eCommerce technology platform Shopify (NASDAQ:SHOP) delivered impressive returns in 2025 but largely stalled out late in the year. With millions of merchants using its services and strong revenue growth still holding, Shopify is among the undisputed majors of the eCommerce world. Is Shopify a good stock to buy now, or will the pressures that kept the stock stuck in the late months of 2025 persist into 2026?
Shopify’s Revenues Grew 32%
Although the business has been around for quite some time, Shopify is still delivering very strong revenue growth that has powered the stock’s returns over the last 12 months. In Q3 of 2025, the most recently reported quarter, Shopify’s revenues rose 32 percent on a year-over-year basis to $2.84 billion. GMV also increased by 32 percent, rising to $92.01 billion. It’s also worth keeping in mind that Shopify’s revenue growth has been a long-term trend, with 12-month revenue totals rising from under $5 billion as recently as 2020 to nearly $9 billion in the last 12 reported months.
Free cash flow has been another major positive for Shopify. The 18 percent FCF margin the business achieved in Q3 marked the ninth consecutive quarter in which Shopify was able to deliver double-digit FCF margins. Total FCF rose to $507 million from $421 million in the year-ago quarter, a gain of 20.4 percent. While Q4’s results haven’t yet been released, guidance from the Q3 report called for an FCF margin slightly higher than what Shopify delivered in Q3.
Although revenue and free cash flow have expanded heavily, Shopify has seen its net income decrease substantially over the last year. While Q3’s net income, excluding equity investments, totaled $264 million, this was a sharp drop from the $828 million it reported in the year-ago quarter. Even so, Shopify’s trailing 12-month net margin remains fairly respectable at 16.7 percent, closely tracked by an ROIC of 14.1 percent and an ROE of 15.5 percent.
Shopify’s Moat Widens with Tech
Shopify is a major force in eCommerce technology, particularly among small and medium-sized businesses. Shopify commands a roughly 28 percent market share in the US and is used by nearly 7 million online stores worldwide. While a bit over half of these stores are located in the United States, Shopify serves merchants in over 170 countries.
Shopify has also worked its way into virtually every aspect of online business, becoming a go-to for everything from fulfillment to financial management. By providing a large range of products and services, Shopify not only makes itself an integral part of its merchants’ business operations but also increases the revenue from its merchant customers.
Though small businesses represent a very large part of Shopify’s overall market, it’s worth noting that the platform is also used by several large and prominent brands. Large brands that use Shopify include the likes of Huel and Red Bull, while such large media outlets as The New York Times and even Wikipedia use the platform for online sales. These large customers give Shopify a strong, solid revenue base, and the many smaller businesses that rely on its services give it diversified exposure both geographically and across industries. Paired with its large portfolio of online business services and large existing market share, this gives Shopify what appears to be a fairly strong competitive moat around its business.
Can Shopify Justify Its High Price Tag?
Despite its extremely promising fundamentals, Shopify is trading at a price that could deter some value-oriented investors. SHOP is currently priced at 122.1 times its trailing 12-month earnings and 20.3 times sales. At $168.28, the stock has also risen to nearly the analyst consensus price target of $177.47, leaving just 5.5 percent of implied upside remaining. Analysts are roughly split on SHOP at the moment, with 24 rating it as a buy, 20 rating it as a hold and only one rating it as a sell.
This valuation does, however, become a bit more palatable when one considers the potential EPS growth that Shopify could experience over the coming few years. 3-5 year estimates call for EPS growth of about 41 percent annually. Starting from the trailing 12-month EPS of $1.37, Shopify would be delivering roughly $7.65 per share if it maintains this growth rate for the next five years. While this growth estimate may prove overly optimistic, Shopify still seems to have at least a chance of growing enough to match its premium price tag.
Direct Integration to ChatGPT a Win
Like most tech businesses, Shopify is already leveraging AI in various products. The real game-changer for Shopify, however, could be direct integration into ChatGPT. In September, OpenAI and Shopify announced that they were partnering to make it possible for ChatGPT users to buy from Shopify merchants without having to leave the chatbot app.
While the potential impacts from this arrangement could be quite positive as more consumers turn to AI to replace or supplement traditional search engines, it’s not yet clear how much ChatGPT will contribute to Shopify’s revenue growth. Affiliation with OpenAI also appears to be a factor in the stock’s rather high price tag, a phenomenon that has become increasingly common across American tech stocks.
Is Now the Time to Buy Shopify?
With its competitive moat, current profitability, strong growth potential and ability to generate large amounts of free cash flow, Shopify is, in many respects, a very appealing business. The main problem facing SHOP at the moment is its valuation, which may have risen to a point where so much future growth is already priced in that pressure could be put on future returns.
To some degree, this view seems to have set in among institutional investors. Since May of last year, institutional selling has consistently outpaced institutional buying. Though the stock has appreciated over that time, returns have also stalled out somewhat in recent months, with the 3-month trailing return currently standing at just 3.4 percent.
At the moment, SHOP may be a bit too expensive to entice investors as a buy. Even so, the business’s qualities likely make Shopify worth watching for better entry points during future price dips or periods when the valuation compresses to a somewhat more reasonable level.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.