Why Is SHOP Stock Falling Today?

Shopify reported its third-quarter results with revenue and gross merchandise volume missing Street estimates.

• Shopify reported third-quarter revenue of $3.74 billion, falling short of the $3.75 billion estimate, according to estimates compiled by Bloomberg.
• Subscription Solutions revenue rose 20% year-over-year to $836 million, missing the $850.2 million analyst estimate, according to Investing.com.
• For the fourth quarter, Shopify expects revenue to grow at a low-thirties percentage rate year over year, while gross profit dollars are projected to grow at a high-twenties percentage rate. 

Shopify Inc.(SHOP) shares tumbled around 19% in premarket trading on Tuesday, as investors reacted to the e-commerce platform’s third-quarter results, with revenue and gross merchandise volume growth missing analyst expectations.

“We extended our track record of consistent execution, with 32% revenue growth and a 22% free cash flow margin,” said Jeff Hoffmeister, Chief Financial Officer of Shopify.

GMV, Subscription Revenue Miss Estimates, EPS Beats

Shopify reported third-quarter revenue of $3.74 billion, up 32% year-over-year from $2.84 billion, falling short of the $3.75 billion estimate, according to estimates compiled by Bloomberg.

Adjusted earnings came in at $0.49 per share, above Koyfin’s estimate of $0.46. Gross profit increased to $1.78 billion from $1.39 billion a year earlier, roughly in line with Koyfin’s estimate of $1.78 billion.

Gross merchandise volume (GMV), which measures the total value of orders processed through Shopify’s platform, rose to $119.15 billion from $92.01 billion a year earlier, representing growth of approximately 29.5%. However, this result came in below the roughly $120 billion forecast cited by Investing.com. 

Subscription Solutions revenue rose 20% year-over-year to $836 million, missing the $850.2 million analyst estimate, according to Investing.com. Meanwhile, Merchant Solutions revenue rose 35% to $2.91 billion, slightly ahead of the $2.9 billion estimate according to estimates compiled from Investing.com.

Q4 Outlook In Focus

For the fourth quarter, Shopify expects revenue to grow at a low-thirties percentage rate year over year, while gross profit dollars are projected to grow at a high-twenties percentage rate. The company also expects operating expenses to account for 29% to 30% of revenue and stock-based compensation to total $155 million. Shopify also expects its free cash flow margin to remain consistent with the fourth quarter of 2025. 

In the third quarter, free cash flow rose to $816 million from $507 million a year earlier, while its margin expanded to 22% from 18%. Operating income increased 66% year over year to $568 million from $343 million.

Shopify also repurchased $562 million of its common stock during the quarter.

Separately, Shopify filed an automatic shelf registration statement with the SEC on Tuesday, allowing it to offer Class A subordinate voting shares, preferred shares, debt securities, warrants, subscription receipts and units in future transactions. 

How Retail Views SHOP

On Stocktwits, retail sentiment for SHOP turned ‘Bullish’ amid ‘high’ message volumes in the past 24 hours. SHOP was also one of the trending tickers on the platform at the time of writing.

One bullish user expects SHOP stock to return to $140 soon.

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SHOP shares have dropped over 7% year-to-date.

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