Shopify's Q4 2023 Earnings Soar

Shopify reported a significant increase in adjusted earnings for the fourth quarter of 2023, with 34 cents per share, up from the 7 cents per share reported in the same quarter the previous year. The company's total revenues for the quarter also saw a substantial increase, jumping 23.6% year over year to $2.14 billion.

The company's Subscription Solutions revenues increased by 31.3% year over year to $525 million. This increase was primarily due to a rise in the number of merchants joining the platform and pricing changes for existing merchants on its Standard subscription plans. Merchant Solutions revenues also improved, increasing 21.3% year over year to $1.62 billion. This improvement was driven by a robust Gross Merchandise Volume (GMV), which improved 23% year over year to $75.1 billion. The Gross Payments Volume grew to $45.1 billion, constituting 60% of GMV processed in the fourth quarter.

Shopify's non-GAAP gross profit increased 30.1% year over year to $1.07 billion, and the gross margin expanded 250 basis points year over year to 49.8%. The company also reported a decrease in adjusted sales and marketing expenses, adjusted general and administrative expenses, and adjusted research and development expenses as a percentage of revenues. Non-GAAP operating expenses decreased 11.4% year over year to $671 million. Operating expenses, as a percentage of revenues, were 31.3% compared with the year-ago quarter’s 43.6%.

The company's adjusted operating income was $396 million, a significant increase from the $63 million reported in the same quarter the previous year. As of December 31, 2023, Shopify had a cash, cash equivalents, and marketable securities balance of $5 billion, slightly up from $4.92 billion as of September 30, 2023. The company's free cash flow was $446 million, up from $276 million in the year-ago quarter.

For the first quarter of 2024, Shopify expects revenue growth in the low-twenties on a year-over-year basis. Adjusting for a 500-600 basis points headwind related to the divestiture of the logistics business, revenues are expected to grow in the mid to high-twenties on a year-over-year basis. The gross margin is expected to increase 150 basis points sequentially, and operating expenses are expected to increase at the low-teens percentage rate sequentially.