# Quarter on Quarter (QOQ) Growth: Definition, Calculation, and Example

![Quarter on Quarter (QOQ)](https://www.investopedia.com/thmb/rA34f279S_IKxr5ZfzK-apwPDJk=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Investopedia_QOQ_Final-ea4eaf1e1e344912b02b79e7d69c7cd9.jpg)

*— Sydney Burns / Investopedia*

## What Is Quarter on Quarter (QOQ)?

Quarter on quarter (QOQ) growth measures the percentage change in a company's performance from one fiscal [quarter](https://www.investopedia.com/terms/q/quarter.asp) to the next. This metric helps investors and analysts track short-term growth, understand trends, and make informed investment decisions. By comparing sequential quarters, companies can adjust strategies and enhance financial forecasting. Explore the calculation method, real-world examples, and the benefits and challenges of QOQ analysis to get a comprehensive understanding of company performance.

### Key Takeaways

*   Quarter on quarter (QOQ) is a technique that measures the percentage change between one fiscal quarter and the previous fiscal quarter.  
    
*   QOQ analysis allows businesses to track short-term financial performance and make necessary adjustments to strategies and processes.  
    
*   While QOQ provides insights into immediate performance, it may not account for seasonal fluctuations that could misrepresent a company's overall health.  
    
*   Year-over-year (YOY) comparisons can offer a broader perspective on performance, avoiding seasonal distortions seen in QOQ analysis.  
    
*   QOQ's usefulness can be limited in industries with significant seasonal income variation, as it may not provide an accurate picture of long-term trends.

## Analyzing Quarter-on-Quarter (QOQ) Trends

QOQ helps businesses track short-term changes and progress toward yearly goals. It can provide valuable information as to how a [company](https://www.investopedia.com/terms/c/company.asp) is performing and allow the company to respond and make process changes if required.

Often, the QOQ measure is used to compare [earnings](https://www.investopedia.com/terms/e/earnings.asp) between quarters. For example, Company ABC’s first-quarter earnings were $1.50 per share, and its second-quarter earnings were $1.75 per share. By calculating the QOQ growth between quarters ($1.75 - $1.50/$1.50), it’s clear that the company has grown its earnings by 16.6%, which is a positive indicator for [investors](https://www.investopedia.com/terms/i/investor.asp).

## Applying QOQ in Real-World Business Scenarios

A quarter in finance is a three-month period within the year. Traditionally, the first quarter (Q1) refers to January, February, and March. Each subsequent three-month period represents Q2, Q3, and Q4.

When used as part of a QOQ analysis, a business would compare [financials](https://www.investopedia.com/terms/f/financial-statements.asp) from Q2 (April, May, June) to Q1 (January, February, March). Unlike YOY, this compares one quarter to the next, not the same quarter year-to-year. For example, Q1 of 2024 is compared to Q1 of 2023 in a YOY review.

> **Important**
>
> Comparing quarters on a year-over-year (YOY) basis can be more effective than on a quarter-on-quarter (QOQ) basis, as it gives a broader picture of company health and is not impacted by seasonal issues.

## Identifying the Limitations of QOQ Analysis

There are circumstances where QOQ analysis may not provide a holistic view of the health of an organization. Seasonal [sales variation](https://www.investopedia.com/terms/s/seasonal-industry.asp) can make industry norms seem like declining trends for landscapers or seasonal sellers.

The same can apply if a business experiences higher earnings during a peak season that may reflect abnormally high growth from one quarter to the next. An organization may choose to adjust the figures seasonally and compensate for regular shifts in business, giving a more accurate picture throughout the year. Since YOY analysis involves the examination of the same quarter from one year to the next, it does not typically require a seasonal adjustment to provide valuable data.

## Case Study: Real-World Impact of QOQ Earnings Reports

Quarterly earnings reports can impact the market. A disappointing earnings report can cause the stock to plunge as investors try to sell off the stock before the price drops.

In 2018, [Amazon](https://www.investopedia.com/how-amazon-makes-money-4587523)’s Q3 earnings exceeded estimates, but its Q4 guidance fell short, causing a stock price drop. The last quarter of the year includes the holidays and is typically Amazon’s busiest season. Fourth-quarter [revenue](https://www.investopedia.com/terms/r/revenue.asp) guidance was significantly below the consensus and caused concern among shareholders. Amazon stock plunged by 10%, although it eventually recovered as investors priced in the news.

## How Does Quarter on Quarter (QOQ) Work?

Quarter on quarter (QOQ) compares performance change between one fiscal quarter and the previous fiscal quarter. It reflects short-term changes in various [metrics](https://www.investopedia.com/terms/m/metrics.asp) and can indicate company performance over two quarters.

## How Does QOQ Benefit a Business?

QOQ lets a company monitor shorter-term changes and progress toward goals or benchmarks set for the year. The measure can provide valuable information on a business’s performance and allow the business to respond and make process changes if it has to.

## Where Is QOQ Less Effective?

An industry that experiences seasonal sales variance may not get an accurate picture of their well-being from QOQ analysis. A downward trend may be an industry norm. The same goes for a business that experiences higher earnings during a peak season that may reflect abnormally high growth from one quarter to the next.

## The Bottom Line

Quarter on Quarter (QOQ) analysis compares the change between one fiscal quarter and the previous, offering a snapshot of short-term performance. This metric helps investors and analysts evaluate a company's growth trajectory over two quarters and can guide adjustments in strategies. However, industries with seasonal fluctuations should consider complementing QOQ with year-over-year (YOY) analysis for a clearer picture, as QOQ might not capture longer-term trends or seasonal impacts effectively.  

> **Article Sources**
>
> 1.  CNBC. “[Amazon Plunges 10% on Revenue and Guidance Miss](https://www.cnbc.com/2018/10/25/amazon-earnings-q3-2018.html).”