CAGR Formula: How to Calculate CAGR in Excel (RRI + Manual)
Summary
CAGR = (Ending value ÷ Beginning value)^(1 ÷ Number of years) − 1. It is the steady yearly growth rate that would take you from the first value to the last. Revenue that grew from $2.40M in 2021 to $4.05M in 2025 has a CAGR of about 13.97% over four years.
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Compound annual growth rate (CAGR) formula
CAGR = (Ending value ÷ Beginning value)^(1 ÷ n) − 1, where n is the number of years between the two values- Beginning value: The value at the start of the period, for example 2021 revenue.
- Ending value: The value at the end of the period, for example 2025 revenue.
- n (number of periods): Years between the two values, which is the count of data points minus one: 2021 to 2025 is 4 years, not 5.
How to calculate compound annual growth rate (CAGR) in Excel and Google Sheets
Excel, using the cells in the worked example below:
=(B6/B2)^(1/(A6-A2))-1Worked example
A regional HVAC services company is preparing a lender update and needs its revenue CAGR from 2021 to 2025. Growth was uneven, with a flat 2023.
| Year | Revenue |
|---|---|
| 2021 | $2,400,000 |
| 2022 | $2,950,000 |
| 2023 | $3,100,000 |
| 2024 | $3,620,000 |
| 2025 | $4,050,000 |
- Ending ÷ beginning = 4,050,000 ÷ 2,400,000 = 1.6875.
- Number of years n = 2025 − 2021 = 4.
- 1.6875^(1/4) = 1.1397, so CAGR = 1.1397 − 1 = 13.97%.
- Excel's built-in shortcut gives the same answer: =RRI(A6-A2,B2,B6).
- Check: 2,400,000 × 1.1397^4 = 4,050,000. The year-by-year rates (22.9%, 5.1%, 16.8%, 11.9%) average 14.2%, which overstates the compound rate.
Result: 13.97% CAGR from 2021 to 2025
How to interpret compound annual growth rate (CAGR)
CAGR smooths a bumpy path into one comparable rate, which makes it good for comparing businesses, products or investments over the same window. It hides volatility: a business that grew 40% then shrank 10% can share a CAGR with one that grew steadily. Always say which years it covers, and pair it with the year-by-year rates when the path matters, for example when a lender asks whether growth is accelerating.
Common mistakes
- Counting data points instead of intervals. Five annual values span four years, so n = 4. Using 5 understates CAGR (here it would give 11.0%).
- Using a negative or zero starting value. The formula breaks; report absolute change or use a different base year.
- Taking the simple average of yearly growth rates. That arithmetic mean (14.2% here) is always at least as high as the compound rate.
- Mixing partial years. For 30 months of data, n = 2.5; better still, use XIRR-style dates or monthly CAGR converted with (1 + monthly rate)^12 − 1.
Calculate compound annual growth rate (CAGR) with Better Analyst
Connect your data or upload a spreadsheet, then ask in plain English. Better Analyst writes and runs the calculation and shows the steps, so you can check the number.
- “What is our revenue CAGR from 2021 to 2025, and how does it compare with each year's growth rate?”
- “Calculate the 3-year CAGR of sessions by channel from our GA4 data.”
- “Which product categories have the highest 3-year sales CAGR?”
Usually calculated from: Google Sheets, Google BigQuery, Snowflake, PostgreSQL, 
Microsoft SQL Server, 
Airtable.