Shares of Shopify Plunge 18% After the Company Posts a Quarterly Loss

Shopify Inc. faced a significant downturn of 18% in its stock value early on Wednesday, prompted by the revelation that the company, renowned for providing tools and technology to enhance retailers' e-commerce endeavors, transitioned into a loss for the first quarter, thus overshadowing its revenue surpassing expectations.

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During the quarter, the company, denoted by SHOP, reported a net loss of $273 million, equivalent to 21 cents per share. This marked a stark contrast from the $68 million income, translating to 5 cents per share, recorded in the corresponding period of the previous year. Adjusting for one-time items, the company's adjusted earnings per share stood at 20 cents, surpassing the FactSet consensus of 17 cents.

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Despite the loss, Shopify's revenue exhibited growth, climbing to $1.861 billion from $1.508 billion in the prior year's quarter, slightly surpassing the FactSet consensus of $1.843 billion. However, this positive performance was offset by a surge in the cost of revenue, which escalated to $904 million from $791 million year-over-year.

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On the operational front, the company observed a 23% increase in gross merchandise volume (GMV), reaching $60.9 billion, surpassing the $59.3 billion FactSet consensus. Merchant-solutions revenue witnessed a 20% uptick, amounting to $1.4 billion, while subscription solutions revenue saw a notable 34% rise, totaling $511 million. Additionally, monthly recurring revenue experienced a 32% boost, amounting to $151 million, with contributions from Shopify Plus accounting for 32%, compared to 33% in the prior year.

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Furthermore, gross payments volume expanded to $36.2 billion, constituting 60% of GMV processed during the period, up from 56% in the previous year.

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Looking ahead, Shopify anticipates second-quarter revenue growth to be in the high-teens percentage range, in line with the FactSet consensus projecting a growth rate of 19%. However, the company foresees a contraction in gross margin by approximately 50 basis points from the first quarter, alongside a rise in operating expenses by a low-to-mid-single digit percentage rate.

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The provided guidance factors in the impact of the sale of the company's logistics businesses last year, which is expected to exert a headwind ranging from about 300 to 400 basis points for revenue, and a gross margin headwind of approximately 200 to 300 basis points.

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Despite this setback, Shopify's stock performance has been relatively stable, with only a 1% decline observed year-to-date as of Tuesday's close, while the broader market represented by the S&P 500 has gained 8.8% during the same period.

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