Shopify Inc. (SHOP): A Bull Case Theory

We came across a bullish thesis on Shopify Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on SHOP. Shopify Inc.'s share was trading at $138.92 as of January 28th. SHOP’s trailing and forward P/E were 102.15 and 72.99 respectively according to Yahoo Finance.

Shopify Inc., a commerce technology company, provides tools to start, scale, market, and run a business of various sizes in Canada, the United States and internationally. Shopify’s Q3 2025 results reflected strong top-line momentum and continued execution, even as margin dynamics remained mixed. Revenue reached $2.84 billion, up 31.5% year over year, driven primarily by Merchant Solutions, which grew 38% as payments penetration, Shop Pay adoption, and international activity accelerated.

GMV rose 32% to $92 billion, with GPV climbing nearly 44% and now representing 67% of GMV, underscoring Shopify’s expanding role in transaction processing. Subscription Solutions delivered steadier growth of 15%, supported by higher-tier plan adoption and variable platform fees, while maintaining an industry-leading 81.7% gross margin despite modest pressure from hosting, global expansion, and AI-related costs.

Profitability remained resilient in absolute dollars but softened on a year-over-year basis. Gross margin declined to 48.9% due to the higher mix of lower-margin payments and increased infrastructure and AI spending. Operating income totaled $343 million, or 12% of revenue, while free cash flow margin reached 18%, continuing a steady improvement trend through 2025.

Importantly, operating expenses fell to 37% of revenue, reflecting flat headcount over two years and rising AI-driven productivity, even as Shopify reinvested heavily in R&D. Stock-based compensation declined as a percentage of revenue, dilution stayed modest, and the company exited the quarter with nearly $6 billion in cash and no debt following the convertible settlement.

Strategically, Shopify continued to deepen its ecosystem. Shop Pay GMV surged 67%, the Shop App evolved into a meaningful discovery and advertising channel, and AI initiatives such as Sidekick and agentic commerce integrations drove sharp increases in AI-attributed traffic and orders. International, offline, B2B, and enterprise adoption all showed strong momentum. Management guided Q4 revenue growth to the mid-to-high 20% range with stable-to-improving free cash flow, reinforcing confidence that Shopify can balance sustained growth, disciplined profitability, and long-term platform expansion despite near-term margin pressures.

Previously, we covered a bullish thesis on Shopify Inc. (SHOP) by Investing Intel’s Substack in May 2025, which highlighted mixed Q1 results, GMV softness, investment write-down–driven losses, and long-term product-led growth despite valuation risks. SHOP’s stock price has appreciated by approximately 36.85% since our coverage due to improving fundamentals and stronger execution. Sergey shares a similar view but emphasizes margin discipline, payments scale, and AI-driven ecosystem expansion.

Shopify Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 91 hedge fund portfolios held SHOP at the end of the third quarter which was 69 in the previous quarter. While we acknowledge the risk and potential of SHOP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SHOP and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.