(Bloomberg) -- Shopify Inc. tumbled after the e-commerce company’s projected free cash flow disappointed investors, overshadowing a strong holiday shopping season performance.

The Canadian e-commerce company said it expects free-cash flow margin to be in the mid-teens in the first quarter, with operating expenses in the low 40% range. The shares were down nearly 8% in premarket trading to $110.58 as of 7:45 a.m. New York time. 

“Shopify’s stronger-than-expected 4Q sales growth was eclipsed by below-consensus guidance for mid-teens free cash flow growth in 1Q, which we don’t see as a major issue given the timing of investments,” Bloomberg Intelligence analysts Anurag Rana and Andrew Girard wrote. 

Shopify’s revenue in the fourth quarter increased 31% to $2.8 billion, ahead of the $2.73 billion analysts were expecting. The company earned 44 cents a share on an adjusted diluted basis, slightly above analysts’ estimates, according to data compiled by Bloomberg.

“Q4 marks our seventh consecutive quarter of 25% or greater revenue growth when excluding logistics,” Chief Financial Officer Jeff Hoffmeister said in a news release. The company also grew its free cash flow margin in every quarter of 2024, hitting 22% by the end of the year, he added.

Shopify’s operating income for 2024 was $1.1 billion, compared with an operating loss of $1.4 billion the year prior. 

Revenue in the first quarter should grow in the mid-20% range over the same period last year, the company said, roughly in line with what analysts were looking for. 

Shopify has begun trying to lure larger companies such as Mattel Inc. to its e-commerce platform, betting that the order volume generated by bigger retailers will help it grow more than quickly than relying on its existing base of mostly mom-and-pop firms. 

Gross merchandise volume, the overall value of merchant sales across Shopify’s systems, was $94.5 billion, beating Wall Street projections of $93 billion. Annual growth for the metric was 24%, “marking our highest GMV growth in three years,” Hoffmeister said.

--With assistance from Melissa Shin.

(Updates with additional details, including EPS, beginning in the third paragraph.)

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