Shopify posted a first quarter that broke multiple records, reporting US$988.6 million in revenue driven by its merchants’ strong sales, as consumers continue to do their shopping online amid the pandemic.   

Wednesday’s earnings significantly surpassed market expectations, with adjusted net income per share of US$2.01, ahead of analysts’ consensus estimate of US$0.74 collated by FactSet. The stock duly jumped more than 12 per cent in early trading Wednesday on the New York Stock Exchange.

Here’s a breakdown of the metrics that matter in Shopify’s first-quarter earnings:

The big numbers: The Ottawa-headquartered firm’s revenues between January and March were up 110 per cent year-over-year, the highest growth rate of any quarter since its May 2015 IPO, according to The Logic’s ongoing analysis. Shopify’s merchant solutions business line—consisting of fees for add-ons to its core software like payment processing, fulfillment and loans—grew 137 per cent, to US$668 million. That revenue is closely tied to the sales of stores on the platform, which boomed in the first quarter. Gross merchandise volume (GMV), a measure of the total value of those orders, was US$37.3 billion, up 114 per cent year-over-year. That means Shopify picked up 1.79 per cent of the value of its merchants’ transactions, a record take rate.  

Why it matters: The first quarter is traditionally the firm’s leanest, as consumers put down their wallets after the splurge of the holiday shopping season. But Shopify brought in more revenue in the first three months of 2021 than the last three of 2020, as the pandemic-induced e-commerce surge continued.

What they said: “This isn’t just a U.S. stimulus story,” said CFO Amy Shapero on Wednesday’s earning call. The Biden administration’s US$1,400 cheques began arriving in household mailboxes in early March, which goosed merchant sales in what is by far Shopify’s largest market. But GMV was already ticking up in January and February, and grew faster outside the U.S. in the first quarter, according to Shapero. While Shopify’s accelerated expansion has tracked increased e-commerce adoption, executives noted there’s plenty of opportunity to go around in the space. “The growth is so big in digital commerce that it really is hard to talk at all about sort of the zero-sumness of offer channels” such as online marketplaces, said CEO Tobi Lütke. (Think: Amazon). “They honestly are all growing.” President Harley Finkelstein argued that “consumer preferences [have] shifted permanently,” noting that e-commerce accounted for less than a third of North American retail sales, meaning it has ample room to grow. “Again, the centre of gravity was offline; it is now online.” 

Notes of caution: A record-setting first quarter might prompt investors to hope for similar blockbuster growth all year. But Shopify, which last offered numerical guidance in February 2020, reiterated its statement that “revenue spread may be more evenly distributed across the four quarters than it has been historically,” assuming vaccinated shoppers eventually return to stores and services they haven’t been able to get to in person due to social distancing restrictions. “We see tougher [year-over-year] comps in quarters ahead,” wrote Eight Capital principal Suthan Sukumar, who covers the stock. But the investment bank continues “to see SHOP as a key beneficiary of ongoing e-commerce adoption and see several levers for the company to deliver on upside to our/Street expectations.” 

Home and away: In February, e-commerce’s share of Canadian retail sales fell 1.3 percentage points month-over-month to 6.8 per cent, according to new Statistics Canada data, although total online transactions were up 92 per cent to $3.1 billion. While that fits broader analyst concerns about how long digital growth can last, and the return of in-person shopping, Shopify’s home market contributed only 6.6 per cent of revenue in 2020. Finklestein pointed to Australia and New Zealand as an indicator of the shift to e-commerce persisting. “In those places, where things have really opened up post-pandemic, we’re actually not seeing any slowdown whatsoever in terms of consumers buying from our merchants,” he said. “In fact, online GMV remains elevated.”

Also noteworthy: The company’s net income of nearly US$1.26 billion mostly came from an unrealized US$1.3 billion gain on Shopify’s stake in Affirm, the buy-now-pay-later company that went public in January.

What’s next: The company plans to recruit more than 2,000 technical staff this year, doubling that part of its workforce. “We are seeing greater volume and velocity of new engineering hires over the last several weeks,” Shapero said. Shopify will also need to find replacements for chief technology officer Jean-Michel Lemieux, chief talent officer Brittany Forsyth and chief legal officer Joe Frasca, who announced their departures earlier this month, or restructure to fill their jobs. The trio’s departure makes five exits from the company’s senior leadership team in just over a year, as Lütke retook control of product. He reassured analysts on the call he won’t follow. “I’m committed,” he said. “I’m in for the long term here. I’ll never in my life come up with a better idea than the one of Shopify.”

An off note: Shopify sometimes plays audio clips from merchants talking about their use of the platform on its earnings calls. On Wednesday, it featured an Indian organic farm, whose founder described using the tech to grow. “As you know, India is battling the worst of this global pandemic right now,” Finkelstein said, introducing the clip. “We are telling this family’s story to bring some hope in a very difficult time.” With COVID-19 case counts in the subcontinent in the hundreds of thousands and many lacking access to healthcare, it was an odd parallel to draw at an event mostly focused on Shopify’s financial achievements.  

How the market reacted: By early afternoon, Shopify was down slightly off its daily high, but still up more than 10 per cent to US$1,280 on the NYSE, giving it a US$158.8-billion market cap. Traditional Canadian stock-market leader RBC is worth US$136 billion.