Shopify Jumps 17% After Quarterly Revenue Grows 34% and Guidance Rises

Shopify shares rose 16.98% on Wednesday, closing at $144.24, after the commerce-software company reported second-quarter results that topped expectations on its main measures and lifted its outlook for the current quarter. The reaction was immediate. The gain carried the stock to its highest close in at least three months, and it was the biggest one-day move among the large-cap names Bellwize follows.

The quarter did the talking. For the three months ended June 30, revenue reached $3.58 billion, up 34% from a year earlier, or 33% in constant currency. Gross merchandise volume, the total value of sales that flow across merchants on the platform, climbed 32% to $115.6 billion. Gross profit rose 31% to $1.71 billion. Free cash flow came in at $654 million, an 18% margin. Subscription revenue was $802 million, while the larger merchant-solutions segment, which includes payments, brought in $2.78 billion. GAAP operating income was $488 million.

Guidance did as much for the stock as the quarter itself. Management said it expects third-quarter revenue to grow at a low-thirties percentage rate year over year, above the roughly 26% that analysts had modeled ahead of the release. It also guided free cash flow margin to the high teens to low twenties, and gross profit dollars to grow at a mid-to-high-twenties rate. Operating expenses were set at 33% to 34% of revenue, alongside $150 million of stock-based compensation. A company that had just posted more than 30% growth across revenue, merchandise volume, gross profit and cash flow guided to a similar pace ahead.

Wednesday’s move extended a run that was already strong. The stock had gained about 18% over the prior 30 days, and it now sits more than 50% above its lowest close of the past three months. It also finished the session above its prior three-month high, a level that had capped the shares over that stretch. Volume backed the price. Some 41.5 million shares traded, nearly five times the 20-day average of 8.8 million, the kind of participation that accompanies a results-day repricing.

The tape has been selective this week. Investors have rewarded profitable growth and punished the opposite, and several large technology names sold off even after beating estimates, on worries that expectations had climbed too high. Shopify’s mix of accelerating volume and a widening cash-flow margin gave the market a cleaner read.

On the calendar: the third-quarter period Shopify just guided to runs through the end of September and captures the opening weeks of the holiday shopping season, when merchandise volume across its merchants typically builds toward its annual peak. The company will report those results this fall. Two figures are worth tracking. The first is whether merchant-solutions revenue, the payments-heavy line that supplied most of the quarter’s dollars, keeps pace with merchandise volume. The second is the free cash flow margin, which management has now guided higher for a second straight quarter.

For now, the numbers were unambiguous, and so was the tape. A double-digit gain on five-times volume is the market voting in size, and on Wednesday it voted up.

This is a general-market summary for information only — not investment advice, and not a recommendation regarding any security.