Shopify delivers upbeat holiday forecast as AI draws customers, shares surge
Shopify adds merchants in new categories
Exceeds sales estimates for ninth straight quarter
Shares soar to highest level in nearly 3 years
Adds analyst quote in paragraph 2, executive comment in paragraph 5; Updates share movement
By Deborah Mary Sophia
Nov 12 (Reuters) -Shopify SHOP.TO forecast fourth-quarter sales growth above estimates, as a focus on employing AI-powered tools in its e-commerce services pulled in more merchants ahead of the crucial holiday season, sending its shares up 25% on Tuesday.
The Canadian firm also topped market expectations for third-quarter revenue, with Third Bridge analyst Charlie Miner calling it a "staggering outperformance of the broader e-commerce market, even in the face of cautious consumer spending."
Shopify, which enables businesses to build and run online stores by providing tools for everything from creating a website to shipping products, has spruced up its services by integrating artificial intelligence-based features this year.
In June, the company rolled out to more merchants its AI assistant, Sidekick, which provides sellers with sales reports, data on customer behavior, and helps execute tasks such as setting up discount codes.
The company added merchants in new categories, including industrial and hardware, in the quarter and signed on more established brands such as jewelry designer Brilliant Earth and footwear brand Reebok, President Harley Finkelstein said on a post-earnings call.
Its Toronto and U.S.-listed shares soared to their highest levels in nearly three years. The stock had climbed more than 40% since Shopify reported upbeat second-quarter results in early August, in a reversal from earlier in the year when downbeat forecasts hammered the shares.
"Both the beat and the forecast are very impressive... Shopify is better-positioned than other software vendors because it's not only growing with its existing customers, but it's adding customers in a variety of categories," said Gil Luria, head of technology research at D.A. Davidson.
Shopify projected current-quarter revenue would increase in a mid-to-high-twenties percentage range, while analysts expected a rise of 22.7%, according to LSEG data.
Revenue jumped 26% to $2.16 billion for the third quarter, compared with analysts' estimate of $2.11 billion, marking the ninth straight quarter of beat on sales.
"The dynamic that investors are going to walk away with... is that Shopify is a share gainer," said Oppenheimer analyst Ken Wong.
Reporting by Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila
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