E-commerce software platform Shopify (NYSE:SHOP) reported Q1 CY2025 results beating Wall Street’s revenue expectations , with sales up 26.8% year on year to $2.36 billion. The company expects next quarter’s revenue to be around $2.56 billion, close to analysts’ estimates. Its non-GAAP profit of $0.26 per share was in line with analysts’ consensus estimates.
Is now the time to buy SHOP? Find out in our full research report (it’s free).
-
Revenue: $2.36 billion vs analyst estimates of $2.34 billion (26.8% year-on-year growth, 1.1% beat)
-
Adjusted EPS: $0.26 vs analyst estimates of $0.26 (in line)
-
Adjusted Operating Income: $329 million vs analyst estimates of $310.7 million (13.9% margin, 5.9% beat)
-
Revenue Guidance for Q2 CY2025 is $2.56 billion at the midpoint, roughly in line with what analysts were expecting
-
Operating Margin: 8.6%, up from 4.6% in the same quarter last year
-
Free Cash Flow Margin: 15.4%, down from 21.7% in the previous quarter
-
Net Revenue Retention Rate: 115%, down from 126% in the previous quarter
-
Billings: $2.36 billion at quarter end, up 28.1% year on year
-
Market Capitalization: $121.9 billion
Shopify’s first quarter results reflected broad-based growth across its product suite, with management attributing performance to new market launches and enhancements in cross-border commerce tools. President Harley Finkelstein emphasized the platform’s ability to help merchants navigate changing trade policies, stating, “Shopify is built for agility…we can pull the right levers to manage through challenges.” Growth was driven by increased adoption of Shopify Payments, international expansion, and new AI-powered features for merchants.
Looking ahead, management pointed to ongoing macroeconomic and trade uncertainties as factors shaping guidance, but noted continued strength through April and early May. CFO Jeff Hoffmeister explained that the company’s outlook considers potential headwinds from tariffs and foreign exchange, balanced by operational efficiencies and disciplined investment. Hoffmeister added, “We will continue to prioritize investing in key areas like our core platform, international, B2B, enterprise, and offline as opposed to driving for higher free cash flow margins in the near term.”
Shopify’s leadership highlighted how investments in new products and operational agility influenced the quarter’s performance and set the stage for future growth. The company addressed changes in merchant behavior, competitive dynamics, and technology adoption.
-
Cross-border and trade tools expansion: Shopify rolled out enhanced tools for managing international sales, including managed markets, duty-inclusive pricing, and the AI-based TariffGuide.ai, aiming to help merchants quickly adapt to new tariffs and trade rules.
-
Payments and local market coverage: The expansion of Shopify Payments to 16 additional countries nearly doubled its coverage, enabling easier onboarding and more seamless payment options for merchants globally.
-
AI integration for efficiency: Management described how internal and merchant-facing AI tools, like Sidekick and AI-powered search, are now core to operations, improving product recommendations, operational speed, and support in multiple languages.
-
Enterprise and brand migration: The platform attracted large brands such as VF Corp’s portfolio and Follett Higher Education, with management noting that legacy and custom-built systems are increasingly viewed as less flexible compared to Shopify’s unified commerce infrastructure.
-
Offline and unified commerce momentum: Shopify’s point of sale business saw uptake among multi-location and enterprise clients, with features like tap-to-pay and same-day delivery integrations cited as differentiators.
Management’s outlook emphasizes continued investment in product innovation, international expansion, and AI-driven operational efficiency, while monitoring macroeconomic volatility and trade policy developments.
-
International and enterprise growth: Leadership sees significant opportunities in Europe, Asia, and Latin America, citing traction with both new and existing large-scale merchants as a driver of revenue diversification.
-
AI and automation leverage: Shopify expects AI adoption to drive both operational efficiencies and new merchant-facing capabilities, with initiatives like Sidekick and improved AI search supporting merchant growth.
-
Trade environment and consumer trends: The company is closely watching the impact of tariffs and sourcing shifts, with management noting that its merchant base’s diversity and exposure to higher-income consumers could help cushion against demand volatility.
-
Samad Samana (Jefferies): Asked about merchant sourcing and tariff exposure; management said impacts vary by merchant, with no major GMV impact seen so far, and highlighted the high-income profile of many end buyers.
-
Martin Toner (ATV): Inquired about China-specific merchant trends; CFO Jeff Hoffmeister said it’s too early for clear conclusions but noted continued GMV strength in April and May.
-
Rob Wildhack (Autonomous): Asked if uncertainty is affecting merchant acquisition; President Harley Finkelstein reported continued strength in both SMB and larger enterprise onboarding, citing legacy platform limitations as a driver of migration.
-
Bhavin Shah (Deutsche Bank): Queried the impact of AI initiatives on expenses and free cash flow; management stated AI is improving efficiency but reiterated a balanced approach to profitability and investment.
-
Keith Weiss (Morgan Stanley): Asked about durability of gross margin pressures; management explained that lower merchant solution margins reflect payment product mix and accounting changes, but that high-margin products are ramping and could offset pressures over time.
Looking ahead, the StockStory team will monitor (1) signs of merchant and buyer resilience amid ongoing trade and tariff changes, (2) the pace at which AI-driven tools and international payment products gain adoption, and (3) continued growth in enterprise and offline commerce segments. Progress on product rollouts and the ability to flex marketing investments based on real-time merchant trends will also be key indicators.
Shopify currently trades at a forward price-to-sales ratio of 10.8×. At this valuation, is it a buy or sell post earnings? See for yourself in our free research report.
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a “fearful” wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today.
