Shopify exceeded its predicted revenue growth, reporting $906 million USD in the second quarter as merchant sales increased despite retail challenges from trade uncertainty.
Shopify’s stock jumped over 20 percent on both the Nasdaq and Toronto Stock Exchange, reclaiming its position as Canada’s most valuable company by market cap, overtaking the Royal Bank of Canada. Shares ended at $154.90 USD on the Nasdaq.
The Ottawa-based e-commerce firm posted a 31 percent year-over-year revenue increase with revenue reaching $2.68 billion USD, exceeding analyst predictions, as noted by Reuters. The $906 million USD net income followed a larger-than-anticipated $682 million USD net loss in Q1. Gross profit rose to $1.3 billion from $1.1 billion in the previous quarter.
CFO Jeff Hoffmeister noted that about four percent of Shopify’s global GMV ships under de minimis exemptions.
During an earnings call, Shopify CFO Jeff Hoffmeister stated that the impacts of potential US tariffs, accounted for in Q2 guidance, did not occur. Gross merchandise volume (GMV), indicating merchant sales, hit $87.8 billion USD, a 16-percent rise compared to Q1, bolstered by significant European figures. Shopify observed GMV and revenue growth acceleration in North America, Europe, and Asia Pacific, quarter over quarter.
Shopify, offering e-commerce software to both small and large businesses, reported the most significant GMV growth among merchants earning over $50 million in GMV annually and those under $2 million.
The prior week, the US intensified its trade conflict with Canada, increasing tariffs and removing the de minimis exemption allowing up to $800 of goods into the US duty-free.
Hoffmeister mentioned that around four percent of Shopify’s global GMV currently benefits from de minimis exemptions. Additionally, Shopify hasn’t observed significant GMV shifts related to de minimis rollback for China-shipped goods.
“We haven’t witnessed any major changes in cross-border activity or buyer behavior,” Hoffmeister stated.
However, he mentioned many Shopify merchants increased prices this quarter and the company is tracking how this metric compares to inflation.
Richard Tse, managing director of National Bank of Canada’s (NBC) financial markets division, informed BetaKit that the earnings exceeded expectations.
“We anticipated it to be strong,” Tse commented, highlighting that merchant sales and Q3 guidance outperformed both NBC’s and industry forecasts.
An NBC earnings preview noted that even severe US tariffs on China would marginally affect Shopify revenue, as imports from China are estimated to comprise about six percent of global GMV.
Shopify disclosed $291 million USD in operating income, marking nearly a 19 percent year-over-year increase. It also maintained a 16 percent free cash flow margin, achieving an eight-quarter double-digit streak.
For the next quarter, Shopify anticipates revenue growth in the mid-to-high twenties, free cash flow margin in the mid-to-high teens, and gross profit growth in the low twenties, year over year.
NBC identified Shopify’s large merchant and enterprise customer base as a significant growth driver. During the earnings call, president Harley Finkelstein remarked that Shopify’s approach of “winning larger merchants” is yielding results, citing customers like Starbucks and Canada Goose.
Finkelstein also noted Shopify’s expansion into new verticals, onboarding business-to-business clients in sectors such as mining, automotives, and education.
“This diversity increases our resilience,” he said.
Tse indicated that the market reaction signifies “more opportunities in this company than initially credited by investors.”
Charlie Miner, analyst at consulting firm Third Bridge, informed BetaKit that “Shopify’s enterprise narrative has been a favored market angle” and might serve as a “powerful catalyst” for the stock.
Aim to incorporate AI, Shopify released developer tools to enable shopping within AI chatbots, offering product searches with AI agents and integrating checkout into conversational AI chats like Microsoft Copilot.
Finkelstein stated Shopify aims to be the foremost partner for shopping infrastructure within AI products, anticipating commerce to increasingly occur in this arena.
An investor questioned Shopify’s speculated partnership with OpenAI, involving integration of Shopify’s checkout technology into ChatGPT, as per the Financial Times. Finkelstein said he wouldn’t comment on the product roadmap but confirmed active efforts in new opportunities and partnerships. Shopify didn’t respond to partnership inquiries, while OpenAI mentioned, “Nothing to add here.”
The NBC preview suggested the OpenAI partnership might drive over $500 million in net revenue on future run-rate basis for Shopify against current estimates.
This quarter, Shopify also expanded its AI toolkit for merchants, enabling website customization with its Sidekick tool. For payments, it collaborated with Coinbase and Stripe to incorporate USDC support, a US-dollar-backed stablecoin.
The e-commerce company faced legal issues this quarter, winning a case against Canada’s tax authority, resisting data requests on Shopify merchants. Additionally, US company Sezzle sued Shopify for purportedly favoring its own payment installment software.
Disclosure: BetaKit’s majority