YoY vs QoQ Growth: Which Comparison Should You Use?

Earnings reports compare results with earlier periods in two ways. They answer different questions.

Year over year (YoY)

YoY compares a period with the same period one year earlier: this year's second quarter against last year's second quarter.

• Best for: seasonal businesses. Retailers sell more in the holiday quarter, and ice cream sells more in summer. Comparing with the same quarter last year removes the seasons.
• Formula: (this period - same period last year) / same period last year.
• This is the standard comparison in earnings reports and in this site's tables.

Quarter over quarter (QoQ)

QoQ compares a quarter with the one right before it: the second quarter against the first.

• Best for: spotting turning points early in a business with little seasonality, such as a subscription software company. It shows whether growth is speeding up or slowing down.
• Weakness: for a seasonal company, a fall from a holiday quarter to the next is expected and says little.
• Some companies annualize QoQ growth to make it look comparable with a yearly rate. That multiplies any noise, so treat it with caution.

Compare rates carefully

• Percent versus percentage points: if margin goes from 20% to 22%, it rose by 2 percentage points, which is a 10% relative increase. Reports should say which one they mean.
• Base effects: a drop of 50% needs a rise of 100% to get back to where you started. A weak prior year makes growth look larger.
• Acquisitions and currency: growth can come from buying another business or from a weaker or stronger dollar. Companies often report "organic" or "constant currency" growth that removes these. It shows how the underlying business did, but check how it is defined.
• Extra days: a 53-week fiscal year or a leap day can add roughly 1-2% to a period.

A quick rule

Use YoY to judge how a company is doing, and QoQ to judge how fast the direction is changing. If they disagree, find out why before drawing a conclusion.