What happened

Shares of Shopify (SHOP 2.80%) were heading lower today after the e-commerce software leader beat estimates on the top and bottom lines in its fourth-quarter earnings report, but missed the mark with its guidance.

As of 10:35 a.m. ET, the stock was down 14.3%.

So what

Shopify reported 26% revenue growth in the fourth quarter, or 28% in constant currency, to $1.73 billion, which topped the consensus at $1.65 billion.

Gross merchandise volume (GMV), the total value of goods sold on the platform, rose 13%, or 17% in constant currency, to $61 billion. Gross payments volume was up 24% to $34.2 billion, which helps explain the gap between revenue and GMV growth.

Monthly recurring revenue rose just 7% to $109.5 million, potentially indicating a slowdown in subscriber growth.

Further down the income statement, gross margin fell from 50.2% to 46% as the company brings in more revenue from lower-margin products like Shopify Payments and Deliverr, the logistics company it acquired last year.

Shopify continues to be unprofitable on a GAAP basis, but posted adjusted earnings per share of $0.07. This is below the $0.14 it recorded in the quarter a year ago, but above the analyst consensus at a loss of $0.01 per share. 

Noting macro headwinds, Shopify President Harley Finkelstein said: "The strength of our Q4 and full-year performance in 2022 is a testament to the resilience of our merchants. Despite persistent macroeconomic challenges, they continued to succeed on Shopify, growing sales and using more of our mission-critical tools to run their businesses."

Now what

Looking ahead, Shopify called for revenue growth in the high teens, gross margin to be slightly higher from Q4 2022, and operating expense growth in the low single digits from Q4 2022 excluding one-time charges -- implying that its bottom-line result in Q1 will be worse than Q4 since Q4 is its seasonally strongest quarter.

The main sticking point seemed to be the revenue growth guidance. The consensus had called for 19.6% growth in Q1, and the high-teens guidance represents a meaningful deceleration from the fourth quarter.

Shopify stock also seems to be taking a hit because it trades at a premium valuation, at a price-to-sales ratio of 10, and the stock has surged this year, up 30% year to date even after today's slide.

While today's sell-off is disappointing, there's nothing in the report that should make long-term investors dump the stock.