Shopify stock drops 7% after third-quarter volume misses targets

Shopify shares declined 7% in Tuesday trading after the company released third-quarter results that underperformed on key metrics. The drop followed a pre-market report where adjusted earnings came in at 49 cents per share, surpassing LSEG estimates of 46 cents. Despite the earnings beat, investors focused on missed targets for revenue and volume.

Quarterly revenue totaled $3.74 billion, a slight dip below the LSEG projection of $3.75 billion. Gross merchandise volume, a critical measure of the goods sold through the platform, reached $119.15 billion. This figure lagged behind StreetAccount analyst estimates of $120.03 billion for the period. Subscription gross profit also fell short of expectations, recording $661 million against a projected $680.3 million, a gap of nearly $20 million.

Harley Finkelstein, president of Shopify, told CNBC's Squawk on the Street that the volume results were consistent and durable. He noted that this marked the thirteenth consecutive quarter of gross merchandise volume growth exceeding 20%. Finkelstein stated that the company remains focused on long-term building while ignoring daily market noise.

The company also addressed its partnership with Meta, which released its consumer-facing AI agent Muse during the third quarter. Shopify served as an early partner, allowing Muse to browse and purchase items within the app and process payments via Shop Pay. Finkelstein said AI agents are generating new traffic and helping consumers discover niche brands, such as the Tin Can phone, a screenless device for children.

Regarding potential pricing pressure from AI agents negotiating on behalf of users, Finkelstein said the company is not currently seeing lower prices. Instead, he described agentic shopping as a merit-based system that surfaces specific products consumers might not otherwise find. He acknowledged economic pressures on shoppers heading into the holiday season but expressed optimism about the sector.

Shopify forecasts fourth-quarter revenue growth in the low thirties range year over year. This outlook is slightly above LSEG estimates of 32.1% for the same period. The company expects this trajectory to continue as AI-assisted shopping capabilities become mainstream during the upcoming holiday season.

Merchant gross profit and merchant revenue both exceeded analyst estimates, providing a counterweight to the misses in subscription metrics. The stock movement on Tuesday reflects investor reaction to the mixed performance across these different revenue streams.