Shopify Revenue Meets Expectations, Shares Dive on Bleak Outlook

Shopify Inc. reported an increase in first-quarter revenue for 2024, rising 23.4% to $1.86 billion compared to the same period in the previous year. The company, which is based in Canada and reports its earnings in U.S. dollars, also posted a non-GAAP profit of $0.20 per share. This marks an improvement from the previous year's quarter. However, Shopify experienced a net loss of $273 million, or 21 cents per diluted share, which contrasts with a profit of $68 million, or five cents per share, from the same quarter a year ago.

Despite the revenue growth and the increase in gross merchandise volume to $60.9 billion, surpassing Wall Street's expectations, the company's shares fell sharply by approximately 17% after the announcement. The decline in share price came after Shopify provided guidance for the second quarter, projecting slower revenue growth at a "high-teens percentage rate" year over year. This slowdown is attributed to an uncertain economy, decreased consumer spending, and the impact of selling its logistics business to Flexport in the previous year.

Shopify's forecast indicates that gross margins for the second quarter are expected to decrease by about 50 basis points from the first quarter. Operating expenses are also anticipated to increase at a low-to-mid-single digit percentage rate for the second quarter, following a 4% decrease in the first three months of the year. The company's reliance on small and medium-sized businesses, which are currently facing the pressures of inflation, contributes to the cautious outlook. Despite these challenges, the company continues to innovate with price hikes and new AI-based tools to support its merchant base.