Shopify Shares Drop After Q3 Revenue and Gross Merchandise Volume Miss Estimates

Q3 Performance Misses

Shopify's stock declined 8.74% following its third-quarter earnings announcement. The company reported adjusted earnings of 49 cents per share, exceeding LSEG estimates of 46 cents per share. However, total quarterly revenue reached $3.74 billion, falling just short of LSEG's $3.75 billion estimate.

Gross merchandise volume (GMV) for the quarter was $119.15 billion, missing analyst estimates of $120.03 billion. Subscription gross profit also came in at $661 million, nearly $20 million below StreetAccount estimates of $680.3 million. Subscription revenue of $836 million missed analyst estimates of $848.1 million.

Company Outlook and Commentary

Shopify projects revenue growth in the "low thirties" range year over year for the fourth quarter, which is below LSEG estimates of 32.1%. Despite the misses, Shopify president Harley Finkelstein described the GMV results as "consistent" and "durable," noting it was the 13th consecutive quarter of GMV growth above 20%.

AI Integration and Impact

During the third quarter, Shopify partnered with Meta for its consumer-facing AI agent, Muse. This partnership allows Muse to facilitate browsing and purchasing on Shopify's platform, with customers able to use Shop Pay for transactions within the Muse app. Finkelstein addressed concerns about potential pricing pressure from AI agents, stating that prices are not being lowered.

Instead, Finkelstein indicated that AI agents are driving new traffic to Shopify businesses and assisting consumers in discovering new brands and products. He cited examples like "the Tin Can phone" seeing success due to agentic-based commerce, which presents products to consumers they might not otherwise find.