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Shopify revenue tops $1B as pandemic causes online sales to surge to record

Shopify Inc.’s revenue crossed the $1-billion mark for the first time in a single quarter and the volume of goods sold through its offerings reached a record level, as businesses started to reopen amid the COVID-19 pandemic.

The e-commerce company, which is based in Ottawa but prefers to list its headquarters as “internet, Everywhere,” attributed the milestones announced Wednesday to the return of stores, restaurants and favourite locales temporarily closed by the health crisis and the growth of e-commerce.

Shopify’s revenue for its second quarter, which ended June 30, reached $1.1 billion US, up 57 per cent from $714.3 million US at the same time last year.

Its gross merchandise value (GMV) — a key metric measuring the total dollar value of orders facilitated through the Shopify platform — hit $42.2 billion US, a $12.1 billion or 40 per cent increase from the second quarter of 2020.

“In places that have begun to reopen, like the U.K., GMV grew faster than our overall GMV in the quarter year-over-year, indicating that online and in-store commerce are no longer mutually exclusive,” Shopify president Harley Finkelstein said in a conference call.

“While we did start to see a shift in some consumer spend back to services and recreation towards the end of the quarter, which we expected, all regions remain at GMV levels above pre-COVID levels.”

Shopify has spent much of the pandemic in the spotlight because it offers digital solutions to help businesses sell goods and services online.

As health officials and politicians imposed restrictions on shopping and what businesses could remain open, Shopify helped scores of companies move online and offered many free trials.

Analysts have closely watched whether the company can hold onto those customers once the trials and COVID-19 cases subside.

The company said Wednesday that it expects revenue will grow rapidly in 2021 but at a slower rate than in 2020, as the number of new merchants joining the platform is lower than the record last year, but more than in any year before 2020.

The pandemic also intensified its ongoing battle with Seattle e-commerce giant Amazon.com Inc.

In recent years, Shopify launched a competitor fulfilment network it plans to expand and make more efficient.

In June, it announced that as of Sunday it won’t take any share of the first $1 million in revenue developers make every year on the array of booking features, subscription tools and other products they design for the e-commerce company’s software.

Shopify previously took a 20 per cent share of all revenues earned by each of the roughly 6,000 developers who create and sell tools that can be integrated and used with Shopify systems. It will now only take 15 per cent once the $1-million mark is reached.

Shopify was upping the ante after Amazon revealed it would take a 20 per cent cut from developers who earn up to $1 million in the prior calendar year, down from 30 per cent before. Those earning less than $1 million in Amazon app store revenue will also receive 10 per cent of their revenue as credits for the company’s web services offerings.

Apple and Google also dropped what they will take from a developer’s first $1 million in revenue to 15 per cent from 30 per cent.

Shopify chief executive Tobi Lutke weighed in Wednesday on the impacts merchants have seen from Apple’s recent decision to allow users to opt out of being tracked by the apps they use and download on iPhones.

“In the near term, we do think it will reduce the efficacy of some ads, but I think it further will incentivize merchants to look for new ways and multiple ways to connect with buyers on top of ads getting increasingly expensive,” he said.

Lutke’s remarks came as Shopify earned $879.1 million US or $6.90 per diluted share, up from $36 million or 29 cents per share a year earlier.

Its net income included a $778 million unrealized net gain on equity investments.

Shopify’s adjusted profit was $284.6 million or $2.24 per diluted share, up from $129.4 million or $1.05 per share in the second quarter of 2020.

The company was expected to earn 97 cents per share in adjusted profits on $1.05 billion of revenues, according to financial data firm Refinitiv.

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