Shopify Profit Outlook Underwhelms, even as Holiday Sales Top Estimates

(Reuters) -Shopify’s Downbeat Quartal’s merit prospects spooked investors on Tuesday, even when the e-commerce company released better than expected sale of the holiday quarterly on the back of healthy consumer expenses and its roll-out of AI features.

US-listed shares in the company, after jumping 13% so far this year driven by investors’ optimism around the company’s revenue growth speed, dropped 9% in the trade in Premarket.

Shopify has invested a lot in building artificial intelligence-based tools and features across its services that help sellers on its platform with tasks ranging from image generation and inventory to collect customer and sales data.

Called ‘Shopify Magic’, Suite of AI features, it launched by the beginning of 2023, and available across all its subscription levels at no extra cost, has driven several small and medium-sized business owners to Shopify. The company also rolled its AI assistant sidekick out to several merchants last year.

Although the AI ​​features helped Shopify posing an increase of 31% from one year earlier in the fourth quarter revenue to $ 2.81 billion, the fastest growth in at least six quarters, they have translated at higher costs for the company.

Shopify expects gross merit dollar to grow with a low -theft production rate in the current quarter, weaker than the 24.2% growth that analysts expected according to visible alpha. It expects that operating costs as a percentage of revenue will be 41% to 42% compared to 31.5% in the holiday quarter.

The company’s revenue forecast for growth in the mid -twenties was also roughly in line with estimates for an increase of 24.4% according to data prepared by LSEG.

Gross merchandise –Volumen, a key metrics representing the total value of orders relieved through Shopify, jumped about 26% to $ 94.46 billion in the quarter that ended on December 31.

(Reporting Deborah Sophia in Bengaluru; Editing Krishna Chandra Eluri)