For those interested in application software investing, pay close attention to the following: Before the market opened on Tuesday, Shopify Inc. (NYSE:$SHOP) posted its earnings report. And even before the opening bell, expectations were high. In fact, and somewhat quietly, Shopify stock has been one of the best performing stocks in the market this year. As of Monday’s close, the stock had increased 115% year-to-date.
When you combine the YTD gains and the nosebleed valuation, it shouldn’t come as a total surprise to hear that some investors were looking at Shopify’s second quarter earnings as a potential threat. However, Shopify posted yet another “beat and raise” quarter. Now, the stock is up another 10% in pre-market trading to pass $100.
Shopify Q2 Earnings:
Perhaps one of the most important numbers in Shopify’s earnings report is a 75% increase in revenue year-over-year. Sales of $151.7 million were more than $8 million ahead of analyst consensus. To put this into context, the 75% growth rate is nine points better than the Street had expected.
For the quarter, adjusted operating loss narrowed year-over-year, coming in around $2.9 billion. The Ottawa, Ontario-based company also beat guidance of $6 million to $8 million. Furthermore, adjusted net loss was 1 cent, five cents better than the analyst consensus.
In addition, subscription revenue increased 64%. This is because the number of merchants joining the service reached another record. In terms of Merchant Solutions sales, these increased 86% on a 74% increase in gross merchandise volume. Keep in mind that most of these sales are transactions fees. To simplify, the company is adding more businesses. With these new businesses comes greater sales and, as a result, Shopify is generating more revenue per sale. Talk about an impressive combination, right?
In the meantime, third quarter guidance looks strong as well. Revenue between the range of $164 million to $166 million is well ahead of its estimates of $156.6 million. Essentially, Shopify moved its growth up a quarter, and that is going to drive a tremendous amount of optimism towards the stock in regular trading.
Also, Shopify disclosed that its merchant base has surpassed 500,000, and the base now reaches a whopping 175 countries. Impressively, over the past year, 131 million customers have purchased from Shopify stores.
Needless to say, these results are extremely significant. For a growth stock like Shopify, surpassing estimates is essential in keeping the rally going. However, even below those headline numbers, the quarter looks promising for the company.
Featured Image: twitter
