Here's our initial take on Shopify's (SHOP -2.78%) fiscal 2025 first-quarter financial report.

Key Metrics

Shopify Posts Growth, but Questions Remain

Shopify posted solid growth in the quarter, with revenue up 27% year over year and gross merchandise volume sold on its platform up 23% to nearly $75 billion. The company also reported a higher net loss, but much of that was accounting related. Backing out the impact of equity investments, net income was up 57% to $226 million in the quarter, and free cash flow climbed by a similar percentage to $363 million.

The company posted a 15% free cash flow margin in the quarter, the seventh consecutive quarter of double-digit free cash flow.

Heading into the quarter, investors were focused on how tariffs and trade wars would impact Shopify's core business. Although the company itself is not a big importer, many of its customers rely on China for merchandise sold on the Shopify platform. The elimination of the "de minimis" loophole, which allowed shipments from China valued at less than $800 to enter duty-free, was particularly worrisome.

Shopify's outlook provided no reason for further panic but also did little to quell the fears. The company expects revenue growth in the current quarter in the mid-20 percentage-wise, matching but not topping Wall Street's forecast for 23% growth.

In a statement, company president Harley Finkelstein made the case that "businesses perform better on Shopify, regardless of market conditions." Shopify's set of tools can help merchants better navigate changes in tariffs and other trade policies, potentially helping the business to gain new customers in the quarters to come.

Immediate Market Reaction

Given the looming threat of tariffs, the market is taking a glass-half-empty approach to this report and the guidance for what is to come. Shopify shares were down about 8% in premarket trading following the release but ahead of the market open.

What to Watch

With the market seemingly moving more on broader macro fears than on Shopify's actual results, management is likely to spend a lot of time on the call talking investors through their outlook for the quarters to come and how Shopify will attempt to navigate through the uncertainty.

The quarter seemingly did little to settle the debate over whether Shopify is a net loser or net winner from the trade wars. But the strong growth and forecast for further growth in the second quarter, coupled with the cash generation, does provide ample evidence that Shopify is a survivor even if conditions worsen in the quarters to come.

Helpful Resources

• Full earnings report
• Investor relations page