sequential growth

The rate of growth of a financial metric from one consecutive period to the next, typically quarter-over-quarter.

Sequential growth measures the rate of change in a financial metric, such as revenue, earnings, or active users, between two consecutive reporting periods. Most commonly, this involves comparing the current quarter directly to the immediately preceding quarter (quarter-over-quarter, or QoQ). This stands in contrast to year-over-year (YoY) growth, which compares a given period to the exact same period from the prior year. Investors monitor sequential growth to gauge near-term business momentum and identify sudden inflection points or operational slowdowns. Because annualized or YoY figures can sometimes mask recent changes due to historical base effects, sequential metrics offer a more immediate health check on a company's current trajectory. While highly informative for fast-growing technology companies, sequential growth can be highly distorted by seasonality in retail, agricultural, or cyclical industries. For example, a toy manufacturer might show massive sequential revenue growth in the fourth quarter followed by a sharp sequential decline in the first quarter. Investors must adjust for these seasonal patterns or rely on seasonally adjusted data to avoid misinterpreting normal seasonal swings as structural business shifts.

Company A reports revenue of $120 million in the second quarter (Q2) and $126 million in the third quarter (Q3). The sequential growth rate is calculated as: ($126 million - $120 million) / $120 million = 0.05, or 5% sequential growth.