TLDR
- Shopify (SHOP) stock down 5% to $89.60 despite strong revenue growth.
- Q1 revenue rose 27% year-over-year to $2.36 billion, beating expectations.
- Net loss deepened to $682 million, or $0.53 per share.
- Shopify forecasts Q2 revenue to grow at a mid-twenties rate.
- Operating margin improved, but free cash flow margin declined.
Shopify Inc. (NASDAQ: SHOP) shares dropped over 5% to around $84 in early trading on May 8, 2025, after the e-commerce firm reported a larger-than-expected quarterly loss. The stock reaction came despite Shopify delivering Q1 revenue of $2.36 billion, up 27% from a year ago and above Wall Street’s forecast of $2.34 billion.
Shopify reported a net loss of $682 million for the quarter ended March 31, compared to a $273 million loss in the same quarter last year. On a per-share basis, the loss came to $0.53, significantly wider than analyst expectations of a $0.17 profit.
Mixed Metrics: Sales Up, Profit Pressured
While revenue surged, Shopify’s gross merchandise volume (GMV) slightly missed analyst estimates, reaching $74.75 billion against expectations of $74.90 billion. The company’s adjusted EBITDA was $325 million, also below the projected $335.6 million.
Shopify $SHOP Q1 2025 results:
✔️ GMV: $74.8 billion, up 23% YoY
✔️ Revenue: $2.36 billion, up 27% YoY
✔️ Payment volume: $47.5 billion, up 31% YoY. Payments penetration: 64%, up from 60% a year ago
✔️ Shop Pay GMV: $22 billion, up 57% YoY
✔️ Gross profit: : $1.17 billion, up 22%… pic.twitter.com/EBq7swobBQ— Jevgenijs Kazanins (@jevgenijs) May 8, 2025
Subscription solutions revenue totaled $620 million, up from $511 million a year earlier. Merchant solutions revenue, which includes payment processing and shipping services, amounted to $1.74 billion, rising from $1.35 billion last year.
Operating margin improved to 8.6%, up from 4.6% a year earlier, signaling better cost efficiency. However, Shopify’s free cash flow margin fell to 15.4%, down from 21.7% in the previous quarter, reflecting higher expenses or lower cash generation.
Upbeat Guidance for Q2
Looking ahead, Shopify expects revenue in the second quarter to grow at a mid-twenties percentage rate year-over-year. Management projected Q2 revenue at $2.56 billion at the midpoint, above analyst estimates of $2.50 billion. However, gross profit growth guidance was trimmed to the high-teens percentage range, down from the low-twenties previously forecasted.
Operating expenses are expected to account for 39% to 40% of revenue in Q2. The company maintains optimism about continued top-line growth but is facing pressure from higher costs impacting margins.
Stock Performance Lags Broader Markets
Despite a strong one-year return of 42.52%, Shopify’s stock has dropped 16.21% year-to-date, underperforming the S&P/TSX Composite index, which has gained 2.31% in the same period. The company holds a market capitalization of $122.6 billion but faces volatility as investors weigh growth prospects against profitability challenges.
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