Shopify’s Costs Grew Half as Fast as Its Revenue Last Quarter

Shopify’s operating expenses rose 16% in the third quarter while its revenue climbed 32%, and that gap lifted operating income about 66% to $568 million, the commerce software company said in its quarterly results Tuesday morning.

Revenue came to $3.74 billion, up from $2.84 billion a year earlier. That was a hair under the roughly $3.75 billion analysts had expected, The Wall Street Journal reported. Merchants pushed $119.1 billion in gross merchandise volume through the platform, a 29% increase.

On profitability, the quarter came in ahead of Shopify’s own targets. When it reported second-quarter results in August, the company guided to operating expenses of 33% to 34% of revenue and a free cash flow margin “in the high-teens to low-twenties.” Expenses ended up near 32% of revenue. Free cash flow reached $816 million, a 22% margin, compared with 18% a year ago. Gross profit grew 28% to $1.78 billion, at the upper end of the mid-to-high-twenties growth Shopify had forecast.

Where the growth came from

Merchant solutions, the segment that includes Shopify’s payments business, brought in $2.91 billion, up 35%. Subscription solutions grew more slowly, rising 20% to $836 million, and monthly recurring revenue reached $230 million from $193 million.

Spending didn’t rise evenly across the company. Research and development grew by about a third, to $497 million, roughly matching revenue. Sales and marketing rose 14% and general and administrative costs 13%. Transaction and loan losses fell to $120 million from $148 million, even though loans and merchant cash advances on the balance sheet grew to $2.35 billion from $1.78 billion at the end of last year.

Net income rose 75% to $462 million. Stripping out changes in the value of its equity investments, Shopify earned $584 million, against $367 million a year earlier.

“We powered $119 billion in GMV, while continuing to build commerce into every surface, every agent, and increasingly, everywhere,” President Harley Finkelstein said in the release. Shopify’s Agentic Storefronts let eligible merchants list products in ChatGPT, Google’s AI tools, Copilot and Meta from one dashboard, part of a broader push by retailers and platforms that WebProNews looked at on Monday.

Top-line growth eased a little

The 32% revenue gain was slightly slower than the 34% Shopify posted in the second quarter, and GMV growth slipped from about 32% to 29%. Chief Financial Officer Jeff Hoffmeister pointed to the company’s size. “Delivering these results at our scale speaks to the strength of our model, our multiple growth drivers, and our expanding addressable market,” he said.

For the fourth quarter, Shopify expects revenue to grow at a low-thirties percentage rate and gross profit at a high-twenties rate. It also forecast operating expenses at 29% to 30% of revenue, down from roughly 32% in the quarter just reported.

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