Shopify Inc’s (TSX:SHOP) Earnings Soar In Q4

Shopify Inc’s (TSX:SHOP)(NYSE:SHOP) Q4 earnings statement shows adjusted earnings climbing and GAAP losses narrowing.

| More on:

Shopify Inc (TSX:SHOP)(NYSE:SHOP) just released its Q4 earnings statement, and the results are as good as anyone could have asked for. Although the trend of revenue growth deceleration continued, the company’s adjusted earnings climbed higher than ever, demonstrating the company’s increasing profitability. The Q4 report comes after a busy quarter for the company, which saw massive sales boosts from cannabis legalization and Black Friday. For investors, it’s a strong sign that Canada’s tech darling is a healthy operation with a bright future ahead of it.

Now, let’s take a look at some highlights.

Revenue growth: strong but slowing

I’ll start with what’s probably the worst news out of an overall great report: Shopify’s trend of slowing revenue growth continued in Q4, with the growth rate down to 54% from 58% in Q3. Slowing growth has been cited as a major concern for company, whose high double-digit growth has failed to keep pace with its increasing costs. However, the concern is overblown: 54% is a very high growth rate, and as long as revenue growth outpaces cost increases, the company can become more and more profitable over time. And that’s exactly what happened, as we’re about to see.

GAAP net loss narrows

For a few quarters now, Shopify has been reporting positive adjusted earnings, but in GAAP terms the company has struggled to break even. Although the company did not achieve positive GAAP earnings in Q4, it got a lot closer, with a $1.5 million loss compared to $3 million in the same quarter a year before. This means that the company cut its losses in half. Shopify’s GAAP net losses are already inching closer and closer to 0, and if the company keeps it up, it’s on track to deliver steady profits faster than Amazon.com did.

Adjusted earnings soar

In adjusted terms, Shopify’s earnings grew in Q4, at $27.9 million compared to $14.7 million in the same quarter a year before. That’s just a hair short of doubling. With revenue growth still chugging along in the mid double digits, the company has plenty of room to keep the growth coming.

Foolish takeaway

Shopify’s Q4 earnings report delivered (almost) all the good news investors could have asked for. While the decelerating revenue growth might look bad, it’s important to remember that 60% can’t be maintained indefinitely. In the meantime, narrowing GAAP losses and rising adjusted earnings show that Shopify is putting its revenue to good use, delivering more and more value to shareholders every quarter. Shopify has long been the king of the Canadian tech scene. In Q4, it retained its crown with ease.

If you’ve ever considered buying Shopify shares, but hesitated because of uncertainty, now might just be the time to make a move.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Andrew Button has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Amazon, Shopify, and Shopify. Shopify is a recommendation of Stock Advisor Canada.

More on Tech Stocks

investment research
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

Is OpenText stock poised for a 2025 comeback? AI ambitions, a 3.8% yield, and cash flow power make it a…

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »

An investor uses a tablet
Tech Stocks

Canadian Tech Stocks to Buy Now for Future Gains

Not all tech stocks are created equal. In fact, these three are valuable options every investor should consider.

Read more »

dividend growth for passive income
Tech Stocks

2 Rapidly Growing Canadian Tech Stocks With Lots More Potential

Celestica (TSX:CLS) and Constellation Software (TSX:CSU) are Canadian tech darlings worth watching in the new year.

Read more »

BCE stock
Tech Stocks

10% Yield: Is BCE Stock a Good Buy?

The yield is bigger than it's ever been in the company's history. That might not be a good thing.

Read more »

Happy shoppers look at a cellphone.
Tech Stocks

So You Own Shopify Stock: Is it Still a Good Investment?

Shopify (TSX:SHOP) stock has had a run, but there's still room to the upside.

Read more »

A person uses and AI chat bot
Tech Stocks

AI Where No One’s Looking: Seize Growth in These Canadian Stocks Before the Market Catches Up

Beyond flashy headlines about generative AI, these two Canadian AI stocks could deliver strong returns for investors who are willing…

Read more »