Run Rate: Defined & Explained

What Is Run Rate?

By Jeremy Bowman – Updated Jan 1, 2025 at 11:02 AM

Key Points

Run rate projects annual figures from shorter periods, using multiplication (e.g., quarter x 4).
Using run rate aids in forecasting annual earnings, especially after major business changes.
Risk: run rate can mislead due to factors like seasonality or exceptional events.

A person using a calculator with financial charts on the desk. — Image source: Getty Images.

Loading image...

Loading paragraph...

Revenue

Revenue is a business’s gross income or the amount of money it brings in from regular operations before costs are considered.

Loading paragraph...

A hypothetical quarterly sales chart to illustrate how calculating run rate works. — Image source: The Motley Fool

Loading image...

Related investing topics

Loading paragraph...

How to Invest in Stocks: 5 Steps to Get Started

Are you ready to jump into the stock market? We've got you. Build long-term wealth using The Motley Fool's market-beating method.

How to Calculate Total Revenue Growth in Accounting

Determining a company's revenue growth rate, and also understanding how that rate can be manipulated at smaller firms.

Why Portfolio Diversification Matters & How to do it

Spreading your money across industries and companies is a smart way to ensure returns.

Loading hub_pages...

One-time events such as a hit new product release or an acquisition or divestiture can also skew a company's results from quarter to quarter, making the use of run rate unhelpful as a metric. Using the run rate for just one month or a quarter can also be a poor way of projecting results for a high-growth business since results are likely to improve over the course of the year.

Run rate can be easily manipulated. Whether or not you use run rate in your own stock analysis, business executives often discuss run rates in their forecasts, so it's an important term for investors to understand.

Loading paragraph...

About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

TMFHobo

@TMFBowman

The Motley Fool has a disclosure policy.