Shopify hits record revenue, profits amid massive year of growth

Shopify Tobias Lütke

Shopify’s fourth-quarter and full-year financial results for 2020 list record revenues and profits for the e-commerce retailer, following a year of COVID-fueled growth.

The Ottawa-based company’s total revenue for the full year 2020 was $2.9 billion, an 86 percent increase from 2019. Shopify’s gross profit grew 78 percent, as a result, to $1.5 billion in 2020, compared with $865.6 million for 2019. All numbers are in USD.

In the fourth quarter alone, Shopify recorded total revenue of $977.7 million, a 94 percent year-over-year increase.

“The spirit of entrepreneurship was strong in 2020, as our merchants’ resilience and ability to adapt helped many of them thrive in a difficult year,” said Harley Finkelstein, Shopify’s president. “Shopify is at the heart of our merchants’ businesses with entrepreneurs around the world trusting us with their livelihoods.”

Highlights from Q4 2020 include merchant solutions, which continue to be a strong point for Shopify, pulling in $698.3 million in revenue, an increase of 117 percent. With a high number of new merchants still joining the platform in Q4, subscription solutions revenue was up 53 percent year-over-year to $279.4 million. Gross profit for the quarter grew 91 percent to $504.4 million, compared with $263.9 million last year.

Shopify’s fourth quarter was driven mainly by the annual wave of Black Friday and Cyber Monday e-commerce shoppers, during which Shopify merchants generated over $5.1 billion USD in sales worldwide, up 76 percent from 2019. Shopify’s impressive shopping season results in Q4 cemented the company’s position as one of tech’s big winners from the pandemic-fuelled growth of e-commerce globally.

From the yearly lens, Shopify’s gross profits of $1.5 billion translated to net income of $319.5 million, or $2.59 per diluted share, compared with net losses of $124.8 million.

Shopify’s latest financial results follow another active quarter for the Ottawa-founded company. One of the most notable developments in Shopify’s strategy has been to bring its online retail capabilities to social media giants. Last year, the company inked partnerships with TikTok and Google (by way of YouTube), on different e-commerce initiatives. Those deals followed Shopify’s first partnership with Facebook over the summer.

Shopify has continued this momentum in 2021. Earlier this month, the company struck another deal with Facebook to bring its payment offering, Shop Pay, to merchants selling on Facebook and Instagram. This deal marked the first time Shop Pay has expanded beyond Shopify directly onto social media platforms.

These moves are the latest in a series of deals Shopify has signed with US tech and retail giants. Another significant deal included an agreement to integrate Shopify merchants onto Walmart’s website.

From an operational lens, the fourth quarter also followed a series of major executive-level personnel changes. One of those changes included COO Finkelstein leading Shopify’s growth and external affairs as president and CEO Tobias Lütke pivoting his efforts to focus on product.

At the time of the executive shuffle, Lütke noted he was Shopify’s first product leader and was excited to get back into the role. In a recent report from The Globe and Mail, Lütke said of Shopify’s platform, “I know it works well, but it’s still terrible.”

The company is also looking to launch its banking product, first revealed in May, early this year. Over the fourth quarter, Shopify revealed payment provider Stripe and Evolve Bancorp would power the offering, called Shopify Balance.

As Shopify continues to build new products and partnerships, it is also looking to patent more of its intellectual property. As the company faces increasing competition from Amazon, Shopify has put a greater emphasis on its IP strategy and recently received two patent approvals during the fourth quarter of 2020.

Since the end of the fourth quarter, the company hired Cathy Polinsky as its new VP of engineering, and revealed plans to double the size of its engineering team, with a goal to hire 2,021 new technical roles in 2021.

As COVID-19 and the e-commerce boom fueled much of Shopify’s growth over the past year, the company expects this rate to normalize in 2021.

Shopify’s expectations for 2021 still predict rapid revenue growth, but at a rate lower than this past year. “While we expect that the first quarter will likely still contribute the smallest share of full-year revenue and the fourth quarter the largest, the revenue spread may be more evenly distributed across the four quarters than it has been historically if the rollout of a vaccine shifts more spending to services and offline shopping towards the back half of the year,” read the report.

“This year, we are doubling down on creating a frictionless path to successful entrepreneurship, as we continue to build a future-proof commerce solution to serve generations to come,” said Finkelstein.

With support from Isabelle Kirkwood and Josh Scott

Meagan Simpson

Meagan Simpson

Meagan is the Associate Editor for BetaKit. A tech writer that is super proud to showcase the Canadian tech scene. Background in almost every type of journalism from sports to politics. Podcast and Harry Potter nerd, photographer and crazy cat lady.