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%.

SHOP’s Top Line Rides on Growing Merchant Base

Gross 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/Y

In 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 Details

As 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 Positive

For 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 Consider

Shopify 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.

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