Shopify (SHOP.US) third quarter MRR falls short of expectations, but strong holiday season sales are expected.

On Tuesday, Shopify (SHOP.US) announced better-than-expected third-quarter performance and strong fourth-quarter revenue guidance. Shopify's third-quarter revenue increased by 32% to $28.4 billion, surpassing the guidance of 20% to 25%. According to FactSet data, the company's revenue also exceeded Wall Street's expectations of $27.6 billion. Subscription service revenue increased to $699 million, while revenue from its largest business - merchant services - increased from $15.5 billion to $21.5 billion. The company has maintained steady growth throughout the year, with recent performance reaching its highest valuation on the Toronto Stock Exchange. As of January 2025, the stock has risen by 59% on the Toronto Stock Exchange with a closing price on Monday of CAD 242.96 (approximately USD 172.85), leading to a market value of CAD 315.78 billion. Gross Merchandise Volume (GMV), a measure of the total value of orders completed through the Shopify platform, increased by 32% to $920.1 billion. Monthly Recurring Revenue (MRR) was $193 million, slightly below expectations. For this quarter (including the important holiday shopping season), Shopify expects revenue to grow by approximately 24% to 29%, while analysts surveyed by FactSet anticipate growth of 22.6%. Gross profit is expected to grow at a rate of 21% to 26%, operating expenses are projected to be between 30% to 31%, and stock-based compensation expenses are $130 million. Despite market preparations for reduced consumer spending, Shopify's performance indicates that its merchants have shown strong resilience, leveraging new artificial intelligence and enterprise tools to drive growth on the platform even in the face of retail industry volatility. This is particularly beneficial for a large portion of Shopify's customer base, consisting of small and medium-sized enterprises, as they can save costs by utilizing AI for tasks such as setting discounts or generating sales reports. Shopify continues to maintain rapid growth, with an increasing number of merchants on its platform and a significant increase in product sales. In August, the e-commerce company stated that despite tariffs and subsequent price increases, there had been no signs of slowing consumer demand. The fourth quarter revenue growth expectations indicate strong demand for this e-commerce company, as retailers prepare for the crucial holiday shopping season. However, after the performance announcement, the company's stock price dropped over 4% in pre-market trading, despite having surged by nearly 63% so far this year.