QoQ (Quarter over Quarter)
Comparing this quarter with the immediately prior quarter — catching the very latest change fast, but subject to seasonality.
In plain terms
QoQ is "comparing this quarter with the one just before." You set Q3 against Q2 — a way to catch the most recent change fast.
If YoY compares with a year ago, QoQ compares with exactly the prior quarter. So changes show up faster, but it has the weakness of taking seasonality head-on (it is like comparing summer with autumn).
What it tells you
QoQ's strength is "speed." When a flow has just started to turn, it can catch the change in a single quarter rather than waiting a year like YoY. It is especially useful for spotting the moment results bottom out and turn (a turnaround).
So QoQ is used to quickly see "is the direction changing," while YoY confirms "did it really grow versus a year ago" — dividing the roles.
Formula
QoQ change = (this quarter's value − prior quarter's value) ÷ prior quarter's value × 100
What high or low means
Positive QoQ means up versus the prior quarter, negative means down. But for seasonal businesses a given quarter is normally negative (or positive) QoQ, so you cannot declare it good or bad on that alone.
So QoQ gains meaning only when you also look at "did it fall this much in the same quarter in past years too."
QoQ's biggest pitfall is seasonality. Retail normally surges in Q4 (year-end shopping) and drops sharply in Q1. Not knowing this and seeing only the negative Q1 QoQ, it is easy to mistake it for "the business broke."
So for strongly seasonal businesses, YoY is more trustworthy than QoQ. QoQ is best used as a supplement for businesses with weak seasonality, or to quickly see a trend reversal.
Being a single quarter's number, it swings on one-off events too (a big contract, a blackout, a strike). Look at several quarters' flow rather than one QoQ.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see QoQ and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.