Quarter on quarter (QOQ) is a measuring technique that calculates the change between one fiscal quarter and the previous fiscal quarter. The term is similar to the year-over-year (YOY) measure, which compares the quarter of one year (such as the first quarter of 2024) to the same quarter of the previous year (the first quarter of 2023).
The measure gives investors and analysts an idea of how a company is growing over each quarter.
Key Takeaways
Quarter on quarter (QOQ) compares a change in performance between one fiscal quarter and the previous fiscal quarter.
QOQ reflects short-term changes in various metrics and can indicate company performance over two quarters.
Businesses that have income fluctuations or peak earnings at certain times may need to make seasonal adjustments or use a YOY metric to measure performance.
Understanding Quarter on Quarter (QQQ)
QOQ allows a business to monitor shorter-term changes and toprogress toward goals or benchmarks set for the year. It can provide valuable information as to how a company is performing and allow the company to respond and make process changes if required.
Often, the QOQ measure is used to compare earnings 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 indicatorfor investors.
Quarter on Quarter in Practice
When used in financial or accounting principles, a quarteris a consecutive 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 from Q2 (April, May, June) to Q1 (January, February, March). This comparison varies from YOY, where the same quarter is compared from one year to the next. For example, Q1 of 2024is compared to Q1 of 2023in a YOY review.
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.
Challenges With QOQ Analysis
There are circ*mstances where QOQ analysis may not provide a holistic view ofthe health of an organization. For example, if an industry experiences seasonal sales variance, such as landscapers or seasonal sellers, what may appear to be a downward trend may be an industry norm.
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 typicallyrequire a seasonal adjustment to provide valuable data.
Real-World Example
A company’s earnings report from one quarter to the next can affect 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’s third-quarter earnings exceeded analysts’ estimates, but Amazon’s guidance for the fourth quarter fell short of expectations, and the company’s stock price plunged in response to the announcement. The last quarter of the year includes the holidays and is typically Amazon’s busiest season. Fourth-quarter revenue 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 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) calculates the change between one fiscal quarter and the previous fiscal quarter. The measuring technique gives investors and analysts an idea of how a company is growing over each quarter.
Quarter on quarter (QOQ) calculates the change between one fiscal quarter
fiscal quarter
A fiscal quarter is a three-month period on a company's financial calendar that acts as a basis for periodic financial reports and the paying of dividends. A quarter refers to one-fourth of a year and is typically expressed as Q1 for the first quarter, Q2 for the second quarter, and so forth.
and the previous fiscal quarter. The measuring technique gives investors and analysts an idea of how a company is growing over each quarter. CNBC. “Amazon Plunges 10% on Revenue and Guidance Miss.”
Q/Q is calculated as follows: (Current quarter - previous quarter) / previous quarter. Essentially, you are subtracting last year's number from this year's, and then dividing that by last year's number.
The difference between the present and past values can be used to get the Change in the value. Of course, this Change could be a positive or a negative number. On dividing the Change by the Past Value, we can get the QoQ growth in percentage terms.
Let's say a company measures its revenue growth on a quarterly basis. In quarter 1 (Q1) of the year, the company earns $1 million in revenue. In quarter 2 (Q2), the company's revenue increases to $1.2 million. So, the company's revenue grew by 20% quarter over quarter.
Quarter on quarter (QOQ) is the rate of change between quarterly fiscal data. It is a commonly used metric in determining a company's quarterly growth or, alternatively, used broadly to evaluate macroeconomic performance (such as GDP). QOQ is used synonymously with quarter over quarter (Q/Q).
In order to do this, we simply divide or split our whole number into 4 equal parts. For example, to calculate a quarter of 28, we can divide 28 by 4. As a calculation, it would look like 28 ÷ 4 , which is equal to 7. It means that one-fourth of 28 is 7.
Quarter on quarter (QOQ) calculates the change between one fiscal quarter and the previous fiscal quarter. The measuring technique gives investors and analysts an idea of how a company is growing over each quarter.
To calculate revenue growth as a percentage, you subtract the previous period's revenue from the current period's revenue, and then divide that number by the previous period's revenue.
A quarter to an hour is 15 minutes before a certain hour. It is also the same as 45 minutes past the previous hour. For example, quarter to 8 means 15 minutes before 8. This is the same as 45 minutes past 7 or 07:45.
One quarter is the same as the fraction ¼. This means that in order to find a quarter of a number, we can divide it by 4 (the denominator). To do this, we simply split our whole number into 4 equal parts. To calculate one quarter of 24, we can divide it by 4.
For example, there are four members in a family. You divide the pizza into 4 equal parts and each member gets an equal share. Hence, when a whole is divided into 4 equal parts, each part is known as one quarter.
A quarter is a three-month period on a company's financial calendar that acts as a basis for periodic financial reports and the paying of dividends. A quarter refers to one-fourth of a year and is typically expressed as Q1 for the first quarter, etc., and can be expressed with the year, such as Q1 2022 (or Q1'22).
Quarter over quarter (Q/Q) measures the growth of an investment or a company from one quarter to the next. Q/Q is also used to measure changes in other important statistics, such as gross domestic product (GDP).
For example, let's say you purchase 100 shares of preferred stock. This stock has a par value of $35 and a dividend percentage of 5.5%. The annual preferred dividend per share is $1.92. To find the quarterly preferred dividend, you can divide this number by 4, which equates to $0.48 per share.
A quarterly report consists of an unaudited statement of profit and loss along with segment results. Companies are mandated to include their six-month (the quarter ended and the preceding quarter) and Year to Date figures of the current year results in the balance sheet and cash flow statement as well.
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