Shopify’s Q3 revenue up 96% from last year amid mass shift to e-commerce

Tobi Lutke
Tobi Lutke

Buoyed by the ongoing shift toward online shopping during the COVID-19 pandemic, e-commerce giant Shopify beat Wall Street’s expectations in the third quarter as the firm reported record revenues and posted its highest quarterly profit yet.

The Ottawa-based software firm, which keeps its books in U.S. dollars, said Thursday its revenues for the quarter ended Sept. 30 were $767.4 million, up 96 per cent from a year earlier ​– and more than $100 million above the consensus among analysts before the earnings were announced.

Shopify – which has regularly posted quarterly losses since it went public in 2015 as it pours much of its revenue into R&D and sales efforts – earned a net income of $191 million. The company’s adjusted earnings hit $140.8 million or $1.13 per diluted share, up from last year when it lost $33.6 million or 29 cents per share.

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Analysts on average had expected a profit of 53 cents per share for the quarter and US$663.4 million in revenue, according to financial data firm Refinitiv.

Despite the robust earnings report, Shopify’s stock was down about $4 to $1,360 in late-morning trading on the Toronto Stock Exchange.

Shopify said monthly subscription revenues from merchants using its platform jumped 48 per cent year-over-year to $245.3 million, thanks in part to new customers signing on after taking advantage of free trials. The company’s gross merchandise volume – the total amount of goods and services purchased through stores that use the platform – more than doubled compared with last year to $30.9 billion.

“The accelerated shift to digital commerce triggered by COVID-19 is continuing, as more consumers shop online and entrepreneurs step up to meet demand,” Shopify president Harley Finkelstein said in a statement. 

“Entrepreneurs will be the force in rebuilding economies all over the world, which makes it even more important for Shopify to innovate and build the critical tools that merchants need to succeed in a low-touch retail environment.”

Shopify continued to add high-profile global brands to its stable of customers through the firm’s Shopify Plus platform. Among the companies joining in the third quarter were French luxury goods provider Dior, weight management company Jenny Craig and fashion retailer BCBG Max Azria.

While best known for helping business owners manage their online stores, Shopify said its products aimed at boosting brick-and-mortar sales also picked up steam in the third quarter. Driven by increased use of technology such as its in-store point-of-sale system and inventory-tracking app, Shopify’s retail gross merchandise volume exceeded pre-pandemic levels, chief financial officer Amy Shapero told analysts.

Still, Shopify officials sought to temper expectations for the fourth quarter, saying the company benefited from a surge in merchants who joined the platform early in the pandemic in the rush to boost their e-commerce presence as in-store sales floundered. 

“While Shopify expects both sellers and buyers to continue adopting multi-channel commerce for safety as the COVID-19 pandemic continues, and to continue using multi-channel commerce for selection and convenience, near-term demand for our subscription and merchant solutions depends on several external factors that are particularly fluid at present,” it said in a statement. 

“These include unemployment, fiscal stimulus, and the magnitude and duration of the COVID-19 pandemic, all of which may impact new shop creation on our platform and consumer spending.”

Now Canada’s most valuable publicly traded company, Shopify also made headlines earlier this week when it announced a deal with video-sharing app TikTok that will allow its merchants to generate short “shoppable video ads.”

– With files from the Canadian Press

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