SHOP's Subscription Growth Accelerates: A Stable Driver of Revenues?

Shopify SHOP continues to strengthen its long-term revenue base through its expanding Subscription Solutions segment, which contributed 24.6% of total revenues in the third quarter of 2025.

Subscription Solutions revenues climbed 14.6% year over year to $699 million, supported by strong demand for higher-priced plans and sustained merchant engagement. Monthly Recurring Revenues increased 10.3%, supported by the continued expansion of Shopify Plus, now 35% of MRR.  The growing contribution from Plus is significant, as these higher-tier merchants deliver stronger ARPU, multi-store needs and long-term stickiness — creating a recurring revenue base.

Shopify benefits from steady subscription income, driven by reliable plans and loyal users, reducing revenue volatility. Subscription Solutions continues to deliver gross margins in the 80% range, providing solid operating leverage even as the company ramps up investments in AI capabilities, product enhancements and international expansion. This momentum is further supported by the broader subscription e-commerce market, which is projected to grow to $6.88 trillion by 2032, according to Fortune Business Insights, supporting Shopify’s long-term growth opportunity.

However, subscription growth faces short-term headwinds. The company is lapping prior Plus pricing changes and extended trial periods, which affect year-over-year comparisons. Higher hosting costs, geographic expansion and increased AI usage also put mild pressure on subscription margins, which dipped slightly to 81.7% on a year-over-year basis.

Still, Shopify expects overall revenues to rise in the mid-to-high 20% range in the fourth quarter of 2025, reinforcing that its subscription business remains a stable, strategically important driver of long-term revenue visibility.

Shopify Confronts Rising Competition

The competitive intensity in e-commerce remains high for Shopify, with Commerce.com CMRC and eBay Inc. EBAY standing out as key challengers.

Commerce.com, the newly rebranded parent company behind BigCommerce, Feedonomics and Makeswift, is sharpening its competitive edge in the modern e-commerce landscape. A central part of Commerce.com’s strategy is its commitment to providing flexible, enterprise-grade subscription solutions, which drives recurring base revenues. In the third quarter of 2025, Subscription Solutions revenues reached $64.7 million, representing a 3% year-over-year increase and a sequential improvement.

eBay is a direct competitor to Shopify in the e-commerce space. Unlike Shopify’s merchant-owned storefront model, eBay operates a large third-party marketplace. Serving both individuals and businesses, eBay spans new, used and collectible goods, supported by a highly engaged buyer base. The company delivered another strong third quarter, with GMV rising 10% to $20.1 billion and active buyers reaching 134 million as of September 2025, highlighting eBay’s sustained strength and influence in the e-commerce market.

SHOP’s Share Price Performance, Valuation & Estimates

Shopify shares have jumped 39.4% year to date, outperforming the broader Zacks Computer and Technology sector’s return of 21.5%. However, the stock has trailed the Zacks Internet Services industry, which has rallied 47.2% over the same period.

SHOP’s YTD Price Performance

Shopify stock is overvalued, with a forward 12-month price/sales of 13.91X compared with the broader sector’s 6.61X. SHOP has a Value Score of F.

SHOP’s Valuation

The Zacks Consensus Estimate for 2025 earnings is pegged at $1.46 per share, up a penny over the past 30 days. This suggests 12.31% year-over-year growth.

Shopify currently carries a Zacks Rank #3 (Hold). 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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