Shopify Inc. gained as the Canadian e-commerce company reported revenue that beat analysts’ expectations after adding more avenues for merchants to sell and promote their products.

Revenue was US$1.4 billion in the third quarter, the Ottawa-based company said in a statement Thursday. That exceeded expectations for US$1.3 billion, according to the median of analyst estimates compiled by Bloomberg. Shopify reported a loss of 2 cents per share on an adjusted basis, compared with estimates of a seven cent loss.

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The U.S.-traded shares closed 17.3 per cent higher, the biggest increase since May.

The better-than-expected results suggest Chief Executive Officer Tobi Lutke’s changes to cope with a tough retail environment, including job cuts and measures to improve services for small-business customers, may be starting to bear fruit. The company nevertheless has a long path to a full recovery, with the shares down more than 75 per cent in the year through Wednesday amid strains from the return of in-person shopping and pressure on consumer spending from high inflation. 

The report may counter some of the gloom this week across the tech sector after heavyweights Meta Platforms Inc., Alphabet Inc. and Microsoft Corp. announced results that disappointed investors, triggering a stock selloff across the industry. 

However, Shopify is still coping with the CEO’s misplaced bet that a surge in pandemic-era online shopping marked a permanent change in habits. Lutke acknowledged in July that the company’s rapid expansion during Covid was unsustainable, and the company said it would cut about 10 per cent of its workforce. 

“Shopify’s better-than-expected sales versus consensus across all business units could mean that the company is past the toughest comparisons to a much stronger 2021,” Anurag Rana, Bloomberg Intelligence analyst, said in a note. “Its results give us confidence that 2023 sales growth may be higher than 2022, fueled not only by smaller merchants, but also by increased migration of larger retailers from older software platforms to Shopify.”

Shopify said in the third quarter gross merchandise volume, which represents total sales from Shopify vendors, was US$46.2 billion, missing analysts’ estimates of US$46.8 billion. It projected an adjusted operating loss for the full year, and the fourth quarter loss will be about the same as that in the third. Currency headwinds from a stronger U.S. dollar, higher inflation and rising interest rates will all weigh on consumer spending, the company said. 

Lutke has been spending for future growth, acquiring delivery startup Deliverr Inc., which provides two-day delivery services for companies including Amazon.com Inc. and Walmart Inc., for US$2.1 billion in May to help it build a fulfillment network. The idea is to offer another revenue-generating service that will complement the company’s subscription software. While the strategy will squeeze operating margins in the short term, that pressure could ease next year as the efforts start to pay off, Rana wrote in a note before Thursday’s report.

The earnings statement highlighted the launch of Shopify’s digital payments in more European countries and its lending system in Australia. The e-commerce firm also introduced Shopify Markets Pro in September, a feature that provides select merchants tools to manage international transactions.

Shopify said Thursday merchant solutions, which includes services such as payments, lending and shipping, gained 26 per cent to US$990 billion. The division accounts for more than 70 per cent of revenue.

Its concerns on inflation come as other e-commerce companies are set to report, with Amazon issuing its statement after the market close. With the year-end holiday season approaching, there’s a risk that big discounts to spur spending by price-conscious consumers will weigh on retailers’ earnings.