Should You Buy, Sell or Hold Shopify Stock Before Q2 Earnings?

Shopify SHOP is scheduled to report its second-quarter 2025 results on Aug. 6.

For the to-be-reported quarter, Shopify expects revenues to grow at a mid-twenties percentage rate on a year-over-year basis.

The Zacks Consensus Estimate for revenues is currently pegged at $2.54 billion, suggesting growth of 24.25% from the year-ago quarter’s reported figure.

The consensus mark for earnings is pegged at 28 cents per share, unchanged over the past 30 days and indicating 7.69% growth from the figure reported in the year-ago quarter.

SHOP’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing in the remaining one, the earnings surprise being 14.87%, on average. 

Shopify Inc. Price and EPS Surprise

Shopify Inc. price-eps-surprise | Shopify Inc. Quote

Let’s see how things have shaped up prior to this announcement.

Key Factors to Note for SHOP’s Q2

Shopify is benefiting from strong growth in its merchant base, a trend that will likely be reflected in second-quarter results. Gross Merchandise Volume (GMV) in the first quarter of 2025 was $74.75 billion, which increased 22.8% year over year. Same-store sales growth from existing merchants, a higher number of merchants on SHOP’s platform, and strong international growth drove GMV. These same factors are expected to have driven GMV growth in the to-be-reported quarter as well. 

Shopify’s ability to consistently deliver GMV growth of more than 20% for seven consecutive quarters underscores the strength of its platform and its ability to support merchants in scaling their businesses. The Zacks Consensus Estimate for second-quarter 2025 GMV is currently pegged at $81 billion, indicating 20.8% year-over-year growth.

Growing usage of Shop Pay is expected to have benefited Shopify in the to-be-reported quarter. New launches like Shopify Balance for Plus, next-day payouts, and availability of flexible payment options in Shopify Credit are expected to have improved cash flow management, driving more merchant adoption of Shopify solutions. 

Shopify’s focus on AI-powered tools, such as Sidekick and tariffguide.ai, is expected to have enhanced merchant efficiency and adaptability, supporting growth.

However, challenging macroeconomic uncertainties, persistent inflation, and cautious consumer spending are headwinds. Ongoing tariff uncertainties also remained a concern.

SHOP Shares Outperform Sector, Industry

SHOP shares have gained 11.5% year to date (YTD), outperforming the Zacks Computer & Technology sector’s rise of 9.1% and the Zacks Internet Services industry’s growth of 1.4%.

Shopify shares have outperformed industry peers, including Alphabet GOOGL and Eventbrite EB. YTD, Alphabet and Eventbrite shares lost 0.1% and 31.9%, respectively.

SHOP Stock Performance

Shopify Trading at a Premium

However, the Value Score of F suggests a stretched valuation for Shopify at this moment.

SHOP stock is trading at a premium with a forward 12-month Price/Sales of 12.74X compared with the industry’s 5.14X, Alphabet’s 6.40X, and Eventbrite’s 0.67X.

SHOP Valuation

SHOP Stock to Ride Higher on Strong Merchant Base

Shopify’s long-term prospects are strong, given its growing merchant base and expanding partner base. Merchant solutions revenues in the first quarter were $1.74 billion and accounted for 73.7% of Shopify’s total revenues. On a year-over-year basis, merchant revenues increased 29%, driven by strong GMV and increased penetration of Shopify payments. 

Shopify’s rich partner ecosystem that includes TikTok, Roblox, PayPal, Snap, Pinterest, Criteo, IBM, Cognizant CTSH, Alphabet’s cloud computing platform Google Cloud, and Adayen, is expected to expand its merchant base further in the to-be-reported quarter.

SHOP’s partnership with Cognizant and Alphabet’s Google Cloud aims to help retailers modernize their commerce platforms and deliver personalized, real-time shopping experiences. Combining Shopify’s platform, Alphabet’s cloud computing platform, Google’s cloud technology, and Cognizant’s expertise, this partnership supports retailers in scaling globally and unlocking new business value through advanced technologies like generative AI. Benefits from this partnership are likely to have been reflected in the to-be-reported quarter’s performance.

In its commerce integration partnership with Roblox, Shopify has opened new avenues for merchants to reach a younger and more engaged audience. This collaboration with Roblox allows Shopify to strengthen its position in the digital commerce space.

Conclusion

SHOP is benefiting from strong growth in its merchant base and expanding footprint. Its focus on improving its client base is a key catalyst.

Shopify currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research