Shopify reported better-than-expected first-quarter earnings and sales, with earnings per share of 20 cents adjusted compared to the expected 17 cents, and revenue of $1.86 billion compared to the expected $1.85 billion. However, the company gave a downbeat forecast for the current quarter, causing shares to drop by as much as 18% in premarket trading. Gross margins for the second quarter are expected to decrease slightly compared to the first quarter due to the sale of Shopify’s logistics business to Flexport last May.
In addition to the downbeat forecast for the current quarter, Shopify said it expects second-quarter revenue to grow at a high-teens percentage rate year-over-year, which is a slowdown from previous periods. The company has posted revenue growth in the low-to-mid twenties for the past six quarters. Second-quarter revenue would grow in the “low-to-mid-twenties” year-over-year when adjusting for the divestiture of the logistics business. The company reported a net loss of $273 million, or 21 cents a share, compared with a profit of $68 million, or 5 cents a share, during the year-ago quarter.
Shopify, which provides tools for companies to sell products online, saw its gross merchandise volume increase by 23% to $60.9 billion in the first quarter. This surpassed consensus expectations of $59.5 billion, indicating strong performance in terms of total merchandise sold on the platform. Despite the positive growth in gross merchandise volume, the company’s net loss and downbeat forecast for the current quarter caused shares to drop significantly in premarket trading.
The sale of Shopify’s logistics business to Flexport last May is expected to impact the company’s gross margins in the second quarter, with a decrease of about 50 basis points compared to the first quarter. This divestiture will also affect year-over-year revenue growth in the second quarter, which is projected to be in the “low-to-mid-twenties” range. Shopify has been experiencing steady revenue growth over the past six quarters, but the slowdown in growth for the current quarter reflects challenges and uncertainties in the market.
Overall, Shopify’s first-quarter performance exceeded Wall Street expectations in terms of earnings and sales, but the company’s downbeat forecast for the current quarter raised concerns among investors, leading to a significant drop in share prices in premarket trading. The divestiture of the logistics business to Flexport will impact gross margins and revenue growth in the second quarter, contributing to the company’s cautious outlook. Despite these challenges, Shopify remains a key player in the e-commerce industry, providing essential tools and services for businesses to succeed in the online marketplace.
