Shopify beat its forecasted revenue growth and posted $906 million USD for the second quarter as its merchant sales rose, seemingly defying the pressures on retailers from ongoing trade uncertainty.
Shopify stock surged more than 20 percent on both the Nasdaq and the Toronto Stock Exchange, surpassing the Royal Bank of Canada to regain the title of Canada’s most valuable company by market cap. Shares closed at $154.90 USD on the Nasdaq.
The Ottawa-based e-commerce company posted 31 percent revenue growth year-over-year as its revenue hit $2.68 billion USD, above analyst estimates, according to Reuters. The $906-million USD in net income came after a larger-than-expected $682-million USD net loss in Q1. Gross profit was $1.3 billion, up from $1.1 billion last quarter.
CFO Jeff Hoffmeister said “only approximately four percent” of Shopify’s global GMV is currently shipped under de minimis exemptions.
On an earnings call, Shopify CFO Jeff Hoffmeister said that the potential impacts of United States (US)-imposed tariffs, which Shopify had worked into its Q2 guidance, did not materialize. Gross merchandise volume (GMV), an indicator of merchant sales, reached $87.8 billion USD, a 16-percent increase compared to Q1 results, and with strong numbers in Europe, the company said. Shopify noted that both GMV and revenue growth rates accelerated in North America, Europe, and Asia Pacific, quarter over quarter.
Shopify, which sells e-commerce software solutions to both small businesses and large enterprises, said that it saw the highest GMV growth for merchants making more than $50 million in GMV annually and those making less than $2 million.
Last week, the US escalated its trade war with Canada, hiking tariffs on goods and eliminating a key policy for small merchants: the de minimis exemption, which allowed up to $800 of merchandise to cross into the US duty-free.
Hoffmeister said “only approximately four percent” of Shopify’s global GMV is currently shipped under de minimis exemptions. He added that Shopify did not see significant changes in GMV related to the de minimis rollback for goods shipped from China in Q1.
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“We haven’t seen any meaningful changes… in terms of cross-border activity, in terms of what we’re seeing in buyer behaviour,” Hoffmeister said.
However, he noted that many Shopify merchants raised prices this quarter and the company would continue to track how this metric compares to inflation.
Richard Tse, managing director of National Bank of Canada’s (NBC) financial markets division, told BetaKit that the earnings beat lined up with expectations.
“We thought it was going to be strong,” Tse said, adding that merchant sales and third-quarter guidance were well ahead of both NBC’s and industry estimates.
An earnings preview note from NBC predicted that even harsh US tariffs on China would have a limited revenue impact on Shopify, as it estimated that exposure to imports from China represented roughly six percent of global GMV.
Shopify reported $291 million USD in operating income, an increase of nearly 19 percent year over year. It also posted a 16 percent free cash flow margin, continuing an eight-quarter double-digit streak.
Next quarter, Shopify said it expects to hit revenue growth in the mid-to-high twenties, free cash flow margin in the mid-to-high teens, and gross profit growth in the low twenties, all on a year-over-year basis.
The NBC note said that one of Shopify’s biggest growth levers is its large merchant and enterprise customer base. On the earnings call, president Harley Finkelstein said Shopify’s strategy of “winning larger merchants” is delivering results as it lands customers such as Starbucks and Canada Goose.
Finkelstein added that Shopify has onboarded business-to-business customers in new verticals, including the mining sector, automotives, and education.
“This diversity makes us even more resilient,” he said.
Tse said the market reaction reflects there being “more opportunities in this company than I think investors may have given it credit originally for.”
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Charlie Miner, analyst at consulting firm Third Bridge, told BetaKit that “Shopify’s enterprise narrative has been one of the market’s favourite angles” and could be a “powerful catalyst” for the stock.
As part of a push to integrate artificial intelligence (AI) into its services, Shopify rolled out a suite of developer tools yesterday to facilitate shopping within AI chatbots. These features include product searches with AI agents and integrating checkout directly into conversational AI chats, such as Microsoft Copilot.
Finkelstein said Shopify is focused on becoming the go-to partner for shopping infrastructure within AI products, as commerce may increasingly take place in this space.
“Whether it takes some of the market share away from search-based commerce or not, we want to be prepared for that,” Finkelstein said.
An investor asked about Shopify’s reported partnership with chatbot giant OpenAI, which would see Shopify’s checkout technology integrated into ChatGPT, according to the Financial Times. Finkelstein said he wouldn’t discuss the product roadmap, but that Shopify is “actively working on new opportunities and partnerships.” Shopify did not respond to a request for comment about the partnership, while OpenAI said it had “Nothing to add here.”
The NBC preview note referenced the potential partnership with OpenAI, saying it could drive more than $500 million in net revenue on a future run-rate basis for Shopify relative to current estimates.
Shopify also expanded its AI toolkit for merchants this quarter, allowing them to create custom websites with its tool Sidekick. On the payments side, it collaborated with FinTech companies Coinbase and Stripe to add support for USDC, a US-dollar-backed stablecoin.
The e-commerce company dealt with legal matters this quarter, as it won a case against Canada’s tax authority, which had requested years of data on Shopify merchants. US buy-now, pay-later company Sezzle also sued Shopify for alleged “privileging” of its own variable payment installment software.
Disclosure: BetaKit majority owner Good Future is the family office of two former Shopify leaders, Arati Sharma and Satish Kanwar.
Feature image courtesy Shopify.