Shopify's First Revenue Miss in Four Years Sends Shares Down Nearly 9%
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Shopify reported Q3 revenue of $3.74 billion — its first miss against analyst estimates in four years — as heavy AI spending on its Sidekick assistant and cautious consumer behavior weighed on the Canadian e-commerce company.
Shopify reported third-quarter revenue of $3.74 billion, falling just short of the $3.75 billion analysts had expected — the company's first revenue miss in four years, according to Bloomberg data. Gross merchandise volume and subscription-solution sales also came in below forecasts. Shares ended Tuesday down 8.7% on the news.
CFO Jeff Hoffmeister said subscription gross margins were compressed primarily by incremental AI spending on Sidekick, Shopify's AI assistant launched in 2023, which the company says attracts more merchants to its platform and drives their success. CEO Tobias Lütke had previously told employees in an internal memo that using AI is a "baseline expectation," and the company is now pursuing "agentic commerce" — AI acting on behalf of shoppers. For the fourth quarter, Shopify expects operating expenses to run between 29% and 30% of revenue, with its free cash flow margin staying flat.
The disappointing results also reflect a tougher consumer backdrop. Shoppers have been pulling back on discretionary purchases and gravitating toward big-box discounters like Costco rather than the independent and premium brands that make up Shopify's merchant base, as persistently high prices for essentials like gas and groceries squeeze budgets. Hoffmeister expressed optimism that Sidekick investment will ultimately pay dividends, saying the tool "propels more merchant success, which materializes in merchant solutions."
