Shopify (SHOP.US) fourth quarter AI revenue surged, but first quarter profit outlook is disappointing.

Despite sales in the fourth quarter (holiday quarter) of Shopify (SHOP.US) being better than expected due to healthy consumer spending and the push of artificial intelligence capabilities, the company's first-quarter profit outlook announced on Tuesday is quite pessimistic, shocking investors. According to the financial report, Shopify's net profit in the fourth quarter was $1.29 billion, earnings per share were $0.99, but adjusted earnings per share were $0.44, in line with Wall Street's expectations. The company's fourth-quarter revenue was $28.1 billion, a 31% year-on-year increase, higher than analysts' expectations of $27.2 billion. For the full year, Shopify's net profit was $2.02 billion, earnings per share were $1.55, and revenue was $88.8 billion. It is understood that Shopify has been heavily investing in building AI-based tools and features to help sellers on its platform with tasks ranging from image generation and inventory management to collecting customer and sales data. The company launched a set of AI features called "Shopify Magic" in early 2023, which is available to all subscription levels at no extra cost, attracting more small and medium-sized business owners to use Shopify. In addition, Shopify also introduced an AI assistant, Sidekick, to more merchants last year. However, following the optimistic performance during the holiday season, Shopify expects the gross margin growth rate in the first quarter of 2025 to be around 20%, lower than Visible Alpha analyst expectations of 24.2%. Additionally, the company also expects the proportion of operating expenses to revenue in the first quarter to reach 41% to 42%, compared to 31.5% in the fourth quarter. According to data compiled by the London Stock Exchange, the company's revenue forecast is around 25% growth rate, roughly in line with the expected 24.4% increase. Regarding revenue forecasts, Shopify expects a growth rate of around 25%, which is basically in line with the market's general expectation of a 24.4% increase. It is worth mentioning that the Gross Merchandise Volume - a key measure of the total value of orders facilitated through the Shopify platform - achieved a growth of about 26% in the quarter ending December 31, reaching $944.6 billion. Although investors are optimistic about Shopify's revenue growth rate, driving its stock listed in the US to rise 13% year-to-date, the company's stock price fell 9% in pre-market trading, mainly due to its bleak first-quarter profit outlook.