The off-by-one that catches everyone
Five years of revenue data is four years of growth. A series running 2021 to 2025 has five data points and four intervals between them, and the exponent in the CAGR formula uses the intervals, not the data points.
CAGR = (2025 revenue / 2021 revenue) ^ (1 / 4) − 1Dividing by 5 instead of 4 is probably the most common revenue-CAGR mistake in circulation. It understates growth every time, and it is invisible unless someone recalculates. This calculator counts intervals for you.
Why the year-on-year column matters
A single CAGR figure hides the shape of the growth completely. Two businesses can both report 25% revenue CAGR over four years while telling entirely different stories:
- One grows 24%, 26%, 25%, 25% — a steady compounding machine.
- The other grows 111%, 10%, 3%, 2% — a company whose growth has essentially stopped, carried by one exceptional year at the start.
The second company will be asked hard questions the moment anyone plots the series. If you are preparing the numbers, plot them yourself first. The year-on-year column beside each row exists so you can see the trend, not just the endpoint average.
Choosing the start year
Because CAGR depends only on the first and last values, the start year you pick largely determines the answer. Starting from a depressed year flatters the rate; starting from an exceptional one buries it. This is not a hypothetical concern — it is one of the most common ways growth figures get quietly shaped.
Two defences. State the window explicitly whenever you quote a CAGR: “28% CAGR FY21–FY25” rather than a bare percentage. And check the number against a different start year before you present it. If the rate swings wildly depending on where you begin, the CAGR is not a good summary of that business and you should show the series instead.
What CAGR will not tell you
It says nothing about the path, as above. It says nothing about profitability — revenue can compound beautifully while margins collapse. And it says nothing about durability: a rate driven by one large customer or a one-off contract looks identical to one driven by a broad base.
For a business, revenue CAGR is a starting question, not a conclusion. It tells you how fast the top line grew and roughly nothing about why.
Questions
Can I use quarters or months instead of years?
You can enter any evenly spaced periods, but the result will be a per-period rate rather than an annual one. To annualize a per-quarter rate, use the rate conversion calculator with an exponent of 4.
What if one year is missing?
CAGR only needs the first and last values, so a gap in the middle does not break the calculation — but leave the row in place with a blank so the interval count stays right. A missing year silently shortens the period and inflates the rate.
What if revenue fell?
You get a negative CAGR, which is the annualized rate of decline. It is a legitimate figure, though for a declining business the year-on-year column usually tells you more than the average does.
Should I use CAGR or average annual growth?
CAGR, in almost every case. The arithmetic average of yearly growth rates overstates compounded growth, and the more volatile the series, the worse the overstatement. Growth of +100% then −50% averages to +25% a year, while the business is exactly where it started — a CAGR of 0%.