Canadian e-commerce giant Shopify posted higher-than-expected revenue and profit during the third quarter of 2023 after cutting costs and teaming up with Amazon on fulfillment.
Per Shopify’s latest earnings report, the firm’s total Q3 revenue hit $1.7 billion USD—a 25 percent year-over increase that translates to 30 percent when accounting for the sale of its logistics business. Meanwhile, Shopify posted $718 million in net income during Q3, a big jump compared to the $159 million the Ottawa-based company lost during the same period last year.
“Our Q3 results should be taken as a clear indicator of our ability to reshape Shopify.”
– Harley Finkelstein
According to Bloomberg News and Reuters, Shopify’s third-quarter revenue and profit, excluding one-time items, both surpassed analyst expectations. The market has reacted favourably to these results thus far: the price of Shopify’s shares on the TSX and NYSE have surged as high as 21 percent since market open as of time of publication.
“Our results showcased the durability of our business model as we delivered a compelling combination of both top line growth and profitability,” Shopify CFO Jeff Hoffmeister said in a statement. “We will continue to operate with discipline, thoughtfully investing in the huge opportunities ahead across regions, products, and channels to help merchants capture every opportunity every step of the way.”
Earlier this year, as part of a push to reduce expenses and return focus to its core business following a late COVID-19 pandemic slump, Shopify laid off 20 percent of its staff and sold Shopify Logistics and Deliverr to Flexport. In August, the firm reached a deal to allow US-based Shopify merchants to use Amazon’s Buy with Prime service to deliver packages. Amazon plans to launch an associated app in the Shopify ecosystem in the coming weeks.
“Our Q3 results should be taken as a clear indicator of our ability to reshape Shopify, making us faster, more agile, and ready for sustained, profitable growth,” Shopify president Harley Finkelstein argued during the company’s earnings call.
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During Q3, Shopify’s gross merchandise volume (GMV), a metric that represents the overall value of merchant sales using Shopify, grew 22 percent year-over-year, surpassing $56 billion. Hoffmeister noted during the call that this represents Shopify’s highest quarterly GMV growth rate since the company’s pandemic highs in 2021. Per Hoffmeister, it was fuelled by growth in the company’s existing and new global merchant base, Europe, and its point-of-sale business.
Per Hoffmeister, this GMV strength contributed towards Shopify’s Q3 revenue growth, alongside increased penetration of Shopify Payments, rising demand for Shopify’s Capital, Markets, and Installments solutions, and its pricing changes.
Hoffmeister noted on the call that Shopify reduced its headcount and real estate footprint after selling its logistics business. Since then, he said that Shopify has been selectively hiring and doing so more slowly, while also keeping its marketing spending disciplined. Hoffmeister said both factors contributed to Shopify’s profit in the third quarter.
During the call, Finkelstein noted that the commerce landscape is “rapidly changing,” adding that Shopify has adapted to this by “operating with greater discipline and efficiency to ensure merchants have the tools they need to navigate any macroeconomic environment.”
RELATED: Shopify posts positive revenues in Q2 2023 for third quarter running
This year, Shopify has made a number of moves to stay competitive and bolster its business. The company launched Commerce Components in a push to woo larger brands, raised the cost of its subscription plans, rolled out a number of new artificial intelligence-powered tools, made its checkout solution Shop Pay available beyond Shopify, expanded the availability of its point-of-sale hardware, and announced a new TikTok integration.
Last month, Shopify also took a stake in wholesale marketplace Faire as part of a new partnership designed to expand its B2B offerings, which Shopify views as “a huge growth opportunity.”
Looking forward, compared to the same periods last year, Shopify said that it expects its full-year revenue to grow at a “mid-twenties percentage rate,” fuelled by fourth-quarter sales growth “in the high teens.”
Meanwhile, Shopify anticipates that its free cash flow will continue to improve during Q4, as it already has with each successive quarter in 2023.
Feature image courtesy Burst. Photo by Avelino Calvary Martinez.
