Shopify, the leading e-commerce software provider, has reported better-than-expected results for the second quarter, causing a surge in its shares during after-hours trading on Wednesday.
Impressive Revenue Growth
In Q2, Shopify generated $1.7 billion in revenue, marking a 31% increase from the previous year and surpassing Wall Street’s consensus forecast of $1.63 billion. This growth is even more remarkable considering it accelerated from 25% in the previous quarter.
Adjusted Earnings Exceed Expectations
On an adjusted basis, Shopify earned 14 cents per share, well above the consensus estimate of six cents per share. However, on a GAAP basis, the company reported a loss of $1.3 billion, or $1.02 per share, primarily due to a $1.34 billion impairment charge relating to the sale of its former logistics business.
Strong Gross Merchandise Volume
Shopify’s gross merchandise volume reached $55 billion, a 17% increase compared to the same quarter last year and surpassing the consensus estimate of $53.5 billion.
Positive Outlook for Q3
Looking ahead to the third quarter, Shopify projects revenue growth in the low 20s compared to the previous year. Accounting for the recent sale of its logistics business would further enhance this growth rate by an additional 3 to 4 percentage points. The market had estimated an 18% growth rate.
Increased Gross Margin and Free Cash Flow
Shopify anticipates its gross margin for Q3 to be 2 to 3 percentage points higher than the 49.3% recorded in Q2. Additionally, the company expects its free cash flow for the third quarter to exceed the combined total for the first two quarters of the year.
Restructuring and Growth
During the previous quarter, Shopify had announced plans to reduce its staff size by 20% while selling its logistics business to Flexport. These recent results validate the company’s new direction and President Harley Finkelstein stated that Shopify is demonstrating greater speed and agility, shipping more products at an accelerated pace. Furthermore, the company’s growth in gross merchandise value is outpacing the overall e-commerce market.
Positive Implications for Amazon
These strong results from Shopify may foreshadow positive outcomes for Amazon.com (AMZN), which is set to report its Q2 results on Thursday afternoon.
Shopify shares experienced a 7.4% decline during the regular trading session but increased by 0.4% in after-hours trading, reaching $62.73. Year-to-date, the stock has shown a notable rise of approximately 80%.
