Shopify Q3 Earnings Show Strong Revenue Growth

Shopify's (NYSE: SHOP) strong growth continued in Q3. The e-commerce specialist's top line soared, beating analyst estimates. This was propelled by double-digit growth in both subscription solutions and merchant solutions revenue as the company surpassed 1 million merchants on its platform during the quarter.

"Our strong results in the quarter were driven in part by the success of our international expansion, which is just one of the many ways we are investing in the platform," said CFO Amy Shapero in the company's third-quarter update. 

But Shopify continued to lose money as operating expenses rose sharply.

Shopify e-commerce platform on a smartphone, laptop, and tablet

Three versions of Shopify's e-commerce platform. Image source: Shopify.

Shopify's financial results

The tech company's third-quarter revenue increased 45% year over year to $390.6 million, well ahead of guidance for revenue between $377 million and $382 million. 

The top line consisted of $225.0 million of merchant solutions revenue and $165.6 million of subscription solutions revenue. These segments grew by 50% and 37% year over year, respectively.

The portion of subscription solutions revenue that is monthly recurring revenue (MRR) increased 34% year over year to $37.9 million. This increase was primarily driven by growth in the number of merchants joining Shopify's platform.

Shopify Plus -- the subscription plan for high-volume merchants -- accounted for 27% of MRR, up from 24% in the third quarter of 2018.

Though the company saw robust revenue growth, rapidly rising operating expenses weighed on profitability. Operating expenses rose 39% year over year, from $181 million in the year-ago period to $252 million. The operating loss widened from $31.4 million in the third quarter of 2018 to $35.7 million in the third quarter or 2019.

Shopify's non-GAAP (adjusted) loss per share for the period was $0.29. This compares with adjusted net income of $0.05 per share in the year-ago quarter.

Raising the revenue forecast

With another quarter of strong growth behind it, management lifted its outlook for the full year. It now expects full-year revenue between $1.545 billion and $1.555 billion. Previously, 2019 revenue was expected to be between $1.51 billion and $1.53 billion.

The company also now forecasts adjusted operating income to be between $27 million and $37 million -- well ahead of its previous guidance between $20 million and $30 million.

For its fourth quarter, management guided for revenue between $472 million and $482 million -- ahead of analysts' average forecast of $470.6 million. The midpoint of this guidance range implies 39% year-over-year revenue growth.

10 stocks we like better than Shopify
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Shopify wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of June 1, 2019


Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Shopify. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More