Shopify Q1 Earnings Preview: Can This E-Commerce Giant Keep Growing?

Investors are gearing up for Shopify’s (SHOP) Q1 2025 earnings report, set to release on May 8, which could either solidify the company’s position as an e-commerce leader or expose vulnerabilities in its growth model. With Wall Street’s eyes trained on key metrics like revenue, gross merchandise volume (GMV), and merchant retention, the report will test whether Shopify can navigate rising costs, regulatory headwinds, and intensifying competition. Let’s break down what to expect.

Key Metrics to Watch

1. Revenue and EPS: Analysts project Shopify to report $2.33–2.37 billion in revenue, reflecting 25-27% year-over-year growth. The EPS consensus hovers around $0.26–0.27, with a +15.1% Zacks Earnings ESP, suggesting a high probability of beating estimates. However, the EPS consensus has dipped 2% in the past month, signaling some caution around execution.

1. Gross Merchandise Volume (GMV): The $74.66 billion estimate represents a 22.7% YoY increase, though this is down from Q4’s 25.8% surge. The Q1 figure is seasonally softer, but investors will scrutinize whether Shopify can sustain momentum amid U.S. tariff changes that could hike costs for small businesses reliant on Chinese imports.

2. Merchant Solutions and MRR: Merchant Solutions revenue is expected to hit $1.71 billion (+26.7% YoY), driven by enterprise partnerships (e.g., Reebok, FC Barcelona). However, MRR growth is projected at 19.2%, reaching $179.99 million. A key risk here is Shopify’s shift to three-month paid trials, which may delay revenue recognition and pressure short-term MRR metrics.

The Elephant in the Room: Tariffs and Trial Periods

Analysts are laser-focused on two critical risks:
- Tariff Impact: The elimination of the $800 de minimis rule means U.S. merchants importing goods from China will face higher duties, squeezing margins. Truist’s Terry Tillman reduced Shopify’s price target to $100, citing this as a “modest drag on GMV” in 2025.
- Trial Period Changes: While longer trials aim to boost long-term retention, they could slow MRR growth in Q1 and Q2. This is a trade-off between short-term pain and long-term gain—a bet investors must be willing to make.

Why Shopify Still Has Momentum

Despite these headwinds, Shopify isn’t standing still:
- International Dominance: International revenue grew 33% in 2024, outpacing North America’s 23%. Expansions in the UK/EU (via tax compliance tools) and Asia-Pacific are paying off.
- Enterprise Upside: Shopify Plus revenue rose 23% YoY to $59 million, reflecting a push into large brands. Deals with Reebok and Champion signal scalability beyond its small-business roots.
- Cash Flow Strength: Q4’s 16.5% operating margin (up from 13.5%) shows cost discipline, with customer acquisition payback improving to 6.6 months.

Analysts Are Split—But Optimism Persists

The Street is conflicted:
- Bull Case: An average $132.95 price target (35% upside) hinges on sustained GMV growth and margin expansion. Oppenheimer’s Ken Wong sees Shopify’s Shop Pay and Balancer Plus tools as retention accelerants.
- Bear Case: ATB Capital’s Martin Toner lowered GMV growth to 16% for 2025, fearing tariffs will crimp small-business activity. The stock’s Zacks Rank #3 (Hold) reflects near-term uncertainty.

Conclusion: Shopify’s Earnings Will Tell the Story

The Q1 report is a litmus test for Shopify’s resilience. If GMV meets or exceeds $74.66 billion despite tariffs, and Merchant Solutions revenue hits $1.71 billion, bulls will argue the long-term growth thesis remains intact. A beat on EPS (thanks to cost controls) could push shares toward $130, while a miss might invite further skepticism about Shopify’s ability to navigate macro headwinds.

Crucially, the trial period’s impact on MRR must be monitored. If the shift spurs long-term retention, it’s a win; if it causes churn, it’s a red flag. With 70% historical beat probability on EPS and a +15.1% Earnings ESP, the odds favor a positive surprise. But tariffs and competition from Amazon’s small-business tools remain lurking threats.

For now, Shopify’s stock trades at just 30x forward earnings, a discount to its growth rate. Investors willing to look past Q1’s seasonal softness and tariff noise might find this a buying opportunity. But as always in tech, execution is everything—and the next 48 hours will reveal whether Shopify’s engine is still firing on all cylinders.

Final Take: Buy the dip if Q1 results beat expectations and management reaffirms full-year guidance. If not? Wait for clarity on tariffs and MRR stability.