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Shopify Posts Earnings Beat as Pandemic Boosts Online Shopping

Shopify reports fourth-quarter earnings and sales that beat analysts' forecasts amid pandemic-related demand for its e-commerce software platform and services.

Shopify  (SHOP)  reported fourth-quarter earnings and sales that blew past analysts' forecasts as the coronavirus pandemic and corresponding transition to online shopping drove demand for the company's e-commerce software platform and services.

The company said it expects a more "normalized pace of growth" in 2021.

Ottawa-based Shopify posted adjusted earnings of $198.8 million, or $1.58 a share, in the fourth quarter vs. adjusted earnings of $50 million, or 43 cents a share, a year ago. Analysts polled by FactSet had been expecting earnings of $1.26 a share.

Revenue was $977.7 million in the quarter, up 94% from a year ago and well above analysts' forecasts of $913.1 million.

Operating income was $112.5 million, or 12% of revenue, vs. a loss of $30.1 million, or 6% of revenue, for the comparable period a year ago. Adjusted operating income was $200 million, or 20% of revenue.

“The spirit of entrepreneurship was strong in 2020, as our merchants’ resilience and ability to adapt helped many of them thrive in a difficult year,” Shopify President Harley Finkelstein said in a statement. 

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Subscription solutions revenue jumped 53% to $279.4 million, primarily due to more merchants joining the platform, Shopify said. Merchant solutions revenue, meanwhile, surged by 117% to $698.3 million. Monthly recurring revenue from ongoing customer service subscriptions was $82.6 million as of Dec. 30.

Shopify has been a big beneficiary of the pandemic and drive to online shopping. Websites powered by Shopify posted some of their best traffic and sales through the critical Thanksgiving-to-Christmas holiday shopping season.

However, the ongoing rollout of vaccines and the petering out of the pandemic could impact revenue for 2021, Shopify said, noting that the ongoing shift to e-commerce, which accelerated in 2020, "will likely resume a more normalized pace of growth." 

Specifically, Shopify said it expects 2021 subscriptions solutions revenue growth "to be driven by more merchants around the world joining the platform in a number lower than the record in 2020, but higher than any year prior to 2020," adding that "we do not expect the surge in GMV that drove merchant solutions in 2020 to repeat."

Shares of Spotify were down 6.46% at $1,368.72 in New York trading on Wednesday.