In This Article:
Key Points
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Shopify delivered solid top-line gross merchandise volume and free cash flow growth in the quarter.
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Net loss expanded, but after adjusting for the impact of equity investments, Shopify’s net income was positive and growing.
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Shopify forecasted Q2 revenue growth in the mid-20% range, matching estimates, but investors were hoping for more in the face of growing tariff headwinds.
Here's our initial take on Shopify's (NASDAQ: SHOP) fiscal 2025 first-quarter financial report.
Key Metrics
Metric | Q1 2024 | Q1 2025 | Change | vs. Expectations |
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Revenue | $1.86 billion | $2.36 billion | 27% | Beat |
Earnings per share | -$0.21 | -$0.53 | n/a | Met |
Gross merchandise volume | $60.9 billion | $74.8 billion | 23% | Met |
Free cash flow | $232 million | $363 million | 56% | n/a |
Shopify Posts Growth, but Questions Remain
Shopify posted solid growth in the quarter, with revenue up 27% year over year and gross merchandise volume sold on its platform up 23% to nearly $75 billion. The company also reported a higher net loss, but much of that was accounting related. Backing out the impact of equity investments, net income was up 57% to $226 million in the quarter, and free cash flow climbed by a similar percentage to $363 million.
The company posted a 15% free cash flow margin in the quarter, the seventh consecutive quarter of double-digit free cash flow.
Heading into the quarter, investors were focused on how tariffs and trade wars would impact Shopify's core business. Although the company itself is not a big importer, many of its customers rely on China for merchandise sold on the Shopify platform. The elimination of the "de minimis" loophole, which allowed shipments from China valued at less than $800 to enter duty-free, was particularly worrisome.
Shopify's outlook provided no reason for further panic but also did little to quell the fears. The company expects revenue growth in the current quarter in the mid-20 percentage-wise, matching but not topping Wall Street's forecast for 23% growth.
In a statement, company president Harley Finkelstein made the case that "businesses perform better on Shopify, regardless of market conditions." Shopify's set of tools can help merchants better navigate changes in tariffs and other trade policies, potentially helping the business to gain new customers in the quarters to come.
Immediate Market Reaction
Given the looming threat of tariffs, the market is taking a glass-half-empty approach to this report and the guidance for what is to come. Shopify shares were down about 8% in premarket trading following the release but ahead of the market open.