Shopify shares declined after the company reported third-quarter results that beat earnings expectations but offered investors questions about costs and future growth. The stock traded at $147.76 on November 3, down 5.42%, after falling as much as 12% in pre-market trading and recovering some of that loss.
Revenue rose 32% year over year to $3.74 billion, while earnings per share came in at $0.49, compared with estimates of $0.47. Gross merchandise volume (GMV) reached $119 billion, up 29.5%. The earnings beat was modest, and the source report said revenue matched expectations, unlike the stronger revenue surprise reported in the previous quarter.
The results showed growth across several parts of the business. Offline GMV increased 30%, business-to-business GMV rose 74%, and international GMV grew 32%. Merchant solutions revenue was up 35%, while subscription revenue increased 20%. Free cash flow totaled $816 million, equal to a 22% margin.
Shopify’s growth has remained strong in recent quarters: revenue has increased at a low-30% rate for seven consecutive quarters, according to the report. GMV growth in constant currency has stayed around 30% for six quarters, while North American growth was 28% for a third straight quarter.
Investors are also watching the cost of developing AI tools. Merchant conversations with Shopify’s Sidekick assistant rose 14% from the prior quarter, while the cost per conversation fell 28%. However, the report notes that management has not yet outlined a clear revenue path for agentic commerce, leaving the timing of AI monetization uncertain.
Spending is another concern. Shopify expects fourth-quarter operating expenses to represent 29% to 30% of revenue, with increased marketing and infrastructure spending ahead of Black Friday and Cyber Monday. Gross profit growth is forecast in the high-20% range, below the company’s low-30% revenue growth outlook, suggesting that margin expansion may pause. The report also notes conflicting figures for third-quarter operating expenses in its source materials, so neither figure should be relied on without checking the filing.
The holiday shopping period will provide an early test of the fourth-quarter outlook. The report cites consensus expectations of about $4.76 billion in fourth-quarter revenue and earnings per share of $0.66. Shopify also expects cumulative GMV to surpass $2 trillion by the end of 2026.
The date of Shopify’s next earnings report was not available in the data reviewed. The report gives consensus estimates for the March 2027 quarter of $4.00 billion in revenue and $0.45 in earnings per share. It also notes that estimate changes after the results may indicate whether investor concerns about spending persist.
Sources: Investing.com News.