Shopify’s Growth Still Looks Solid

Here’s our initial take on Shopify‘s (SHOP -1.40%) fourth-quarter financial report.

Key Metrics

A Milestone for Shopify

Shopify’s fourth-quarter financial report kept the company on a track toward regaining its full glory after losing well over 80% of its value during the 2022 bear market. Gross merchandise volume for the full 2024 year was up 24% from 2023, with growth in the fourth quarter outpacing that full-year growth rate. With annual GMV approaching $300 billion, Shopify passed the $1 trillion mark in cumulative GMV throughout the Canadian e-commerce site’s history. Adjusted net income and free cash flow saw similarly impressive gains year over year.

CEO Tobi Lütke didn’t make any comments in the prepared press release, but executive Harley Finkelstein and Jeff Hoffmeister had praise for the company’s success. Corporate president Finkelstein pointed to Shopify’s track record and its focus on merchants for giving the company a good competitive position heading into 2025. CFO Hoffmeister pointed to improving free cash flow margin levels and accelerating GMV growth throughout the year.

Shopify didn’t offer full-year guidance for 2025, but its expectations are for the first quarter to continue the momentum it generated in 2024. First-quarter revenue growth should be in the mid-20s percentage range, with gross profit rising in the low 20s percentage range. Operating expenses of between 41% and 42% of revenue would be better than its performance historically during the first quarter, and free cash flow margin will likely be in the mid-10-percent range.

Immediate Market Reaction

Despite numbers that topped expectations, Shopify saw its stock lose ground immediately after its report. However, losses steadily narrowed as the morning premarket session continued, and the stock briefly poked into positive territory an hour after the report, recovering from losses of as much as 10%.

The initial move downward might not seem to make sense in the context of strong financial results. Yet the e-commerce stock had gained more than 50% between mid-November and yesterday’s close, and a modest pullback wasn’t unreasonable from that perspective.

What to Watch

Shopify has seen particularly strong gains in several areas that it has emphasized as pathways to future growth. International revenue was up 33% year over year, as was revenue from offline sources. The company’s Shop Pay product and its business-to-business segment are producing extraordinary gains, and a 32% rise in gross payment volume over the payment network is encouraging. With over 875 million online shoppers and a 12% market share of the U.S. e-commerce market, Shopify has set high expectations among investors. The rising e-commerce star will likely have to keep surpassing those expectations in order to push its stock price to new all-time highs.

Helpful Resources

• Full earnings release [opens PDF]
• Investor relations page