How the Revenue Growth Calculator works
This tool compares two revenue figures — a previous period and a current period — and reports how much revenue changed, both in dollars and as a percentage. When the two periods are more than a year apart, it also converts that change into a compound annual growth rate (CAGR) so multi-year growth can be compared on a consistent, year-over-year basis.
The formulas
The period-over-period growth rate is the standard revenue growth formula used in financial reporting:
Growth rate = (Current revenue − Previous revenue) ÷ Previous revenue × 100
When the two periods span more than one year, the same total change is smoothed into a constant annual rate using the compound annual growth rate formula:
CAGR = (Current revenue ÷ Previous revenue)(1 ÷ n) − 1
where n is the number of years between the two periods. If n = 1, CAGR and the simple growth rate are the same number. The calculator then projects revenue forward by compounding the current figure at that CAGR for the number of years you choose to project.
Worked example
A company reports $500,000 in revenue for the previous period and $575,000 for the current period, one year later. The growth rate is ($575,000 − $500,000) ÷ $500,000 × 100 = 15%, an absolute gain of $75,000. Because the periods are one year apart, the CAGR is also 15%. Projecting that 15% rate forward three more years gives $575,000 × (1.15)3 ≈ $874,647.
Why CAGR matters over multiple years
Comparing revenue from five years ago directly to today's revenue only tells you the total change, not the pace. Two companies that both doubled revenue over five years grew at very different speeds if one did it in year one and stalled, while the other grew steadily every year. CAGR answers the question "what constant annual rate would have produced this same total change?" — it does not describe the actual year-to-year path, which may have been uneven.
Common interpretation mistakes
- Revenue growth measures the top line only — it says nothing about profitability, cash flow, or margin. Fast-growing revenue paired with widening losses is not automatically good news.
- A negative growth rate is a valid, meaningful result: it means revenue declined between the two periods, not that something is wrong with the calculation.
- The projected revenue figure is a straight-line extrapolation of the calculated CAGR. It assumes the same rate holds every year going forward, which real businesses rarely do exactly.
When to escalate to a specialist
For investor presentations, loan covenants, M&A diligence, or regulatory filings, cross-check this calculator's output with a CFO, accountant, or financial analyst, and confirm both revenue figures are measured on the same accounting basis (GAAP vs. cash, recognized vs. billed). The arithmetic here is standard; the source data and its accounting treatment deserve their own scrutiny.