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What is Year-over-Year (YoY) Growth?
Year-over-Year (YoY) Growth is a performance comparison metric that measures the percentage change in a value—such as revenue, profit, expenses, or customers—between a specific period and the same period in the previous year. It helps businesses evaluate trends while eliminating seasonal effects.
Definition
Year-over-Year (YoY) Growth is the annualized rate of change between two corresponding time periods one year apart, used to assess performance, growth, or decline.
Key Takeaways
- Eliminates seasonal distortions for clearer performance evaluation.
- Commonly used in finance, economics, and operations.
- Useful for tracking long-term growth trends.
Understanding Year-over-Year (YoY) Growth
YoY Growth offers a simple but powerful way to understand whether performance is improving or declining. Unlike month-over-month or quarter-over-quarter metrics, YoY comparisons account for seasonality—ensuring that factors like holiday sales, tourism cycles, or agricultural seasons do not distort the analysis.
Businesses use YoY Growth to evaluate revenue patterns, cost structures, customer acquisition performance, market expansion, and operational efficiency. Investors and analysts rely on YoY metrics to judge the health and stability of companies.
Governments and economists also use YoY figures—for example, YoY inflation or YoY GDP growth—to assess macroeconomic conditions.
Formula (If Applicable)
YoY Growth (%) = ((Current Period Value − Previous Year Value) / Previous Year Value) × 100
Example: If revenue last year was $1,000,000 and this year it is $1,200,000:
- YoY Growth = (1,200,000 − 1,000,000) / 1,000,000 × 100 = 20%
Real-World Example
A hotel reports earnings of $500,000 for Q2 in 2025 compared to $400,000 in Q2 of 2024. The YoY Growth is:
- (500,000 − 400,000) / 400,000 × 100 = 25%
This indicates substantial performance improvement, potentially driven by tourism growth or better pricing strategies.
Importance in Business or Economics
- Reveals long-term trends and performance direction.
- Informs strategic decisions such as expansion, cost-cutting, or investment.
- Helps investors assess company stability and resilience.
- Provides governments with clarity on inflation, GDP, and employment trends.
Types or Variations
Revenue YoY Growth: Measures income change annually.
Expense YoY Growth: Tracks cost inflation or optimization.
Customer YoY Growth: Measures client acquisition or retention.
Economic YoY Indicators: GDP, inflation, unemployment.
Related Terms
- Compound Annual Growth Rate (CAGR)
- Quarter-over-Quarter (QoQ) Growth
- Month-over-Month (MoM) Growth
Sources and Further Reading
- International Monetary Fund (IMF): https://www.imf.org
- U.S. Bureau of Labor Statistics (BLS): https://www.bls.gov
- Investopedia – YoY Growth Overview: https://www.investopedia.com
Quick Reference
- Purpose: Measure annual performance change.
- Best For: Tracking long-term trends with seasonal consistency.
- Common Uses: Revenue, inflation, GDP, customer growth.
Frequently Asked Questions (FAQs)
Why is YoY Growth important?
It removes seasonality, providing a clearer view of performance trends.
How is YoY Growth different from CAGR?
YoY measures single-year change; CAGR measures multi-year compounded growth.
What does negative YoY Growth mean?
It indicates decline compared to the same period last year.
