Tailwinds and headwinds

Tailwinds are external forces working in a company's favor, making growth easier: a market it has barely begun to penetrate, a product cycle picking up, favorable regulation, a weakening competitor. Headwinds are the opposite, external forces working against it: new competition, a saturating market, rising costs, unfavorable regulation.

Both terms borrow from sailing, wind that pushes a boat forward versus wind that pushes back against it. Neither is something the company itself controls or created, they describe the environment a business is operating in, separate from how well it is executing.

When projecting a company's future growth or margins, whether real tailwinds or headwinds are blowing, and how strong they are, is one of the main reasons to project faster or slower than a company's own historical average, rather than just extrapolating the past forward unchanged.