’s where the Compound Annual Growth Rate, or CAGR, comes in.
CAGR = ((Ending Value / Beginning Value) ^ (1 / n) – 1) × 100
Here, “n” is the number of years between the two values. The caret (^) means “raised to the power of.”
Walk through it step by step. Suppose your revenue was $1 million five years ago and is $1.6 million today:
- Divide ending by beginning: $1,600,000 / $1,000,000 = 1.6
- Raise to the power of 1/n: 1.6 ^ (1/5) = 1.6 ^ 0.2 = 1.0986
- Subtract 1: 1.0986 – 1 = 0.0986
- Multiply by 100: 9.86%
Your CAGR is roughly 9.9%, meaning revenue grew at an average annual rate of about 9.9% per year over that five-year stretch. This is more useful than saying “revenue grew 60% total” because it gives you a single annualized rate you can compare against competitors, industry benchmarks, or your own targets.
You can calculate CAGR in a spreadsheet without doing the math by hand. In Excel or Google Sheets, the formula looks like this: =((B2/B1)^(1/5)-1)*100, where B2 is ending revenue, B1 is beginning revenue, and 5 is the number of years.
Year-Over-Year vs. Sequential Growth
The same formula produces different insights depending on which periods you compare. Year-over-year (YoY) growth compares a period to the same period one year earlier: Q2 of this year versus Q2 of last year, or January versus January. This approach automatically accounts for seasonal patterns. A retailer that always spikes in December won’t look artificially strong comparing December to November.
Sequential growth (also called quarter-over-quarter or month-over-month) compares consecutive periods. It’s useful for spotting momentum shifts quickly, but it can be misleading in seasonal businesses. A ski resort showing negative sequential growth from March to April isn’t necessarily in trouble.
For most business planning and investor communication, year-over-year is the standard. Sequential growth is more common in internal reporting where you’re watching short-term trends closely.
Organic vs. Total Revenue Growth
When a company acquires another business, its revenue jumps overnight, but that jump doesn’t reflect how the core business is performing. That’s why analysts and business owners often separate organic growth from total growth.
Organic revenue growth strips out revenue gained through mergers, acquisitions, or divestitures. It only counts revenue from products and services sold through existing operations. To calculate it, remove any revenue from acquired businesses during the measurement period, then apply the standard formula to what remains.
If your company had $10 million in revenue last year and $13 million this year, but $2 million of this year’s total came from a business you acquired in June, your organic revenue is $11 million. Organic growth is ($11M – $10M) / $10M × 100 = 10%, while total growth is 30%. Both numbers are valid, but they tell very different stories about your business.
Putting Your Growth Rate in Context
A growth percentage on its own doesn’t tell you whether your business is performing well. You need context: how does your rate compare to others in your industry?
Growth rates vary dramatically by sector. According to data compiled by NYU Stern’s Aswath Damodaran, five-year revenue CAGRs as of January 2026 ranged from under 1% for building supply retailers to over 29% for internet software companies. Semiconductor firms averaged about 11% annual growth over that stretch, while general retail came in around 10%. Specialty chemical manufacturers grew at roughly 8% per year.
Some sectors even post negative growth. Grocery and food retail showed a five-year CAGR of about -2.6%, reflecting consolidation and shifting consumer habits rather than any single company’s failure.
The takeaway: a 12% annual growth rate might be exceptional in a mature manufacturing segment and mediocre in software. When evaluating your number, compare it to companies of similar size in your industry, not to headline figures from high-growth tech firms.
Handling Tricky Scenarios
Starting From Zero or Negative Revenue
The formula breaks down when the prior period’s revenue is zero, because you can’t divide by zero. If you’re a brand-new business that had no revenue last quarter, there’s no meaningful percentage to calculate for your first quarter of sales. Just report the absolute dollar figure instead.
Similarly, if you’re working with net revenue figures that went negative (due to heavy refunds or adjustments), the percentage growth calculation can produce misleading results. Switching from -$50,000 to +$100,000 is clearly an improvement, but the formula gives you -300%, which makes no intuitive sense. In cases like these, report the dollar change rather than forcing a percentage.
Comparing Periods of Different Lengths
Make sure you’re comparing equal time frames. Comparing a 31-day month to a 28-day month, or a quarter with a major holiday to one without, can skew your results. If your periods aren’t equal, normalize the data first by converting to a daily or weekly average before applying the growth formula.
Accounting for Currency Fluctuations
Companies that operate internationally often report growth on both a reported basis and a constant-currency basis. If the dollar strengthened against the euro, a European division’s revenue might look flat in dollar terms even though it grew in euros. When you see “constant currency” growth, the company has recalculated both periods using the same exchange rate to isolate actual business performance from currency swings.
Quick Reference for Spreadsheets
If you’re tracking growth regularly, set up your spreadsheet to calculate it automatically. With prior-period revenue in cell A2 and current-period revenue in cell B2:
- Basic growth: =(B2-A2)/A2*100
- CAGR (ending value in B2, beginning in A2, years in C2): =((B2/A2)^(1/C2)-1)*100
For a running growth tracker, put your monthly or quarterly revenue in a column and use the formula in the adjacent column, referencing the cell directly above as the prior period. This gives you a live view of how growth is trending over time, making it easy to spot acceleration or slowdowns before they show up in annual figures.