Shopify Inc. shares fell sharply on Wednesday after the company reported a quarterly loss and issued an outlook that anticipates slower revenue growth in the upcoming quarter. The e-commerce platform, which reports in U.S. dollars, posted a net loss of USD 273 million for the quarter ended March 31, equal to a loss of USD 0.21 per diluted share. That compares with a profit of USD 68 million, or USD 0.05 per diluted share, in the same quarter a year earlier.
Despite the loss, Shopify’s revenue for the quarter rose to USD 1.86 billion, a 23% increase from USD 1.51 billion in the first quarter a year ago. Still, investors reacted negatively to the company’s guidance and other headwinds: Shopify’s stock closed down USD 19.59, or 18.5%, at USD 86.16 on Wednesday.
For the second quarter, Shopify expects revenue growth to decelerate to the high-teens percentage range year over year. Management pointed to the sale of its logistics business—announced last May when the company also disclosed approximately a 20% reduction in headcount—as a primary factor in the slower top-line projection. The company’s outlook anticipates revenue growth will be roughly three to four percentage points lower in Q2 compared with the year-ago quarter, and it expects gross margin to decline by about half a percentage point from first-quarter levels.
Other pressures noted in the outlook include a stronger U.S. dollar and “some softness in European consumer spending,” according to chief financial officer Jeff Hoffmeister. Hoffmeister singled out the U.K. and parts of Europe as showing signs of economic slowing, even as Shopify has recently experienced solid performance in those regions.
Merchants solutions leading growth segment
Shopify continues to see its merchants solutions business drive a large portion of overall revenue. Merchants solutions revenue reached USD 1.35 billion in the quarter, up from USD 1.13 billion a year earlier. Management attributed much of that increase to the absence of logistics revenue following the business sale, which altered the composition of revenue streams.
Subscription solutions revenue also grew, totaling USD 511 million compared with USD 382 million in the same quarter last year. On an adjusted basis, Shopify reported adjusted earnings of USD 0.20 per diluted share for the quarter, a meaningful improvement from an adjusted profit of USD 0.01 per share in the first quarter of 2023. That adjusted result exceeded analysts’ expectations, which were reported at USD 0.17 per diluted share.
Hoffmeister emphasized that pricing actions contributed to the first-quarter performance but said the benefit from pricing changes is expected to be smaller in Q2. Despite near-term headwinds, he reiterated confidence in Shopify’s product suite and go-to-market initiatives, expressing belief that the company remains well positioned in unified commerce and can continue building on its momentum.
Automation enables growth without hiring
Following last year’s workforce reductions, Shopify has kept headcount flat for three consecutive quarters, according to president Harley Finkelstein. He said the company believes it can limit future headcount growth while sustaining both revenue growth and profitability, in part by leaning on automation and improved operational infrastructure.
“Over the past 18 months, we’ve committed significant effort into building efficient infrastructure and systems, which are instrumental in streamlining our work and maintaining our high-velocity product releases,” Finkelstein said. He described those systems as catalysts that allow Shopify to operate with greater speed and efficiency without proportionally expanding staff.
Hoffmeister highlighted the expanding role of artificial intelligence in merchant support. In the first quarter, more than half of Shopify’s merchant support interactions were assisted by AI, and many of those interactions were fully resolved with AI help. AI has also enabled round-the-clock live support across eight languages, replacing limited-hour coverage in some markets.
According to management, AI-enhanced support has improved the merchant experience by shortening average interaction times and lowering barriers for merchants who might otherwise hesitate to ask questions they perceive as trivial. These operational gains have helped Shopify maintain service levels while avoiding meaningful increases in headcount.
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