Shopify issued a rosy third-quarter forecast on Wednesday as the company’s AI efforts draw more merchants to its suite of e-commerce services, assuaging fears over growing competition and sending its shares up more than 18 per cent. The strong outlook and a market-beating June quarter show that AI is shaping up to be a major growth driver for Shopify, and no longer the threat it was once expected to be, with chatbots such as ChatGPT and Claude increasingly becoming better at handling routine tasks for businesses. If current gains hold, Shopify shares are set to recoup most of their losses this year. Through last close, the stock was down 23.4 per cent, as investors fretted over competitive threats, as well as ballooning AI costs at Shopify. Through its partnerships with OpenAI, Google and Microsoft, Shopify has been able to boost demand by helping retailers on its platform reach more customers through AI chatbots or search queries. “AI search has been particularly helpful to some of the smaller brands ... These are brands that also happen to make up the majority of Shopify’s merchant base,” Shopify President Harley Finkelstein said in an earnings call. The company said that AI-driven customer traffic and orders at stores running on its platform both tripled in the second quarter. Shopify’s AI tools for merchants - particularly its Sidekick assistant - have also seen strong adoption from small- and medium-sized businesses that are increasingly leaning on AI to execute tasks faster and cheaper. Daily active merchants using Sidekick surged 3.6 times year-over-year, Shopify said. The company generates revenue by taking a cut of sales from sellers on its platform and selling subscription plans to merchants. It expects third-quarter revenue to grow in the low-thirties percentage range, above analysts’ estimate for a 26.3 per cent increase, according to data from LSEG. It also forecast a mid-to-high twenties percentage rise in gross profit, above market expectations. “Shopify’s guidance left no doubt in investors’ minds about the durability of growth in the second half of the year, and the commitment to delivering margin expansion even with AI investments,” Jefferies analyst Samad Samana said. While its AI initiatives have helped Shopify boost its revenues, rising AI token and cloud infrastructure costs have sparked worries of prolonged margin disruption. The company, however, handily beat second-quarter adjusted profit estimates. It reported 42 cents per share in the June quarter, above estimates of 40 cents. Gross merchandise volume (GMV), or the total value of goods sold on Shopify, rose 32 per cent to US$115.57 billion during the quarter, with solid growth across all merchant sizes, product categories, and geographies. That helped revenue surge 34 per cent to US$3.58 billion and beat analysts’ estimate of US$3.45 billion. --- Reporting by Deborah Sophia in Bengaluru; Editing by Shinjini Ganguli
