Shares of Shopify Inc. SHOP-T slumped more than 15 per cent on Tuesday after the company forecast slowing revenue and profit growth for the current quarter despite topping most analyst expectations in the first three months of the year.
The Ottawa-based company anticipates revenue growth will slow slightly in the second quarter – in the high twenties, compared with its low-thirties estimate last quarter – with a similar drop expected for gross profit growth, now projected to be in the mid-twenties.
Nonetheless, these estimates came in mostly above what analysts were expecting, Royal Bank of Canada analyst Paul Treiber said in a note to investors Tuesday morning.
Shopify, which provides tools for businesses to run their stores online, posted revenue growth of 34 per cent and gross merchandise value (GMV) growth – the total sales made over its platform – of 35 per cent during the quarter, the latest in a series of consecutive double-digit increases.
It’s not unusual for Shopify’s share price to swing widely on earnings day despite positive returns, as investors gauge whether the company can maintain its meteoric revenue growth and sales volume amid tech turbulence.
Shopify’s share price on the Toronto Stock Exchange is now down 33 per cent this year, and many other tech companies have seen their share prices slide in recent months over disruption from artificial intelligence. The stock fell $27.09 to $146.28 on Tuesday.
While the company reported a net loss for the quarter, that loss was entirely attributable to its equity stakes in other companies which have been affected by that investor concern.
Speaking with analysts Tuesday morning, Shopify president Harley Finkelstein doubled down on the company’s AI strategy, which has included partnering with chat services like OpenAI’s ChatGPT to promote products directly to buyers.
In the first quarter, orders from AI-powered searches increased by 13 times year-over-year, he said. Those who searched through AI are buying at twice the rate of those who come through other sources, he added.
The company is seeing an uptick in its merchants’ use of Shopify’s AI tools, including features which can autonomously recommend and build website sections, he said.
Meanwhile, AI has freed up employees to work on higher-value tasks, he said.
“AI has become an exoskeleton for everyone at Shopify, giving them a virtual team of agents, and that makes room for rapid experimentation,” he said. “AI now writes well over 50 per cent of our code, and that number is going up.”
Speaking with analysts Tuesday morning, chief financial officer Jeff Hoffmeister confirmed reports that the company is expanding its lending business by seeking money-transfer licences in the United States, which will help Shopify be more flexible in how it lends money to merchants using its site.
Revenue was US$3.1-billion for the quarter ended March 31, up 34 per cent from the same period last year, beating analyst expectations of $3-billion.
Gross merchandise value increased nearly 35 per cent to US$101-billion, compared with an analyst consensus of US$98.7-billion.
Shopify reported a net loss of US$581-million for the quarter, compared with a net loss of US$682-million a year earlier, owing to a US$941-million loss on its equity investments.
Excluding the impact of those equity investments, the company’s net income was US$360-million.