Shopify's third-quarter revenue exceeded Wall Street's expectations, showing an impressive increase in gross merchandise volume as the e-commerce platform prepares for the crucial holiday selling season. The Canadian company reported a revenue of $2.16 billion for the September quarter, a rise from $1.71 billion in the previous year, surpassing the consensus estimate of $2.11 billion from Capital IQ.
Following this announcement, Shopify's shares on the New York Stock Exchange surged by 22% during Tuesday's trading session. "Shopify achieved 26% revenue growth and 19% free cash flow margin this quarter, marking our sixth consecutive quarter of more than 25% revenue growth excluding logistics," stated Chief Financial Officer Jeff Hoffmeister.
He further noted, "Moreover, we have grown free cash flow margin sequentially each quarter this year, consistent with what we delivered last year." Revenue from subscription solutions increased to $610 million from $486 million last year, driven by a rise in the number of merchants using the platform.
Merchant solutions revenue rose to $1.55 billion from $1.23 billion, supported by the ongoing growth in gross merchandise volume and the expanding use of Shopify payments. Gross merchandise volume, or GMV, experienced a significant gain of 24%, totaling $69.72 billion. Net income, excluding the effects of equity investments, grew to $344 million from $173 million a year earlier.
Shopify's gross margin slightly declined to 51.7% from 52.6%. Total operating expenses also decreased to $835 million from $779 million on a year-over-year basis. Looking ahead, Shopify expects its fourth-quarter revenue to grow at a mid-to-high-twenties percentage rate compared to the prior year, based on the same factors that have contributed to its robust revenue growth this year.
The Street anticipates revenue of $2.63 billion. Additionally, sales are projected to rise 24% annually in the 2023 fourth quarter to reach $2.14 billion. "The fourth quarter is seasonally our highest volume quarter of the year as it includes the key holiday selling period, including Black Friday and Cyber Monday," Hoffmeister explained.
"We expect to see similar seasonal trends to those observed in previous fourth quarters.".