Shopify Benefits From Growing Merchant Base: Should You Buy or Wait?

Shopify SHOP is benefiting from its strong growth in its merchant base. New merchant-friendly tools, such as Shop Minis, Shop Cash, and Sign in with Shop, as well as Shop Pay solutions, helped the company win merchants regularly. Strong adoption of these solutions holds promise for Shopify’s prospects. 

This growing adoption is reflected in Shopify’s financial performance. Merchant solutions revenues in the second quarter were $2.02 billion and accounted for 75.5% of Shopify’s total revenues. On a year-over-year basis, merchant revenues increased 36.6%, driven by strong Gross Merchandise Volume (GMV) and increased penetration of Shopify payments. GMV in the second quarter was $87.84 billion, which increased 30.6% year over year. 

The strong fundamentals have also been reflected in the stock’s performance. Shopify shares have gained 33% in the year-to-date period compared with the broader Zacks Computer & Technology sector’s increase of 13.8%. The Zacks Internet - Services industry has increased 9% in the same time frame.

SHOP Stock's Performance

SHOP Benefits From an Expanding Portfolio and AI Growth

SHOP’s expanding portfolio has been a major growth driver for its success. Its merchant-friendly tool Shop Pay stands out as a key driver. The app processed $27 billion in Gross Merchandise Value in the second quarter of 2025, up 65% year over year. 

Shopify’s international expansion is another key driver of its growing merchant base. The company’s second-quarter 2025 results revealed that international GMV grew 42% year over year, with Europe leading the charge. This growth is fueled by both new merchants joining the platform and existing merchants outperforming their respective e-commerce markets.

Shopify is at the forefront of agentic commerce, leveraging AI to transform how consumers discover and shop for products. The company’s investment in AI-driven tools, such as Catalog, Universal Cart, and Sidekick, helped merchants improve customer engagement and streamline operations.

A Rich Partner Base Aids SHOP’s Prospects

Shopify’s rich partner ecosystem has been a major growth driver. An expanding partner base, which includes Microsoft MSFT, TikTok, Roblox RBLX, PayPal, Snap, Pinterest, Criteo, IBM, Cognizant, Alphabet’s cloud computing platform Google Cloud, and Adayen, has further expanded its merchant base.

Shopify’s partnership with Microsoft has been noteworthy. The partnership with Microsoft involves the integration of Shopify’s Checkout Kit into Microsoft’s Copilot, a major player in the AI space. This integration allows merchants to embed their checkout process directly within Microsoft’s AI-driven platform, enabling seamless shopping experiences for users. 

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.

In the second quarter of 2025, Shopify signed iconic brands like Starbucks, Canada Goose, and Burton Snowboards, highlighting Shopify’s ability to cater to diverse industries. Other notable additions included Michael Kors, Miele, Beachbody, and Signet Jewelers, which reflect Shopify’s rising popularity.

SHOP Suffers From Stiff Competition

Despite SHOP’s strong growth in its merchant base and expanding footprint, it is facing stiff competition in the e-commerce marketplace against the likes of Amazon AMZN and Alibaba.

Amazon is expanding its footprint in the e-commerce space by continuously expanding its product offerings. In the second quarter of 2025, Amazon launched generative AI tools to enhance the shopping experience, including “Hear the highlights” for audio summaries of reviews and “Enhance My Listing” to keep product listings current and compelling.

SHOP’s 2025 Earnings Estimates Revisions Are Steady

The Zacks Consensus Estimate for SHOP’s 2025 earnings is currently pegged at $1.44 per share, which has increased 2.8% over the past 30 days and indicates year-over-year growth of 10.77%.

The consensus mark for SHOP’s 2025 revenues is currently pegged at $11.21 billion, indicating year-over-year growth of 26.24%.

Shopify Inc. Price and Consensus

Shopify Inc. price-consensus-chart | Shopify Inc. Quote

SHOP Stock Overvalued

SHOP stock is currently overvalued, as the Value Score of F suggests a stretched valuation at this moment.

The stock is trading at a premium, with a forward 12-month Price/Sales of 14.50X compared with the Internet - Services industry’s 5.49X.

Price/Sales (F12M)

Conclusion: Hold SHOP Stock for Now

SHOP is benefiting from strong growth in its merchant base and expanding footprint. Its focus on improving its client base is a key catalyst. Hence, investors who already own the stock may expect the company’s growth prospects to be rewarding over the long term. 

However, stiff competition, challenging macroeconomic uncertainties, persistent inflation, and cautious consumer spending are headwinds.

In the second quarter of 2025, Shopify also faced gross margin pressure due to higher hosting costs, the return to three-month paid trials, and the expanded PayPal partnership, which carried lower margins. Stretched valuation also remains a concern.

Shopify currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable time to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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