Revenue and profits
Revenue for the Merchant Solutions segment increased 31% year-over-year, driven mainly by higher GMV and the continued penetration of Shopify Payments. Revenue from Subscription Solutions rose 11% YoY, driven by growth in Plus subscriptions.
On a GAAP basis, Shopify reported EPS of $0.05 in Q1 2023 compared to a loss of $1.17 per share last year. Adjusted EPS dropped 50% YoY to $0.01 but managed to surpass expectations.
GMV/GPV growth
Shopify recorded strong growth in gross merchandise volume and gross payment volume (GPV) in the first quarter. In Q1 2023, Shopify’s GMV increased 15% to $50 billion versus the year-ago quarter. This growth was driven by resilience in consumer spending, existing merchant same-store sales growth and growth in merchant base. Total attach rate, which is revenue divided by GMV, rose to 3.04% from 2.79% last year.
Gross payments volume grew to $27.5 billion, or 56% of GMV processed, in Q1 from $22 billion, or 51%, in the year-ago period. This growth was driven by the strong performance of merchants using Shopify Payments, new merchant adoption worldwide, greater penetration of Shop Pay, and the growth of Shopify’s integrated Point-of-Sale solution in physical retail stores.
Margins
In Q1, Shopify’s gross margin dropped to 47.5% from 53% last year. Margins were impacted mainly by the dilutive effect of Deliverr, and also by Merchant Solutions forming a larger portion of the business. Within Shopify Payments, the greater mix of Plus as well as the higher mix of credit cards versus debit cards put pressure on gross margins. The company’s operating expenses grew 24% YoY in Q1.
Outlook
For the second quarter of 2023, Shopify expects its revenues to grow at a similar rate to the first quarter. It expects the pricing changes that were just rolled out to be counterbalanced by the pending sale of the logistics business. Gross margin percentage is expected to be similar to Q1 with the continued growth of Shopify Payments, a low-margin business. Operating expense dollars are expected to decrease by a mid-single digit percentage compared to the first quarter.