Shopify shares sank about 9% in early trading Tuesday after the e-commerce platform reported third-quarter revenue that fell short of Wall Street estimates for the first time since 2022, overshadowing 32% sales growth and a holiday-quarter forecast that came in above expectations.
The stock traded at $141.76, down $14.46, or 9.3%, as of 9:38 a.m. EST, paring a premarket slide of about 15%.
Revenue rose 32% from a year earlier to $3.742 billion in the quarter ended Sept. 30, Shopify said in its earnings release Tuesday, just below the roughly $3.75 billion analysts had expected – the company’s first revenue miss against consensus estimates since 2022.
Gross merchandise volume, the total dollar value of orders sold through Shopify’s platform, grew 29% to $119.15 billion, also short of the roughly $120 billion analysts had projected. Subscription solutions revenue, the company’s recurring software business, rose 20% to $836 million, below the roughly $850 million expected, while merchant solutions revenue climbed 35% to $2.91 billion.
Gross margin narrowed to 47.6% from 48.9% a year earlier as lower-margin merchant services made up a larger share of the business.
The miss landed alongside otherwise strong results. Operating income jumped 66% to $568 million, net income rose to $462 million from $264 million a year earlier, and free cash flow reached $816 million – a 22% margin, up from 18%. Adjusted earnings of 49 cents a share topped analyst estimates.
“We extended our track record of consistent execution, with 32% revenue growth and a 22% free cash flow margin,” Chief Financial Officer Jeff Hoffmeister said in the release. “Delivering these results at our scale speaks to the strength of our model, our multiple growth drivers, and our expanding addressable market.”
President Harley Finkelstein said the company “powered $119 billion in GMV, while continuing to build commerce into every surface, every agent, and increasingly, everywhere.”
For the fourth quarter, Shopify forecast revenue growth in the low-thirties percentage range – above what analysts had penciled in for the holiday season, though a slower pace than the 34% growth it posted earlier this year – with gross profit expected to grow in the high-twenties percentage range.
Shopify provides the software backbone for millions of online stores, handling checkout, payments and shipping for everyone from first-time sellers to major brands. Its gross merchandise volume offers one of the broadest real-time reads on online shopping heading into the holidays.
What it means for you: The sell-off is about Wall Street’s expectations, not a pullback in online shopping – $119 billion worth of goods moved through Shopify-powered stores in the quarter, up 29% from a year ago. If you run a small business on the platform, the company announced no price or fee changes today. For investors, the drop reflects how much good news was already priced into the stock: even a narrow miss on revenue, paired with slightly slower growth ahead, was enough to knock about 9% off the shares at the open.
JBizNews Desk | Wall Street
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