It has been about a month since the last earnings report for Shopify (SHOP). Shares have lost about 1.8% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Shopify due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for Shopify Inc. before we dive into how investors and analysts have reacted as of late.
Shopify Q3 Earnings Meet Estimates, Revenues Increase Y/Y
Shopify reported third-quarter 2025 non-GAAP earnings of 34 cents per share, in line with the Zacks Consensus Estimate. The bottom-line figure declined 5.6% year over year.
Revenues of $2.84 billion surpassed the Zacks Consensus Estimate by 3.34%. The top line soared 31.5% year over year.
SHOP’s Top Line Rides on Growing Merchant Base
Gross Merchandise Volume (GMV) in the third quarter was $92.01 billion, which increased 32% year over year. Offline GMV increased 31% year over year while B2B GMV jumped 98%. International GMV grew 41% year over year, with Europe’s GMV increasing 49% year over year (42% on a constant currency basis).
Shopify is benefiting from strong growth in its merchant base. Merchant solutions revenues in the third quarter were $2.15 billion and accounted for 75.4% of Shopify’s total revenues. On a year-over-year basis, merchant revenues increased 38.2%, driven by strong GMV and increased penetration of Shopify payments.
Shopify Payments’ GMV penetration hit 65% in the third quarter of 2025. Shop Pay GMV increased 65% year over year to $29 billion in GMV. Shop App native GMV jumped 140% year over year.
Subscription solutions revenues in the third quarter were $699 million and accounted for 24.6% of Shopify’s total revenues. On a year-over-year basis, subscription solutions revenues increased 14.6%.
Monthly Recurring Revenue (MRR) in the third quarter was $193 million, which increased 10.3% on a year-over-year basis. Plus category accounted for 35% of MRR in the reported quarter.
SHOP’s Q3 Operating Details
In the third quarter of 2025, gross profit was $1.39 billion, up 24.4% year over year. Gross margin contracted 280 basis points (bps) year over year to 48.9% due to unfavorable mix shift from Subscription Solutions to Merchant Solutions and strong results from the low-margin payments business.
Subscription Solutions’ gross profit grew 14% year over year, while Merchant Solutions’ gross profit grew 33%. Subscription Solutions’ gross margin was 81.7% down slightly on a year-over-year basis due to higher hosting costs needed to support growing merchant transaction volumes and SHOP’s continued geographic expansion, as well as higher AI usage. Merchant Solutions’ gross margin contracted 150 bps to 38.2%.
Total operating expenses were $1.05 billion, up 25.5% year over year. Sales & Marketing (S&M) expenses increased 24% year over year to $410 million. Research & Development (R&D) expenses increased 13% year over year to $375 million. General & Administrative (G&A) expenses inched up 0.9% year over year to $115 million.
However, as a percentage of revenues, total operating expenses declined 180 bps to 36.8%. S&M expenses as a percentage of revenues decreased 90 bps year over year to 14.4%. As a percentage of revenues, R&D expenses decreased 220 bps year over year to 13.2%. As a percentage of revenues, G&A expenses decreased 120 bps to 4%.
Consequently, SHOP reported an adjusted operating income of $465 million, up 15.7% year over year. Operating margin contracted 220 bps year over year to 16.4%.
SHOP’s Balance Sheet Details
As of Sept. 30, 2025, cash and cash equivalents (including marketable securities) totaled $6.35 billion, which increased from $5.82 billion as of June 30.
Free cash flow increased 20.4% year over year to $507 million. The free cash flow margin contracted 100 bps year over year to 18% in the reported quarter.
SHOP's Q4 Guidance Details
For the fourth quarter of 2025, Shopify expects revenues to grow in the mid-to-high twenties percentage rate on a year-over-year basis.
Gross profit is anticipated to grow at a low-to-mid-twenties percentage rate on a year-over-year basis.
Shopify expects GAAP operating expense as a percentage of revenues to be in the 30-31% range.
Free cash flow margin is expected to be slightly above the third quarter of 2025’s reported figure.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in fresh estimates.
VGM Scores
Currently, Shopify has a average Growth Score of C, a score with the same score on the momentum front. However, the stock has a grade of F on the value side, putting it in the lowest quintile for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Shopify has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Shopify is part of the Zacks Internet - Services industry. Over the past month, Alphabet Inc. (GOOG), a stock from the same industry, has gained 12.6%. The company reported its results for the quarter ended September 2025 more than a month ago.
Alphabet reported revenues of $87.47 billion in the last reported quarter, representing a year-over-year change of +17.3%. EPS of $2.87 for the same period compares with $2.12 a year ago.
Alphabet is expected to post earnings of $2.58 per share for the current quarter, representing a year-over-year change of +20%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.3%.
Alphabet has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Shopify Inc. (SHOP): Free Stock Analysis Report Alphabet Inc. (GOOG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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