Shopify Inc (NYSE: SHOP) reported second-quarter revenue that exceeded analyst estimates, along with a stronger-than-expected third-quarter outlook, signaling that investments in artificial intelligence are attracting more merchants to its e-commerce platform. This development eases investor concerns that emerging AI tools might intensify competition for small businesses, worries that had previously weighed on the stock.
Financial results for the second quarter showed revenue of $3.583 billion, a 34% increase from $2.680 billion in the same period last year, surpassing the market consensus of $3.445 billion. Gross merchandise volume (GMV) reached $115.567 billion, up 32% from $87.837 billion a year earlier. On the profitability front, gross profit rose 32% to $1.708 billion, operating profit jumped 68% to $488 million, and net income grew 66% to $1.502 billion.
Looking ahead, the company guided for third-quarter revenue growth in the "low 30% range," exceeding the market's expectation of 27%. If achieved, this would mark the sixth consecutive quarter of revenue growth exceeding 30%. Following the announcement, shares surged more than 20% in pre-market trading on Wednesday.
Operating expenses for the second quarter totaled $1.220 billion, a 21% increase from $1.011 billion, slightly below market predictions. Prior to the earnings release, there were concerns that rising AI-related costs could pressure profit margins. However, the company had previously noted in its first-quarter report in May that AI was already assisting with over half of its code generation.
Despite geopolitical tensions from the Middle East conflict and higher energy prices pressuring consumer budgets, a robust job market and rising wages have sustained consumer resilience. Through partnerships with OpenAI, Google, and Microsoft, the company helps retailers on its platform use AI-powered chatbots and search features to reach more customers, driving demand.
Adoption of the company's AI tools, such as the Sidekick AI assistant, is growing among small and medium-sized businesses, which are increasingly relying on AI to complete tasks faster and at lower cost. President Harley Finkelstein commented, "This was an exceptionally strong quarter. We support businesses of all sizes, and with AI, we are expanding the possibilities for what any business can achieve."
The company generates revenue by taking a cut of each transaction processed on the platform and by selling subscription plans to merchants. Officials noted steady growth across all merchant sizes, product categories, and geographic regions during the quarter. CFO Jeff Hoffmeister stated, "Building on strong growth from last year's second quarter, GMV growth accelerated further, with solid results across all merchant sizes, channels, and regions. At the same time, we continued to improve operating leverage, achieving an 18% free cash flow margin. The model we are committed to building is one that delivers broad, sustained, and compounding growth, guided by financial discipline."