Shopify beat its forecasted revenue growth in Q1 2025 but posted a net loss and slightly deflated profit outlook for next quarter as it navigates the impacts of a United States (US) trade war on its merchant clients.
Shopify attained $74.7 million in gross merchandise volume this quarter, marking a 22-percent year-over-year increase but falling short of consensus estimates.
The Canadian e-commerce giant, which reports its earnings in USD, hit $2.36 billion in Q1 revenue, a 27 percent growth year-over-year, slightly beating its forecast for the quarter. This marks eight straight quarters of 25 percent or more revenue growth, excluding the sale of Shopify’s logistics business in 2023.
The e-commerce giant’s gross profit grew 22 percent compared to Q1 2024, hitting $1.1 billion and surpassing its expected growth but missing Wall Street estimates, according to Reuters.
Shopify also recorded a larger-than-expected $682-million net loss for Q1, triggering an eight-percent fall in pre-market trading. Shopify last posted a quarterly loss in Q1 2024 of $273 million. Its operating income of $203 million also came in well under analyst expectations, according to FactSet figures cited by Barron’s.
Shopify shares on the Nasdaq fell five percent at market open, but quickly recovered to trade at $92 by publication time. Heading into earnings, Shopify’s stock price had dipped 11 percent since the beginning of the year. Tech stocks, including Shopify’s, took a hit at the beginning of April in the wake of economic uncertainty due to US tariffs.
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In an earnings call today, Shopify president Harley Finkelstein acknowledged the broader context of market instability but insisted that the company’s Q1 results pointed to durable growth.
“As the platform that powers global commerce, we’re of course monitoring for slowdowns, but our data through April shows little evidence of that,” Finkelstein said.
Shopify attained $74.7 million in gross merchandise volume (GMV) this quarter, marking a 22-percent year-over-year increase but falling short of FactSet consensus estimates. Free cash flow hit $363 million in Q1 2025, more than a 50-percent increase year-over-year, with a 15-percent free cash flow margin, continuing a seven-quarter double-digit streak.
Despite the upbeat earnings, Shopify is projecting gross profit dollars to grow at a slightly lower rate year-over-year, while analysts were expecting a rise above 20 percent, according to Reuters. Otherwise, Shopify’s forecast for the upcoming quarter is similar to its Q1 expectations, as it anticipates year-over-year revenue growth in the mid-twenties and a free cash flow margin in the mid-teens. Operating expenses should represent between 39 and 40 percent of revenue, the company said.
On the earnings call, Shopify CFO Jeff Hoffmeister said the lower profit projections are mostly driven by “higher cloud and infrastructure hosting costs needed to support higher volumes and geographic expansion.” Shopify launched in 16 new markets this quarter, including Mexico and several European countries.
Charlie Miner, analyst at consulting firm Third Bridge, told BetaKit that Shopify’s cautious profit guide for Q2 could slow momentum and reverse recent gains, but that “market share gains and operating leverage” remain on track.
According to The Globe & Mail, more than a dozen analysts have cut their target prices for Shopify since the beginning of April as trade tensions have disrupted the e-commerce landscape. Analysts expected increased pressure on Shopify’s small merchants from the impacts of hefty US tariffs on Chinese goods and the elimination of the ‘de minimis’ exemption, which allowed goods under $800 to enter the US from China duty-free. US President Donald Trump has announced his intention to eventually close the de minimis loophole for all imports into the country.
On the earnings call, Hoffmeister said that the closing of “de minimis” is not expected to have a “meaningful impact” on Shopify in the short term, but that he would continue to monitor its effects. He claimed only one percent of Shopify’s GMV is related to Chinese imports subject to the exemption.
“We are roughly a month into the escalation of tariffs, and we continue to see strength in GMV,” Hoffmeister said. “But as we look at the guidance we gave in Q2, it obviously assumes continued strong performance.”
Hoffmeister added that Shopify hasn’t seen broad-based price increases among its merchants in response to trade concerns, but some are considering alternative strategies, such as sourcing changes.
Back in February, CEO Tobi Lütke claimed Shopify would be unaffected by tariffs the US was threatening to impose. At the time, Robert Gillezeau, assistant professor of economic analysis and policy at the University of Toronto, told BetaKit that it was “extremely unlikely” Shopify could avoid a tariff impact and its associated economic slowdown.
Shopify rolled out a suite of resources this quarter to help its merchants manage the impacts of tariffs, including a duties calculator, “buy local” shopping features, and a guide to international import shipping. In the company’s latest annual report, Shopify included “the imposition of or an increase in tariffs” among the potential risks to its business.
The headwinds for small and medium-sized businesses come as Shopify has shifted its focus to attract enterprise clients. This quarter, Shopify rolled back a $1-million USD revenue exemption used by many app developers on its platform. Now, the revenue sharing exemption will only apply to the first $1 million USD of a developer’s lifetime revenue, with the 15 percent share on amounts above that remaining unchanged.
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In response to an investor question about attracting new clients, Hoffmeister said larger brands are moving to Shopify “at an even higher clip” for simplified operations, higher execution speed, and lower costs.
Miner said Shopify’s enterprise traction represents its “most structurally positive signal right now.”
“A recent expert I spoke with told me Shopify is now ‘winning north of 90% of deals where they’re considered,’” Miner said, calling it “a sharp reversal” from just a few years ago in the segment. “The company’s product investments are clearly landing.”
This quarter, Shopify revealed that AI is now a core aspect of employee expectations. CEO Tobi Lütke said in a memo that employees will have to demonstrate AI can’t help them before asking for more resources or staff. Finkelstein reiterated today that Shopify is now fostering a culture of “reflexive AI usage,” while Hoffmeister said AI use is helping drive faster product development.
Shopify expanded its AI arsenal this quarter, rolling out a new feature this quarter to allow merchants to design a store theme using AI prompting. The company also acquired AI search startup Vantage Discovery for an undisclosed amount in March. Finkelstein said their monthly average users of Sidekick, Shopify’s AI assistant for merchants, doubled this quarter.
Disclosure: BetaKit majority owner Good Future is the family office of two former Shopify leaders, Arati Sharma and Satish Kanwar.
With files from Josh Scott. Feature image courtesy Shopify.