Shop Pay Grows 57% in Q1 as Shopify Says Wait and See on Tariffs

Macro uncertainty abounds, but Shopify’s first-quarter earnings results showed double-digit growth in gross merchandise volumes (GMV) and a continued movement toward streamlined checkout online and further inroads made in offline commerce.

Forward looking guidance anticipates an acceleration of top-line trends, but margins seemed to be investors’ focus. Shares were down 1% during intraday trading on Thursday (May 8) against a backdrop where markets were broadly higher.

“It’s still early to assess the full impact of the current trade environment,” Shopify President Harley Finkelstein said on the conference call with analysts. He added that “we’re, of course, monitoring for potential slowdowns, but our data through April shows little evidence of that.”

The company’s earnings results noted that revenues were up 27% to $2.4 billion; GMV surged 22% to $74.8 billion.

Offline GMV increased 23% and B2B GMV delivered triple-digit growth, up 109% from the year-ago first quarter, said Finkelstein.

Helping Firms Manage Tariffs

With a nod to the current fluid state of tariffs, Finkelstein pointed out that the company’s managed markets products give U.S. merchants “more options with our merchant of record service for collecting and remitting duties and taxes while managing other markets independently. This means if new duties are announced, most merchants can achieve compliance within hours.” Separately, earlier this year Shopify made its duties calculation available at checkout for all merchants and as of the end of the quarter, he said, the number of shops actively using this feature nearly doubled since January.

“Later this month, we’ll introduce duty inclusive pricing, allowing merchants to set international prices that include duties in the product price. This ensures transparent pricing from the start and helps customers avoid surprise fees at checkout,” Finkelstein said.

“Shopify Payments continues to be our largest product offering and a key driver. We made great progress in Q1, with payments GMV penetration hitting 64%,” Finkelstein said, as Shopify Payments expanded into new markets in Europe.

Shop Pay Gains Ground

Shop Pay, the rapid checkout feature, saw 57% growth year on year, processing $22 billion in GMV in the quarter.

The Shop App continued its momentum in Q1, hitting over 94% year-over year growth in what Finkelstein termed “native GMV, an impressive acceleration and 84% growth last quarter.”

Additionally, merchants are using Sidekick, the platform’s artificial intelligence (AI) powered assistant, in increasing numbers, he said.

CFO Jeff Hoffmeister said on the call that GMV was driven by same-store sales growth of existing merchants, growth in the Shopify merchant base globally and “continued strength in Europe, which grew 36% from both strong same-store sales growth and new merchant acquisition with same-store sales growth being a larger contributor this quarter.” There’s been particular strength in categories such as health and beauty, home and garden and food and beverage, he said.

Hoffmeister said that amid the trade and tariff volatility, “certain sectors or segments will require more time to address their supply chains in this environment, but many others also represented on Shopify can move more quickly, mitigating some of the impact to Shopify from these disruptions. Merchants’ pivots in response to trade concerns are wide ranging, including decisions on inventory strategies, pricing changes and sourcing selections.”

He said later in the call that in the U.S. more than half of the buyer base “skews towards higher income consumers with more than half of their buyers in the U.S. having income exceeding $100,000/ We believe this helps insulate our merchants from some of the potential swings in pricing or other market factors as  higher income consumers tend to be less price sensitive.”

The company expects current quarter revenues to grow in the mid 20% range year over year. As lower margin payment products are part of the mix, he said, gross dollar profit growth will come in at a rate lower than revenues; non-cash charges will also factor into margin impact.

During the Q and A with analysts, and asked about the current environment, Hoffmeister said that “we’re roughly a month into the escalation of tariffs, and we continue to see strength in GMV. As we look at the guidance we gave in Q2, it obviously assumes continued strong performance.”