Shopify Shares fell 18% on Wednesday, wiping the company’s value by nearly $20 billion. Gave This quarter’s revenue and profit outlook surprised investors.
Here’s how the company performed in the first quarter compared to LSEG’s consensus estimates:
- Earnings per share: Adjusted 20 cents, forecast 17 cents.
- Revenue: $1.86 billion vs. $1.85 billion expected
Better-than-expected first-quarter results were overshadowed by Shopify’s current quarter outlook. The Canadian e-commerce company expects second-quarter sales to increase in the low teens year-over-year, which is in line with consensus expectations for 19.5% growth. , he said, but it has been slowing down since the last few quarters. Shopify has posted year-over-year revenue growth in the low-to-mid 20% range over the past six quarters.
Shopify executives said on a conference call with analysts that U.S. consumer spending remains strong, but “we are pricing in related headwinds.” [foreign exchange] The outlook for the second quarter is likely to be influenced by a stronger dollar and a slight softening in consumer spending in Europe. ”
Gross profit is expected to decline by about 50 basis points in the second quarter compared to the first quarter, as a result of the sale of Shopify’s logistics business to freight forwarder Flexport last May. Meanwhile, Shopify said it expects operating expenses to increase by low to mid-single digits quarter over quarter, while Wall Street expects flat growth.
Baird analysts said in a note to clients on Wednesday morning that the expected increase in operating expenses “will likely reflect an otherwise strong first quarter as the company leans toward marketing and research and development (AI/GenAI) investments.” He said it would cloud the report.
Shopify, which develops tools for businesses to sell products online, has been strengthening its artificial intelligence capabilities for businesses in recent quarters, including Shopify Magic, which can automatically generate lists, edit images, and more. .including rivals Amazon, Etsy and eBay has also introduced AI capabilities for sellers on its platform.
“Without a clear positive impact, [gross merchandise volume] Baird analysts said they rate Shopify stock as outperforming.
While Shopify has been investing in AI, it has retreated from other areas such as logistics services. Last May, the company laid off 20% of its workforce to weather the post-pandemic e-commerce downturn.
Shopify President Harley Finkelstein said in an interview on CNBC’s “Squawk on the Streets” that the company is “focused on the long term.”
“We want to be able to make these investments for the future, which is why we provided this guidance,” Finkelstein said.
The company reported a net loss of $273 million, or 21 cents per share, compared with a profit of $68 million, or 5 cents per share, in the year-ago period.
Shopify said gross merchandise volume, or the total amount of products sold on its platform, rose 23% to $60.9 billion. That beat consensus estimates of $59.5 billion, according to Street accounts.