Shopify Q4 + Projecting and Seasonality

Great quarter!

Myths and a reminder of the company scope/vision

I have heard misconceptions about their target market. I’ve heard they are only for small business and I’ve heard they are only for large business. I have heard they are only for eCommerce. None of this is accurate.

The truth is…

Shopify says they are and “entrepreneurship company for merchants of all sizes” and their vision is a cloud-based “Single Integrated Back Office”. Even a small business with one brick-and-mortar location can use Shopify for everything from PoS and accounting flows to a website for an online presence with social media channels to shipping and inventory management.

They break down the business in to these categories and products:

  • Entrepreneurs: Basic
  • SMBs: Shopify & Advanced
  • Larger Brands: Shopify Plus

The Report
Their decks are always really nice. I highly recommend a skim:…
Scroll down to “Annual Cohorts Provide Strong Foundation for Growth” and check out how each cohort continues to grow dramatically, even those who came on to the platform before 2018!

I’m going to try for some more hidden and interesting bullets here rather than copy the top set.

Revenue growth: 94% YoY and 27.4% sequentially (QoQ) - This is a seasonally high quarter and inline with past years. See my breakdown below. However, it is still impressive that this happened at today’s scale.) This is still just a sliver of their TAM.

  • Subscription Solutions revenue was $279.4 million, up 53% - This includes [1] Apps, themes, domains, shopify plus subscription component, [2] monthly recurring revenue for shopify plus and [3] core products. All of these grew roughly proportionally with the first group being outpaced but the others, which is fine. This stuff is mostly the “land” in “land and expand”. The expand part comes mostly from merchants using more services as they take advantage of the platform and support offerings which is the next part

  • Merchant Solutions revenue growth increased 117% - I don’t think they break out the details here but this is everything else that is not “Subscription Solutions” as far as I can tell. That means it is things like transactions from ShopPay and external payment providers, loan income, shipping, consulting, fulfilment perhaps, etc. I take this to be the “expand” in land and expand….simply having customers grow and sell more things. The fact that this is the largest segment growing is amazing and proves the company is delivering on their core beliefs and mission to grow along with their customers.

  • Operating leverage continues to improve significantly. S&M shrank from 28% to 18% of revenue and R&D shrank from 16% to 12% of revenue. This tells me they are scaling without scaling costs, which is what we love to see from largely SaaS companies!

  • I find this referral stat neat as a sort-of-retention-rate-measure: 42,200 partners referred a merchant to Shopify over the past 12 months, up 72% compared with 24,500 over the 12 months ended December 31, 2019.

  • Introduced POS Pro, a new subscription offering with incremental valuable features such as buy-online-pickup-in store, staff roles and permissions, exchanges, and smart inventory management.

  • Expanded the availability of Shopify Payments to 17 countries. Added Austria and Belgium

  • Expanded Shopify Capital beyond the U.S. to support merchants in the United Kingdom and Canada.

  • Launched Shopify Shipping in Australia

  • Their aggregation app “Shop” had more than 100 million registered users, including buyers that have opted in to Shop Pay as well as users of the app, and at the start of 2021 had more than 19 million Monthly Active Users. Remember they do not monetize this. It is value-added, or a differentiator.

  • If they report this again it will be an interesting comparison point I think: the number of consumers buying from Shopify merchants grew 52% from 2019 to nearly 457 million, an acceleration from the 38% year-over-year growth in consumers buying from Shopify merchants in 2019

  • Announced three partnerships to help bring thousands of small businesses online and help them adapt to a digital economy. Partnerships include the Government of Canada through the ‘Go Digital Canada’ program, the New York State Government through ‘Empire State Digital’, and the Victoria State Government in Australia through the ‘Small Business Adaptation Program’.

  • An interesting bit of news: Subsequent to 2020 year end, in February 2021, Shopify announced the expansion of our accelerated checkout, Shop Pay, to Facebook and Instagram. With this expansion, Shopify Payments will process all transactions by Shopify merchants on Facebook and Instagram upon full implementation of the integration later this year. This is the first time that Shop Pay is being offered outside of Shopify […] Instagram in the US, and will be rolling out to […] Facebook in the US in the coming weeks.

The numbers are great but…
…it looks like there is seasonality to the numbers and while growing at 27% QoQ looks amazing it has happened in this quarter in the past two years as well. There is that big COVID-jump last June as the world rushed to create an online presence or add features to their existing one to aid in business continuity during the pandemic. The fact they reported the first pandemic quarter that late means this next report will still show a YoY comp from before the pandemic. I honestly have no idea what to expect and I haven’t found any forward-looking numbers in the report. That said, just based on the the revenue growth numbers, this seems to be one company that was serious when they said the pandemic brough future business to today. The QoQ numbers seem largely consistent in spite of the jump up. Even at a scale 4x bigger than 2 years ago the quarter growth is just as high and it only seems to fuel the fire.

So…any thoughts on this guess? I simply changed the revenue to get a QoQ number inline with past seasonality. Note the YoY still looks great as it smooths the seasonality out, but that has always been true as well. Consider what it would be like if they actually grow this coming quarter.

	*Guess*	**Dec-20**	Sep-20	Jun-20	Mar-20	Dec-19	Sep-19	Jun-19	Mar-19	Dec-18	Sep-18
Revenue	 *920*	**977.7**	767.4	714.3	470	505.2	390.6	362	320.5	343.9	270.1
YoY	*95.7%*	**93.5%**	96.5%	97.3%	46.6%	46.9%	44.6%	43.8%	49.6%	54.4%	57.5%
QoQ	*-5.9%*	**27.4%**	 7.4%	52.0%	-7.0%	29.3%	 7.9%	12.9%	-6.8%	27.3%	 7.3%

How do you think through this fact that the next quarter is probably not going to look great even if it is?


Thanks for the detailed analysis. Shopify has demonstrated consistent growth over the last few years and I’ve been a happy shareholder, but I share your concerns going forward.

  1. Revenue growth yoy below. Prior to 2020, the revenue growth was decelerating. If covid didn’t happen, 2020 would have probably shown 40% revenue growth instead of the 90+% growth we’ve seen. I’m guessing most of the businesses that needed to quickly pivot to an online platform have already done so in 2020. If the growth in 2020 is a pull forward, will they demonstrate slower revenue growth in 2021 (i.e. 35-40%)?
    2019: 47.05%
    2018: 59.40%
    2017: 72.94%
    2016: 89.70%
    2016: 95.43%
    2015: 108.98%

  2. It’s a B2B company with no direct consumer relationship. I downloaded the Shop app as soon as I could and tried it out. It was a bit underwhelming. I could add stores that I already shop with (and had to enter by trial and error which stores might be selling through Shopify), but there is no way to discover new stores, or shop by a specific item. I’ve provided feedback through the app (months ago), no change yet.

  3. Market Cap: $168B. Can I see this being a trillion dollar company like Apple, Amazon, Microsoft? Note that all the behemoths are consumer facing companies. I can see Shopify growing into a Salesforce ($226B market cap), and even a $500B company. But how long is it going to take them?

  4. Gross Margins: They are getting into the fulfillment space. Nothing wrong with that per se – it will make their business more sticky for their customers, but infrastructure will be more capital intensive and decrease their margins.

  5. Opportunity Cost: Do I like Shopify better than CRWD, TWLO, DDOG, NET? How about compared to smaller capital light businesses like LMND and FVRR?

Don’t get me wrong, it’s an amazing company and they have an awesome CEO. But I’m debating whether to trim my position a bit given all of the above. Would love to hear everyone’s thoughts.


Rafes, thanks for your great post and putting it all into context. Shopify is a machine and looking at the last row, QoQ growth, it runs like a clock, except when there is a pandemic uptick!

I think the answer to your question is in your numbers and the investment horizon. I believe next quarter is going to be blowout on YoY and QoQ the normal decline due to seasonality (ie I think it will look great and be great). I will do anything apart from hold and be happy. :slight_smile:


I was looking through the Premium board and someone posted this chart that really puts Shopifys growth into perspective.

Another user posted this article:…

"In its 2020 earnings results, Shopify reported that consumers spent a total of $120 billion on its platform, almost exactly double the figure from 2019.

Shopify is an impressive story of entrepreneurship, and of the acceleration of ecommerce in lockdown.

But it’s interesting more generally because it illustrates some pretty important trends in tech and ecommerce."


I can find the quote, but I believe Tom Gardner has said he sees Shopify eventually morphing into a BtoC company.

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I have heard that too that they might become a BtoC company in the future. As a Shopify store owner, the challenge that I see with going that route is that you would essentially be putting each Shopify store in competition with other Shopify competitors. Right now, we are all essentially unknown to each other. If I’m selling widget B and another shop owner is selling widget B, we’re not competing currently for the same traffic. If we’re put into some type of Shopify marketplace, like an Amazon or eBay, we’ll then be competing and will no longer be anonymous to each other. I’m not sure how Shopify will navigate this challenge OR how I would view it as a store owner.

I think for them to rival Amazon, which many think they will, they may have to move to BtoC. I’m also an Amazon 3rd party seller and their huge advantage to me right now is their Fulfilled by Amazon (FBA) program that ships my inventory for me to their millions of Prime members. If SHOP can create alternative FBA style of fulfillment for me, then owning a SHOP store, as a small business owner, becomes much more attractive. In addition, dealing with Amazon’s seller support is nothing short of horrendous. That continues to push sellers away from their platform and toward alternatives like SHOP. But it’s difficult to replace the sales generated from Amazon with any alternatives at this time because you have to generate traffic to your store (Amazon does that for you). I’m hopeful that SHOP will eventually be that alternative with an FBA style business model.

I trimmed my position in SHOP after the earnings because my position was a significant portion of my portfolio due to 600% growth and because I don’t think they can grow as quickly as some of the other investment opportunities available.


I feel like I’m combo-replying to basically each post in this thread so far.

How do you think through this fact that the next quarter is probably not going to look great even if it is?
Well, I’m very overweight in SHOP (+30%) so I can’t say growth deceleration isn’t on my mind, but I still have my eye on their long term prospects, both geographically and in terms of their product offerings. I’m not thinking on a quarterly basis. Unlike, say AMZN (more below), there’s a lot SHOP hasn’t done yet, and if you look at the hyperchart image fsuarjun03 shared ( they look like they’re just getting started. When combined with the youth and vision of their leadership…

Can I see this being a trillion dollar company like Apple, Amazon, Microsoft?

it’s a yes to that question for me. Someone wrote recently that Apple was thought to be too big to grow at a market-beating rate before it hit $1B, and now it’s $2.2B and still growing. More poignantly, both that individual and I now see AAPL as our portfolio’s ‘stodgy stable blue-chip anchor’ stock even though it’s tech-y. On the other hand, I also still hold a similar amount of COST as the other stock in that IRA, so AAPL’s not the worst offender. On the other other hand, Market Cap was part of my rationale for exiting AMZN last fall–what else is there for them to do that will lead to better returns than the other companies I invest in and follow?. Key thing is that from a long-term view, I believe SHOP is still on the steep part of the proverbial S curve, whereas AMZN, though still smaller than AAPL ($1.7B today), seems a little more gassed out. I asked that same question you (Evie12) did, about my AMZN exit: yes it’ll grow, “but how long is it going to take them?”

Regarding Shopify building its consumer-facing presence, this might be the Tom Gardner quote you (jille101) were thinking of, from late last year:
I think Shopify has got to become a consumer brand —- a place shoppers go to conveniently buy across a range of providers. I think the Consumer-as-Key-Stakeholder is the next horizon for the company. I believe they have the brand, talent, and resources to pull it off. I also believe that the outcome is at least a $500 billion market cap. I think that Shopify adding this new stakeholder (the consumer) is more in line with its culture and vision than is Amazon’s culture and vision in trying to add back Product Innovators/Business Owners as key stakeholders (whom they have decimated over the last decade).

I hope I’m not overstepping by sharing Tom’s quote here–it’s part of a much longer and more nuanced post and discussion, and a great sample of the Premium Boards content (which is not about TomG–he’s probably posted only a dozen or so times there about SHOP) that makes subscribing to at least one TMF service worthwhile (IMO) for any non-passive stock investor.

-n8 (holdings at profile)


3. Market Cap: $168B. Can I see this being a trillion dollar company like Apple, Amazon, Microsoft?

Of all the companies out there - part from Ali Baba, I cannot think of any with a greater likelihood of reaching a trillion $ valuation than Shopify. And to achieve that it still doesn’t have to do more than scratch the surface of commerce.