What is 'Quarter Over Quarter - Q/Q'

Quarter over quarter (Q/Q) is a measure of an investment's or company's growth from one quarter to the next. Quarter-over-quarter growth is most commonly used to compare a company's growth in profits or revenue, though it can also be used to describe changes in money supply, GDP or other economic measurements.

BREAKING DOWN 'Quarter Over Quarter - Q/Q'

Investors and analysts pore through a company's financial statements, which are released either yearly or quarterly, to assess the financial health of the company. The quarterly statements are publicly available through the EDGAR database and are called 10-Q statements. When a company’s performance over multiple quarterly periods is reviewed, the analyst seeks to determine quarter-over-quarter performance.

Quarter over quarter (Q/Q) is a rate of change of performance between one fiscal quarter and the previous quarter. A quarter is generally three months, or 90 days, long. A quarter over quarter measures changes in the growth rate or earnings of a company in one quarter over previous quarters. Typically, the comparison is between reports from one quarter of the company's fiscal year with those from the previous quarter. Q/Q is calculated as (current quarter - previous quarter) / previous quarter.

For example, let’s measure the Q1 and Q2 earnings of Intel Corporation and IBM Corporation for 2017.

(in millions)

Intel

IBM

Q1 Earnings

$2,964

$1,750

Q2 Earnings

$2,808

$2,331

Q/Q change

($2,808 - $2,964) / $2,964

($2,331 - $1,750) / $1,750

 

= -5.26%

= 33.2%

While Intel’s earnings growth dropped from the first to the second quarter, IBM’s increased quarter over quarter. However, note that only the last two quarters have been examined. An investor would want to look at several other quarters to see if this is a trend or just a seasonal or temporary adjustment. Comparing quarter-over-quarter information among companies with different quarter start dates can distort an analysis — the time included may vary, and seasonal factors may become skewed.

Other variations of the quarter over quarter are the month over month (M/M) and year over year (Y/Y). The month over month measures growth over previous months, but tends to be more volatile than Q/Q, as the rate of change is affected by one-time events, such as natural disasters. The year over year reports changes in performance in one year over a previous year. Y/Y incorporates more data and, thus, is able to give a better long-term picture of the underlying report figure. Q/Q rate of change is typically more volatile than Y/Y measurement, but less volatile than the M/M figure.

Some economic reports are released quarterly and compared to previous quarters to indicate the growth of an economy. For example, the Gross Domestic Product (GDP) report, released by the Bureau of Economic Analysis (BEA), is released on a quarterly basis and helps to influence the decisions of the government, businesses and individuals.

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