Shopify Inc. (NYSE, TSX: SHOP) reported its third-quarter 2024 financial results this morning, recording a quarterly revenue of $2.16 billion, a significant 26% increase from $1.71 billion during the same quarter last year and an increase from $2.08 billion in the previous quarter. This marks the sixth consecutive quarter of more than 25% revenue growth, a streak that excludes any impact from Shopify’s divestment in logistics.
A major factor behind Shopify’s revenue increase is its expanding Gross Merchandise Volume (GMV), which reached $69.7 billion for Q3 2024. This figure indicates a 24% year-over-year rise from the $56.2 billion reported in Q3 2023, driven by heightened sales activity across its vast merchant network. The Q3 2024 GMV also grew from the prior quarter, where it stood at approximately $67 billion.
Alongside GMV growth, Shopify’s Subscription Solutions revenue surged by 26% year-over-year, reaching $610 million compared to $486 million in Q3 2023, while its Merchant Solutions revenue—derived from transaction fees, point-of-sale products, and related services—jumped to $1.55 billion, up from $1.23 billion a year ago.
Gross profit rose to $1.12 billion in Q3 2024, up from $901 million in Q3 2023, representing a 24% increase and a growth from $1.09 billion in Q2 2024. Operating income more than doubled year-over-year, soaring to $283 million in Q3 2024 from $122 million in the prior-year period. This contrasts sharply with the $276 million operating income reported last quarter.
Shopify’s free cash flow came in at $421 million, a remarkable increase from $276 million in Q3 2023, representing a free cash flow margin of 19%. This improvement is also notable when viewed against the prior quarter’s free cash flow of $400 million.
With $1.51 billion in cash and cash equivalents at the end of the quarter, up from $1.29 billion in Q3 2023 and a slight increase from $1.50 billion last quarter, Shopify remains well-capitalized. Additionally, Shopify holds $3.39 billion in marketable securities, maintaining a robust balance sheet that provides flexibility for future investments and growth initiatives.
Sales and marketing expenses increased to $331 million, up slightly from $295 million in Q3 2023, aligning with its efforts to drive customer acquisition and brand visibility in new and existing markets. Research and development (R&D) expenses reached $332 million, up from $313 million in the same quarter last year. General and administrative expenses, however, declined to $114 million from $137 million a year earlier. Overall, operating expenses rose to $835 million from $779 million in Q3 2023, with a marginal increase from the $820 million reported in Q2 2024.
Net income came in at $828 million, up from $718 million in Q3 2023. Excluding gains from equity investments, Shopify’s net income stood at $344 million, a sharp increase from $173 million in the previous year. Despite an uptick in stock-based compensation to $110 million from $102 million last year, Shopify’s operational income and net earnings exhibited strong growth.
Looking ahead, Shopify projects Q4 revenue growth in the mid-to-high twenties percentage range, underscoring cautious optimism for the peak shopping season. The company anticipates gross profit growth to align with Q3’s rate, supported by sustained GMV and merchant expansion. Shopify also expects operating expenses as a percentage of revenue to remain around 32-33%, with stock-based compensation projected at $120 million. Free cash flow margin is expected to remain steady relative to Q4 2023, indicating consistent financial discipline.
Shopify last traded at $87.12 on the NYSE.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
