Canadian e-commerce giant Shopify has posted strong third-quarter revenue growth, a sizable profit, and an upbeat forecast for the upcoming holidays.
Shopify’s sales climbed 26 percent year-over-year to $2.16 billion USD in Q3, according to its latest earnings report, exceeding analyst expectations. In a statement, Shopify CFO Jeff Hoffmeister highlighted that this marks Shopify’s sixth consecutive quarter of greater than 25 percent revenue growth excluding the sale of its logistics business in 2023.
“I truly believe this is the best version of Shopify yet.”
Harley Finkelstein, Shopify
During the company’s Q3 earnings call, Hoffmeister attributed Shopify’s revenue growth to gross merchandise volume (GMV) strength, rising subscription revenue, pricing changes, and increased payments penetration. Shopify’s third-quarter GMV was $69.7 billion, marking a 24 percent jump relative to Q3 2023.
Shopify also posted $828 million in net income in Q3, more than half of which—$484 million—was attributable to the impact of its equity investments. This marks an increase compared to the $718-million profit Shopify generated during the same period last year.
Public market investors have reacted favourably to the company’s Q3 earnings beat: Shopify’s shares have risen more than 21 percent on the TSX and NYSE as of publication time following its Q3 earnings beat.
“I truly believe this is the best version of Shopify yet,” Shopify president Harley Finkelstein said during Shopify’s latest earnings call. “We are really pleased with our overall size and our shape, how we’re operating, and especially our free cash profile.”
In Q3, Shopify’s free cash flow was $421 million, for a margin of 19 percent. Hoffmeister said that Shopify is pleased with this profile. “It strikes the right balance between profitability and investing back into the business to continue to deliver top-line growth,” he added.
“These consistent results [in Q3], delivering both growth and profitability, demonstrate the durability of our business, our numerous growth drivers, and our ability to balance investing in the future with discipline, delivering double-digit free cash flow margin,” Hoffmeister said.
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Shopify saw lower margins on payments during the third quarter amid pressure from a higher mix of Shopify Plus merchants and credit card usage over debit, which Hoffmeister said were partially offset by growth in its other merchant solutions.
The Shopify CFO noted that Shopify also saw higher absolute dollar losses on capital loans and payments. Hoffmeister described these as a function of volume increases for both businesses and claimed that the company’s loss ratios remain within a consistent range.
Finkelstein said that Shopify attracted a growing number of enterprise retailers to its platform during Q3, including Hanes, Lionsgate Entertainment, and Reebok.
The Shopify president indicated that international growth—which he said continues to outpace North America, especially in Europe—remains a focus for Shopify.
Hoffmeister noted that Q4, which includes Black Friday and Cyber Monday, is typically Shopify’s highest volume quarter.
Shopify is forecasting fourth-quarter revenue growth this year at a mid-to-high-twenties percentage rate relative to Q4 2023 as it heads into the holiday shopping season.
Disclosure: BetaKit majority owner Good Future is the family office of two former Shopify leaders, Arati Sharma and Satish Kanwar.
Feature image courtesy Shopify.