Shopify Q1 Earnings Lag Estimates, Revenues Jump Y/Y, Shares Fall

Core Insights - Shopify reported first-quarter 2025 non-GAAP earnings of 25 cents per share, missing the Zacks Consensus Estimate by 3.85%, but showing a 25% increase year over year [1] - Revenues reached $2.36 billion, surpassing the Zacks Consensus Estimate by 1.32%, and reflecting a 26.8% year-over-year growth [1] - Following the earnings report, Shopify shares declined by 2%, with an 11.6% year-to-date drop, compared to a 9.1% decline in the Zacks Computer and Technology sector [1] Revenue and Growth - Gross Merchandise Volume (GMV) for the first quarter was$ 74.75 billion, up 22.8% year over year, driven by same-store sales growth, an increase in merchants, and strong performance in Europe [2] - Merchant solutions revenues were $1.74 billion, accounting for 73.7% of total revenues, with a year-over-year increase of 29% [3] - Subscription solutions revenues reached$ 620 million, making up 26.3% of total revenues, and increased by 21.3% year over year [4] Profitability and Expenses - Gross profit for the first quarter was $1.17 billion, a 22.2% increase year over year, with Merchant Solutions' gross profit growing by 24% [6] - Total operating expenses were$ 966 million, up 10.9% year over year, but as a percentage of revenues, they decreased by 590 basis points to 40.9% [6] - Adjusted operating income was reported at $329 million, reflecting a significant year-over-year increase of 63.7% [8] Cash Flow and Balance Sheet - As of March 31, 2025, cash and cash equivalents totaled$ 5.51 billion, slightly up from $5.48 billion at the end of 2024 [9] - Free cash flow increased by 56.5% year over year to$ 363 million, with a free cash flow margin expanding by 100 basis points to 15% [9] Future Guidance - For Q2 2025, Shopify anticipates revenue growth in the mid-twenties percentage range year over year, with gross profit expected to grow at a high-twenties percentage rate [10] - The Zacks Consensus Estimate for Q2 2025 revenues is $2.49 billion, indicating a 21.92% growth from the previous year [11]