Shopify Q4 Earnings Meet Estimates, Revenues Up Y/Y, Shares Rise

Shopify SHOP reported fourth-quarter 2024 non-GAAP earnings of 44 cents per share, in line with the Zacks Consensus Estimate. The figure jumped 29.4% year over year.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Revenues of $2.81 billion surpassed the Zacks Consensus Estimate by 3.26%. The top line soared 31.2% year over year.Following fourth-quarter 2024 results, SHOP shares increased 3.08% to close at $123.59 on Tuesday. Shopify shares have appreciated 37.6% in the trailing 12 months, outperforming the Zacks Computer and Technology sector’s return of 22.1%. Shopify Inc. Price, Consensus and EPS Surprise Shopify Inc. price-consensus-eps-surprise-chart | Shopify Inc. Quote SHOP’s Top Line Rides on Growing Merchant BaseGross Merchandise Volume (GMV) in the fourth quarter was $94.46 billion, which increased 25.7% year over year. Same-store sales growth from existing merchants, particularly Plus merchants, a higher number of merchants on SHOP’s platform and strong international growth drove GMV in the reported quarter. International GMV grew 33% in the fourth quarter, driven by 37% growth in Europe, the Middle East and Africa. Shopify saw higher same-store sales growth from existing merchants in the region than new merchants.Point of sales GMV increased 26% year over year in the reported quarter.Shopify is benefiting from strong growth in its merchant base. Merchant solutions revenues in the fourth quarter were $2.15 billion and accounted for 76.3% of Shopify’s total revenues. On a year over year basis, merchant revenues increased 32.6% year over year driven by strong GMV and increased penetration of Shopify payments. The company processed $61 billion of GMV (64% of GMV versus 60% in fourth-quarter 2023) on Shopify Payments, up 35% year over year.Shop Pay was 41% of Gross Payments Volume in the reported quarter.Subscription solutions revenues in the fourth quarter were $666 million and accounted for 23.7% of Shopify’s total revenues. On a year-over-year basis, subscription solutions revenues increased 26.9%.Monthly Recurring Revenue (MRR) in the fourth quarter was $178 million, which increased 23.6% on a year-over-year basis. Plus category accounted for 33% of MRR in the reported quarter, unchanged sequentially.SHOP’s Operating Expenses Rise Y/YIn the fourth quarter of 2024, gross profit was $1.4 billion, up 27% year over year. Subscription Solutions gross margin was 79.9%, down from 81.5% reported in the year-ago quarter due to higher cloud and infrastructure hosting costs. Merchant Solutions’ gross margin was 38.2%, down from 39.2% in the year-ago quarter due to lower non-cash revenues from certain partnerships and the negative impact of an expanded partnership with PayPal.Total operating expenses were $887 million, up 14.7% year over year. As a percentage of revenues, total operating expenses declined 450 basis points (bps) to 31.5%.Sales & Marketing (S&M) expenses increased 9.8% year over year to $348 million. As a percentage of revenues, S&M expenses decreased 240 bps year over year to 12.4%Research & Development (R&D) expenses increased 12.9% year over year to $351 million. As a percentage of revenues, R&D expenses decreased 200 bps year over year to 12.5%.General & Administrative (G&A) expenses increased 12% year over year to $112 million. As a percentage of revenues, G&A expenses decreased 70 bps to 4%.Consequently, SHOP reported an operating income of $465 million compared with an operating income of $289 million reported in the year-ago quarter.SHOP’s Balance Sheet DetailsAs of Dec. 31, 2024, cash and cash equivalents (including marketable securities) totaled $5.48 billion, which decreased from $4.9 billion as of Sept. 30, 2024.Free cash flow increased 37% year over year to $611 million. The free cash flow margin expanded 100 bps to 22% in the reported quarter.SHOP’s Q1 Guidance PositiveFor the first quarter of 2025, Shopify expects revenues to grow at a mid-twenties percentage rate on a year-over-year basis. Gross profit is anticipated to grow at a low-twenties percentage rate on a year-over-year basis.Shopify expects GAAP operating expense as a percentage of revenues to be in the 41% - 42% range. Free cash flow margin is expected to be in the mid-teens.Zacks Rank & Stocks to ConsiderShopify carries a Zacks Rank #3 (Hold) at present. Arista Networks ANET, Twilio TWLO and Five9 FIVN are some better-ranked stocks in the broader sector. While ANET and TWLO sport a Zacks Rank #1 (Strong Buy) each, FIVN carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Arista Networks is scheduled to report its fourth-quarter 2024 results on Feb. 18. Twilio is set to report fourth-quarter 2024 results on Feb. 13, while Five9 is scheduled to report its fourth-quarter 2024 results on Feb. 20.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Arista Networks, Inc. (ANET): Free Stock Analysis Report Five9, Inc. (FIVN): Free Stock Analysis Report Shopify Inc. (SHOP): Free Stock Analysis Report Twilio Inc. 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