BigCommerce (BIGC)

E-commerce software platform provider BigCommerce (NASDAQ: BIGC) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 3.2% year on year to $84.43 million. The company expects next quarter’s revenue to be around $86 million, close to analysts’ estimates. Its non-GAAP profit of $0.04 per share was in line with analysts’ consensus estimates.

Company Overview

Founded in Sydney, Australia in 2009 by Mitchell Harper and Eddie Machaalani, BigCommerce (NASDAQ:BIGC) provides software for businesses to easily create online stores.

While e-commerce has been around for over two decades and enjoyed meaningful growth, its overall penetration of retail still remains low. Only around $1 in every $5 spent on retail purchases comes from digital orders, leaving over 80% of the retail market still ripe for online disruption. It is these large swathes of the retail where e-commerce has not yet taken hold that drives the demand for various e-commerce software solutions.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, BigCommerce’s 9.3% annualized revenue growth over the last three years was sluggish. This was below our standard for the software sector and is a poor baseline for our analysis.

This quarter, BigCommerce reported modest year-on-year revenue growth of 3.2% but beat Wall Street’s estimates by 1.3%. Company management is currently guiding for a 2.7% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 4.1% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and implies its products and services will see some demand headwinds.

While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.

BigCommerce’s ARR came in at $354.6 million in Q2, and over the last four quarters, its growth was underwhelming as it averaged 3.6% year-on-year increases. This performance mirrored its total sales and suggests that increasing competition is causing challenges in securing longer-term commitments.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

BigCommerce is quite efficient at acquiring new customers, and its CAC payback period checked in at 35.6 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.

For software companies like BigCommerce, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

BigCommerce’s robust unit economics are better than the broader software industry, an output of its asset-lite business model and pricing power. They also enable the company to fund large investments in new products and sales during periods of rapid growth to achieve outsized profits at scale. As you can see below, it averaged an excellent 78.1% gross margin over the last year. That means BigCommerce only paid its providers $21.94 for every $100 in revenue.

BigCommerce produced a 79% gross profit margin in Q2, marking a 3.2 percentage point increase from 75.8% in the same quarter last year. BigCommerce’s full-year margin has also been trending up over the past 12 months, increasing by 1.6 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as servers).

While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.

BigCommerce’s expensive cost structure has contributed to an average operating margin of negative 8.6% over the last year. Unprofitable software companies require extra attention because they spend heaps of money to capture market share. As seen in its historically underwhelming revenue performance, this strategy hasn’t worked so far, and it’s unclear what would happen if BigCommerce reeled back its investments. Wall Street seems to think it will face some obstacles, and we tend to agree.

Over the last year, BigCommerce’s expanding sales gave it operating leverage as its margin rose by 6.7 percentage points. Still, it will take much more for the company to reach long-term profitability.

This quarter, BigCommerce generated a negative 8% operating margin. The company's consistent lack of profits raise a flag.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

BigCommerce has shown mediocre cash profitability over the last year, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 7.4%, subpar for a software business.

BigCommerce’s free cash flow clocked in at $11.91 million in Q2, equivalent to a 14.1% margin. This result was good as its margin was 1.1 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

Over the next year, analysts predict BigCommerce’s cash conversion will slightly improve. Their consensus estimates imply its free cash flow margin of 7.4% for the last 12 months will increase to 9.1%, it options for capital deployment (investments, share buybacks, etc.).

BigCommerce reported $134.5 million of cash and $166 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $30.97 million of EBITDA over the last 12 months, we view BigCommerce’s 1.0× net-debt-to-EBITDA ratio as safe. We also see its $3.01 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly BigCommerce blew past analysts’ revenue and adjusted operating income expectations this quarter. Overall, this print had some key positives. The stock traded up 5.9% to $5.05 immediately after reporting.

Updated: November 6, 2025 at 9:13 PM EST

Before deciding whether to buy BigCommerce or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We see the value of companies addressing major business pain points, but in the case of BigCommerce, we’re out. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its ARR has disappointed and shows the company is having difficulty retaining customers and their spending. And while the company’s gross margin suggests it can generate sustainable profits, the downside is its operating margins reveal poor profitability compared to other software companies.

BigCommerce’s price-to-sales ratio based on the next 12 months is 1.1x. This valuation multiple is fair, but we don’t have much confidence in the company. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $7.36 on the company (compared to the current share price of $4.99).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.