What is Revenue Growth?
Revenue growth refers to the increase in sales of a company between periods. Expressed as a percentage, it shows how much a company grew its revenues in one period compared to the previous period. Investors usually calculate it quarter-over-quarter (QoQ) or year-over-year (YoY).
A company that achieves or reports high revenue growth will likely represent a high return on investment possibility. A quick example is Nvidia, which grew its revenue from $10,918 million USD in the fiscal year 2019 to $16,675 million USD in the fiscal year 2020, meaning a 52.73% revenue growth. Nvidia's revenue growth provided a 113% stock profit during the whole of 2020.
What is the Revenue Growth Formula?
The revenue growth formula describes the relationship between two numbers and expresses it as a percentage:
Revenue Growth = ((Revenuefinal − Revenueinitial) / Revenueinitial) × 100%
- Revenuefinal — most recent revenue data between the two numbers to evaluate.
- Revenueinitial — older revenue data between the two numbers to evaluate.
What is the Revenue Growth Rate?
The revenue growth rate is the speed at which the sales or income provided by services is generated. It uses the same concept as the compound annual growth rate (CAGR), which is why it is also known as revenue CAGR.
This approach can include more years; thus, it provides a more reliable result. For NVIDIA, the revenue growth rate (CAGR) was 27.19% during the last five years — meaning revenues compounded at 27.19% per year.
What is the Revenue Growth Rate Formula?
The revenue CAGR formula calculates the annual compound rate over multiple years:
Revenue CAGR = ((Revenuefinal / Revenueinitial)1/n − 1) × 100%
Where n is the number of years in the period.
How to Calculate Revenue Growth and Revenue Growth Rate?
Follow these steps:
- Identify your initial revenue (older period) and final revenue (more recent period).
- For simple growth: subtract initial from final, divide by initial, multiply by 100.
- For CAGR: divide final by initial, raise to the power of (1/years), subtract 1, multiply by 100.
- Select your currency and scale (exact, thousands K, millions M, or billions B).
How to Project Revenue Growth Rate?
To project future revenue using a known CAGR:
Revenuefuture = Revenuecurrent × (1 + CAGR/100)n
For example, if a company has $16,675M in revenue with a 27.19% CAGR, after 5 years:
Revenue = $16,675M × (1.2719)5 ≈ $55,700M
Final Examples from Year 2020
| Company | Revenue 2019 | Revenue 2020 | Growth | 5-Year CAGR |
|---|---|---|---|---|
| Nvidia | $10,918M | $16,675M | +52.73% | 27.19% |
| Tesla | $24,578M | $31,536M | +28.31% | ~38% |
| Apple | $260,174M | $274,515M | +5.51% | ~6% |
| Amazon | $280,522M | $386,064M | +37.62% | ~26% |
FAQs
Is 10% revenue growth considered good?
For large established companies, 10% annual revenue growth is generally considered solid. For startups and high-growth companies, investors typically expect 20–40% or higher. Context matters: a 10% growth for Apple ($27B added revenue) is far more significant than 10% for a small startup.
What is a negative revenue growth?
Negative revenue growth (also called revenue decline) means a company's sales decreased compared to the prior period. It can signal market challenges, competition, or economic downturns. However, it may be intentional if a company divests non-core segments.
What is the difference between revenue growth and profit growth?
Revenue growth measures total sales increase, while profit growth measures the increase in earnings after expenses. A company can show strong revenue growth but declining profits if costs rise faster than revenue — a distinction crucial for investors to understand the full financial picture.
How do I use the scale options (K, M, B)?
Enter values in the scale you prefer. "Millions (M)" means you enter 16.675 for $16,675,000,000 (16.675 billion) — wait, that's billions. With millions scale, enter 16675 for $16,675M. The calculator automatically multiplies your input by the selected scale factor.
- Exact: enter actual numbers (e.g., 16675000000)
- Thousands (K): enter in thousands (e.g., 16675000 for $16.675B)
- Millions (M): enter in millions (e.g., 16675 for $16.675B)
- Billions (B): enter in billions (e.g., 16.675 for $16.675B)