Shares of Shopify (SHOP 3.24%) surged today after the e-commerce software leader posted strong results in its second-quarter earnings report. The company beat estimates on the top and bottom lines and called for accelerating revenue growth in the third quarter.
As a result, the stock was up 22.9% as of 11:41 a.m. ET.
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Shopify gets a perfect score
Shopify has been highly volatile since the end of the pandemic, and the stock has a history of swinging on earnings as it still trades at a pricey valuation. However, this morning's earnings report hit all the key marks.
Revenue rose 21% to $2.05 billion, topping expectations of $2.01 billion. Adjusting for the sale of the Deliverr logistics business, revenue was up 25%. Gross merchandise volume (GMV) increased 22% to $67.2 billion, indicating strong underlying growth in the business. Revenue growth was also balanced between merchant solutions and subscription solutions.
Gross payments volume jumped from $31.7 billion to $41.1 billion, or up to 61% from 58%, showing Shopify is processing a greater percentage of sales on its platform. On the bottom line, gross margin improved from 49.3% to 51.1%, helped by the sale of the logistics business and higher subscription prices.
Free cash flow soared from $97 million to $333 million, and it reported adjusted earnings per share of $0.26, up from $0.14 in the quarter a year ago and better than the consensus at $0.20. Shopify was also profitable on a generally accepted accounting principles (GAAP) basis with $171 net income, or $0.13 per share.
Shopify President Harley Finkelstein said, "Our Q2 results make it clear: Shopify is rapidly strengthening its position as a leading enabler of global commerce and entrepreneurship."
NASDAQ: SHOP
Key Data Points
Shopify expects momentum to continue
Investors were also impressed with Shopify's guidance. The company forecasted revenue growth in the low- to mid-20s percentage rate and for gross margin to increase 50 basis points from Q2. It also said the free-cash-flow margin would be similar and that it expects a double-digit free-cash-flow margin for the rest of the year.
The results show the growth story is still far from over and the margin improvement is impressive as well. It's unsurprising to see Shopify up on the news, especially given the stock's recent pullback.
