Canada's Shopify forecasts revenue above estimates, shares surge

Shopify’s latest results suggest artificial intelligence is strengthening, rather than disrupting, its e-commerce business. Shares jumped more than 18% after the company issued an optimistic third-quarter forecast on Wednesday, Aug. 5, helping the stock recover most of its losses this year. Through the previous close, shares had fallen 23.4% as investors worried about competitive threats and ballooning AI costs. The June quarter provided evidence of accelerating demand. AI-driven customer traffic and orders at stores using Shopify both tripled in the second quarter. Daily active merchants using Sidekick, Shopify’s AI assistant, rose 3.6 times year over year as small and medium-sized businesses used the tool to complete tasks faster and more cheaply. Shopify has partnered with OpenAI, Google and Microsoft to help retailers reach more customers through AI chatbots and search queries. President Harley Finkelstein said AI search had been particularly helpful to smaller brands, which represent most of Shopify’s merchant base. As ChatGPT, Claude and similar tools become more capable of handling routine business tasks, AI may become a demand generator for Shopify rather than solely a competitive risk. The company generates revenue by taking a portion of sellers’ sales and selling subscription plans to merchants. It expects third-quarter revenue to grow in the low-thirties percentage range, above analysts’ 26.3% estimate, according to LSEG. Gross profit is expected to rise in the mid-to-high twenties percentage range, also above market expectations. Jefferies analyst Samad Samana said the guidance demonstrated confidence in second-half growth and margin expansion despite AI investments. However, rising AI token and cloud-infrastructure costs remain a risk to margins and could prolong disruption. Shopify reported second-quarter adjusted earnings of 42 cents per share, beating estimates of 40 cents. Gross merchandise volume rose 32% to $115.57 billion, with solid growth across merchant sizes, product categories and geographies. Revenue increased 34% to $3.58 billion, exceeding the $3.45 billion analyst estimate. The key investment question is whether AI partnerships, Sidekick adoption and AI-driven traffic can sustain merchant growth while Shopify controls token and cloud costs.