Shopify stock reversed up on Tuesday after the e-commerce firm reported December quarter revenue that topped Wall Street targets and investors mulled mixed March quarter guidance.
Canada-based Shopify reported fourth quarter earnings before the market open.
"The Q1 2025 outlook met consensus for revenue growth, but fell short on margins," said Jefferies analyst Samad Samana in a report. "The Q4 results were healthy and the guidance continues the trend of conservatism on margins."
At UBS, Timothy Chiodo said in a report: "In the near-term, Shopify plans to prioritize investing further in key areas such as the company's core platform, international, B2B, enterprise, and offline point-of-sale, as opposed to driving higher free cash flow margins given the opportunities Shopify sees ahead."
For the period ended Dec. 31, Shopify said adjusted EPS rose 29% to 44 cents. Also, revenue rose 31% to $2.81 billion.
Analysts expected the Shopify earnings report to record a profit of 43 cents on revenue of $2.73 billion. A year earlier, Shopify earned 34 cents per share on revenue of $2.144 billion.
"The customer base continues to expand upmarket to larger enterprise brands," said William Blair analyst Arjun Bhatia in a report. "We believe the enterprise motion is just getting started and see room for this to accelerate in coming quarters as Shopify takes share from custom-built and legacy commerce systems."
Shopify Stock: FCF Outlook Light
In Q4, gross merchandise volume from merchant transactions rose 24% to $94.4 billion, topping estimates of $93 billion.
On the stock market today, Shopify stock initially fell nearly 7%. Shares clawed back after the company's earnings call with Wall Street analysts. Shares closed up 3.1% to 123.59.
For the first quarter of 2025, Shopify said it expects revenue "to grow at a mid-twenties percentage rate on a year-over-year basis." Shopify forecast "gross profit dollars to grow at a low-twenties percentage" year-over year.
Also, Shopify predicted "operating expense as a percentage of revenue to be 41% to 42%" and "free cash flow margin to be in the mid-teens."
"Shopify's Q4 results beat cleanly across the board, with record-high GAAP operating margins," said Evercore ISI analyst Mark Mahney in a report. "Q1 guidance came in mixed. Free cash flow margin guide of mid-teens percent implying roughly $323 million to 375 million in free cash flow came in meaningfully below the Street at $410 million."
Further, the company did not break out Q4 earnings per share in its news release.
Shopify Stock Technical Ratings
The December quarter is usually Shopify's best quarter annually because of the holiday shopping period. In December, Shopify preannounced e-commerce data following the Thanksgiving holiday.
Shopify sets up e-commerce websites for small businesses, and partners with others to handle digital payments and shipping. Further, the company is building a U.S. distribution network to store and ship products for its merchant customers.
Heading into the earnings report, Shopify stock had advanced 12% in 2025. Shares had been trading near a 120.72 flat-base buy point for several sessions.
SHOP stock holds a Relative Strength Rating of 95 out of a best-possible 99, according to IBD Stock Checkup.
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