# CAGR Formula: How to Calculate CAGR in Excel (RRI + Manual)

- URL: https://betteranalyst.com/metrics/cagr
- Published: 2026-10-29
- Updated: 2026-10-29
- Author: David Bressler, Founder (https://betteranalyst.com/authors/david-bressler)

> **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.

Category: [Finance](https://betteranalyst.com/metrics#finance)

Calculate compound annual growth rate with the CAGR formula or Excel's RRI function. Worked five-year revenue example and the period-counting trap.

## 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))-1
```

## Worked 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.

*Annual revenue (table starts in cell A1)*

| Year | Revenue |
| --- | --- |
| 2021 | $2,400,000 |
| 2022 | $2,950,000 |
| 2023 | $3,100,000 |
| 2024 | $3,620,000 |
| 2025 | $4,050,000 |

1. Ending ÷ beginning = 4,050,000 ÷ 2,400,000 = 1.6875.
2. Number of years n = 2025 − 2021 = 4.
3. 1.6875^(1/4) = 1.1397, so CAGR = 1.1397 − 1 = 13.97%.
4. Excel's built-in shortcut gives the same answer: =RRI(A6-A2,B2,B6).
5. 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](https://betteranalyst.com/data-connectors/google-sheets), [Google BigQuery](https://betteranalyst.com/data-connectors/bigquery), [Snowflake](https://betteranalyst.com/data-connectors/snowflake), [PostgreSQL](https://betteranalyst.com/data-connectors/postgresql), [Microsoft SQL Server](https://betteranalyst.com/data-connectors/mssql), [Airtable](https://betteranalyst.com/data-connectors/airtable).

[Try Better Analyst free](https://betteranalyst.com/signup)

## Further reading

- [Excel RRI function](https://betteranalyst.com/excel/rri-function)
- [Compound interest calculator](https://betteranalyst.com/compound-interest-calculator)
- [Analyze year-over-year sales in Excel](https://betteranalyst.com/blog/how-to-analyze-year-over-year-sales-in-excel)
- [RATE function](https://betteranalyst.com/excel/rate-function)
- [Better Analyst for finance teams](https://betteranalyst.com/solutions/finance)

## Frequently asked questions

### What is the Excel function for CAGR?

Excel has no function named CAGR, but RRI does the same job: =RRI(number_of_periods, start_value, end_value). =RRI(4,2400000,4050000) returns 13.97%. Google Sheets supports RRI with the same arguments.

### How do I calculate CAGR for months instead of years?

Use the number of years as a fraction: 18 months is n = 1.5. Or compute a monthly rate with n = 18 and annualise it with (1 + monthly rate)^12 − 1.

### What's the difference between CAGR and average annual growth?

Average annual growth is the arithmetic mean of each year's percentage change; CAGR is the single compounded rate linking the first and last values. CAGR is lower whenever growth varies from year to year.