Before the pandemic became a thing, Shopify was about a $60 billion company. At that time, we took a bet on Shopify. We made the bet because we believe there would be more businesses moving online in the future. And Shopify is positioned to capture this growth with its merchants-centric business model. Undoubtedly, the pandemic accelerated our outlook and Shopify won and became a $153 billion business in the process. But we believe that’s not the end of growth for Shopify, only the beginning.

It is earnings season and Shopify’s revenue grew 110% year over year. Shopify’s outstanding performance was fueled by a 71% jump in subscription revenue to $320 million, and a 137% surge in merchant solutions revenue to $668 million. This is even though the economy is in a way already on track to fully reopen. Shopify is sending a message that whether there is a pandemic or not, it is well-positioned to keep on growing. Albeit, growth may increase at a lower rate as the economy fully reopens and customers favour in-store purchases over online channels.

Shopify noted during the earnings call, “we continue to expect to grow revenue rapidly in 2021 but at a lower rate than in 2020.” This is something we foresaw at Rise and we are already adjusting for it in our portfolio. As we noted in our Q1 report, we have already started making post-pandemic bets and the returns so far confirm our thesis. 

Shopify’s merchant customers are also benefiting from booming e-commerce growth. Its gross merchandise volume (GMV) – the total amount of sales facilitated by its platform – increased an astounding 114%, to $37.3 billion.

And as its merchants prosper, so does Shopify. Alex Danco explains the business model best here if you are curious. The summary of the business model adopted by Shopify is such that it is positioned to capture value at every merchant’s success points. And its continued growth shows that it’s been able to do this successfully.

Shopify’s adjusted net income and earnings per share rose more than tenfold to $254.1 million and $2.01 per share, respectively.

Talking about the GMV, Shopify President, Harley Finkelstein said “Our GMV growth accelerated year over year as merchants across cohorts and geographies thrived in our platform, backed by robust consumer spending.” He continued to highlight how more and more merchants choose Shopify when he said “more entrepreneurs launched businesses on Shopify, trusting us with their livelihoods as they turn their ideas into reality.”

What’s Ahead?

The global e-commerce market size was valued at USD 9.09 trillion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 14.7% from 2020 to 2027. While there are hundreds of players in the industry, Shopify is well-positioned to capture some of the growth with its focus on merchants who are looking to take their businesses online in the most convenient and efficient way.

“We are focused on building a commerce operating system that will help shape the future of retail,” Chief Financial Officer Amy Shapero said. “Our merchant-first business model positions us to capture the massive opportunity presented by the growth of digital commerce, benefiting both our merchants and Shopify.”

Shopify also intends to spend heavily on growth initiatives in the year ahead. Although this will weigh on its profits, we are ready to take sides with a company that will make short-term sacrifices for long-term gains. “We expect full-year 2021 adjusted operating income to be below the level we achieved in 2020,” the company said.

With nearly $7.9 billion on its balance sheet for Q1 ended, we believe Shopify can easily afford these investments.

We are excited about the wealth compounding opportunities that we are building for our customers. And we urge you to join if you haven’t and invite others to join us as well.

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