Compound Annual Growth Rate is the annualized rate at which a metric would have grown if it grew at a constant rate over a specified multi-year period. CAGR smooths year-to-year fluctuations into a single number that enables cross-period and cross-company comparisons.
CAGR is the standard summary statistic for market size projections, long-term financial performance, and capability-growth metrics in technology markets. Most industry forecasts quote some version of CAGR ("the global enterprise AI market will grow at 34 percent CAGR through 2030") because it is the most compact way to express multi-year trajectory.
CAGR has known limitations. It assumes continuous compounding, which flattens the meaning of volatile years. It extrapolates long-term patterns from short samples, which is often unreliable for emerging technologies. It treats equal percentage changes as equivalent, which obscures when a market is growing from a small base versus a large one. Sophisticated analysts use CAGR alongside absolute dollar growth and penetration metrics rather than relying on it alone.