Shares of Shopify (NYSE:SHOP) surged on Wednesday, rising about 12% by 12:30 p.m. EST. Bullishness toward the stock follows yet another strong quarterly report for the company.

Shopify's business has seen extraordinary momentum in recent years as merchants adopt the company's e-commerce platform in droves and as Shopify rolls out more services for those merchants. Strong business growth has fueled a monstrous rally in the tech company's stock price. Including Wednesday's gain, the stock is up 219% in the last year alone and 900% over the last three years.

The company's fourth-quarter update was a great reminder of why investors love the stock so much. Not only did the company crush analysts' expectations for its top and bottom lines, but its revenue growth rate accelerated.

Here's a closer look at the quarter's results.

A shopping cart icon displayed on a smartphone's screen

Image source: Getty Images.

Strong top-line momentum

Shopify's fourth-quarter revenue increased 47% year over year to $505.2 million. This was far ahead of management's guidance for fourth-quarter revenue between $472 million and $482 million and analysts' average forecast for revenue of $482 million. Perhaps even more notable was the meaningful uptick in Shopify's fourth-quarter year-over-year revenue growth rate compared to the third quarter. In Q3, revenue rose 45% year over year -- a deceleration from 48% growth in the second quarter. 

Shopify's accelerated growth benefited from a number of factors. Merchant solutions revenue (revenue from payment processing, transaction, and referral fees) rose 53% year over year to $322 million, fueled mostly by a 47% year-over-year jump in gross merchandise volume (GMV). Subscriptions solutions revenue (primarily consisting of revenue from subscriptions to its platform) increased 37% year over year to $183.2 million.

These results meant Shopify finished the year with total 2019 revenue of $1.578 billion, up 47% year over year.

Investing aggressively

While Shopify is seeing strong revenue growth, management's aggressive investment in growth opportunities means this robust top-line performance is struggling to translate into earnings growth. For the full year of 2019, Shopify's non-GAAP (adjusted) net income was $34.3 million, down from $44.1 million. In Q4, however, the company's adjusted operating income notably improved, rising from $21.4 million in the year-ago period to $28.5 million. But adjusted operating income was 6% of revenue in both of these periods, showing how Shopify is ramping up spending.

Shopify's operating expenses in the fourth quarter of 2019 were $294 million, up from $195 million in the fourth quarter of 2018. Sales and marketing, research and development, and general and administrative expenses increased 39%, 54%, and 79% year over year, respectively.

Management expects 2020 to be an even more aggressive investment year. The company will invest in "growth initiatives to better serve merchants and energize the flywheel well into the future," said Shopify CFO Amy Shapero in the company's fourth-quarter earnings release. Specific investment areas will include the company's nascent fulfillment network, its collaborative fleet of warehouse robots (via the company's recent acquisitions of 6 River Systems), Shopify Plus, international expansion, e-commerce platform and point-of-sale improvements, and brand awareness.

While these investments should help fuel more strong revenue growth in 2020, they'll also weigh on Shopify's bottom line. The company expects its full-year adjusted operating income to be between breakeven and a loss of $20 million. This compares to adjusted operating income of $45.8 million in 2019.