Shopify expects strong holiday revenue, costs dent quarterly profit

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(Reuters) -Shopify projected strong revenue growth for the crucial holiday shopping season on Tuesday, but U.S. shares of the Canadian e-commerce platform fell about 3% premarket after its third-quarter profit took a hit from higher costs.

The company has spent heavily on the research and development of artificial intelligence features and upgrades designed to make it easier for sellers to manage their businesses on the platform.

That, along with increased marketing costs, resulted in a 25.5% jump in operating expenses in the quarter that pulled down net income to $264 million from $828 million a year ago.

But Shopify’s efforts have kept merchants returning despite pressures from U.S. tariffs and concerns around shaky consumer spending. Gross merchandise volume (GMV) – the total value of products sold on the platform – rose 32% to $92.01 billion in the quarter.

The new features have been especially helpful for the small- and medium-sized businesses that make up a large portion of Shopify’s client base, as they can save on costs by turning to AI for tasks such as setting up discounts or creating sales reports.

Shopify has also been working to get big brands such as Tom Ford fragrances maker Estée Lauder, footwear maker Aldo and Kim Kardashian’s Skims clothing line to sign up for its services.

It expects revenue to rise in the mid-to-high-twenties percentage range in the fourth quarter, compared with analysts’ average estimate for a 23.4% increase, according to data compiled by LSEG.

The company reported total revenue of $2.84 billion for the third quarter ended September, compared with estimates of $2.76 billion.

(Reporting by Deborah Sophia in Bengaluru; Editing by Devika Syamnath)