AI gives Q2 boost to Shopify

THE implementation of artificial intelligence has seen Canadian retail platform Shopify outstrip estimates for its second-quarter revenues.

Shopify, which is designed to assist small and medium businesses create an online shop, has expanded its use of AI-enabled functions - a move which has allowed it to attract more users.

“Our Q2 results make it clear: Shopify is rapidly strengthening its position as a leading enabler of global commerce and entrepreneurship,” said Shopify President Harley Finkelstein.

“More and more merchants across the world are putting their trust in Shopify’s unified commerce operating system to fuel growth and simplify complex operations. We’re fully committed to executing our growth strategies and delivering immense value to our merchants for years to come.”

Jeff Hoffmeister, Chief Financial Officer, said the management team was proud to report another quarter of robust financial performance.

"We drove strong growth in GMV, revenue, and gross profit, all amidst a mixed consumer spend environment, continued to take share and concurrently expanded our free cash flow margin," he added.

"We delivered across every metric. Our results underscore our commitment to providing exceptional value to our merchants through focused operating execution and efficiency. As a high-growth global technology leader in commerce, we remain committed to leveraging our core strengths and investing in opportunities to achieve sustainable growth and long-term profitability.”

Second-Quarter Financial Highlights (all comparisons are to the second quarter of 2023)

• Gross Merchandise Volume (“GMV”) increased 22% to $67.2 billion
• Revenue increased 21% to $2.0 billion, which translates into year-over-year growth of 25% after adjusting for the sale of logistics businesses
• Merchant Solutions revenue increased 19% to $1.5 billion, driven primarily by the growth of GMV and continued penetration of Shopify Payments
• Gross Payments Volume (“GPV”) grew to $41.1 billion, representing 61% of GMV processed in the quarter, versus $31.7 billion, or 58%
• Subscription Solutions revenue increased 27% to $563 million, driven by growth in the number of merchants and pricing increases on subscription plans
• Monthly Recurring Revenue (“MRR”) as of June 30, 2024 increased 25% to $169 million, driven by growth in merchants. Shopify Plus contributed $52 million, or 31%, of MRR
• Gross profit dollars grew 25% to $1.0 billion. Gross margin for the quarter was 51.1% compared to 49.3%, driven primarily by the lack of the dilutive impact of the logistics businesses and changes in pricing plans partially offset by continued growth of payments
• Free cash flow was $333 million compared to free cash flow of $97 million
• Free cash flow margin for the quarter was 16% compared to free cash flow margin of 6%
• Cash and marketable securities were $5.0 billion as of June 30, 2024, with a net cash position of $4.1 billion after consideration of outstanding convertible notes

For the third quarter of 2024, Shopify says it anticipates...

• Revenue to grow at a low-to-mid-twenties percentage rate on a year-over-year basis;
• Gross margin to be higher by approximately 50 basis points compared to Q2 2024;
• GAAP operating expense as a percentage of revenue to be 41% to 42%;
• Stock-based compensation to be $120 million; and
• Free cash flow margin to be similar to Q2 2024. And a continued expectation to deliver double-digit free cash flow margin for the rest of the year.