OTTAWA
Shopify Inc.'s stock fell on Tuesday after the e-commerce platform's third-quarter revenue missed analyst estimates for the first time in four years.
The Ottawa-based company reported US$3.742 billion in revenue for the three months through September, shy of the consensus estimate of US$3.744 billion compiled by S&P Global Market Intelligence.
Shopify's share price opened down 12.8 percent at US$136.21 on the Nasdaq.
"We delivered exactly what we said we would: consistent, durable growth, yet again," Shopify president Harley Finkelstein said on an investor call.
The company posted US$462 million in net income, a 75 percent increase from a year ago, and earnings of US$0.49 per share, slightly ahead of estimates.
Its free cash flow margin rose to 22 percent from 18 percent a year ago.
Gross merchandise volume, the total value of goods sold on its platform, grew 29.5 percent year-over-year to US$119.1 billion, which analysts described as slightly below expectations.
"Expectations were high," Kevin Krishnaratne, Bank of Nova Scotia's director of equity research, software and services, wrote in an investor note.
Thanos Moschopoulos, an analyst at BMO Capital Markets, said markets were likely responding to the softer GMV and slight revenue miss, which is "unusual" for Shopify.
Shopify merchants sold US$119.1 billion worth of products in the quarter, with European clients' business growing particularly fast.
Chief financial officer Jeff Hoffmeister said Shopify merchants now capture half of e-commerce sales in the U.S. and more than 40 percent in Europe.
Major retailers debuting on the platform in the quarter included Lululemon Athletica Inc., Pierre Balmain S.A. and Clinique Laboratories LLC.
Finkelstein highlighted the company's work with AI agents, which allow consumers to delegate purchases through personal assistants like Meta Platforms Inc.'s Muse.
"While the volume is still small here, adoption is growing," he said, noting that AI traffic has more than doubled year-over-year, while automated orders are up more than three-fold.
He said AI channels sent shoppers to product pages at three times the rate of typical search.
Finkelstein addressed concerns about AI agents negotiating lower prices, saying, "We're not seeing that prices are being lowered."
Shopify has tailored its technology to assist AI agents, building a shared catalog of its clients' products and ensuring they receive up-to-date inventory and pricing information.
"For merchants, this means reach, a huge new pool of customers with zero lift for them," Finkelstein said.
The company's own AI assistant, Sidekick, helps clients set up and run their stores, with daily use up nearly four-fold in the quarter compared to a year ago.
However, the development of Sidekick and clients' growing use of it has lowered the margins of Shopify's subscription sales, Hoffmeister said.
Subscription revenue of US$836 million also fell short of analyst estimates.
The company expects fourth-quarter revenue to grow at "a low-30s percentage rate" on an annual basis, slightly above analysts' consensus.
The fourth quarter is typically Shopify's biggest, driven by Black Friday, Cyber Monday and holiday shopping.
Finkelstein said he believes this will be "the first holiday season where AI-assisted shopping capabilities will become mainstream."
This story was written by the e2gold.ca newsroom from reporting by The Globe and Mail, BetaKit, Financial Post and CNBC. Quotes are checked word for word against that reporting.