Can Shopify's Expanding Merchant Base Sustain Its Growth Momentum?

Shopify SHOP is benefiting from robust growth in its merchant base driven by its merchant-friendly tools, including Shop Pay, Shopify Pay Instalments, Sign in with Shop and the Shop App. The strong adoption of these solutions holds promise for Shopify’s prospects.

In the first quarter of 2025, Merchant Solutions’ revenues 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 Gross Merchandise Volume and increased penetration of Shopify payments. 

Among these offerings, Shop Pay stands out as a key driver of this momentum. The app processed $22 billion in Gross Merchandise Value in the first quarter of 2025, up 57% year over year. Large brands like Birkenstock, Lilly Pulitzer, and Johnny were adopted by Shop Pay, enhancing Shopify’s portfolio.

Shopify’s investment in AI-driven tools, such as Shopify Sidekick, tariffguide.ai and Shop Inbox, is helping merchants improve customer engagement and streamline operations. By leveraging AI, Shopify enhances its platform’s power and user-friendliness.

An expanding partner base that includes TikTok, Snap, Pinterest, Criteo, IBM, Cognizant, Amazon, PayPal, Roblox, YouTube, Target, Manhattan Associates, COACH, Oracle and Adyen is expected to expand its merchant base further.

SHOP Faces Stiff Competition From AMZN and BABA

Shopify is facing stiff competition in the e-commerce marketplace against the likes of Alibaba BABA and Amazon AMZN.

Alibaba’s ecosystem approach provides multiple revenue streams and cross-selling opportunities. Customer management revenues at Taobao and Tmall grew 12% year over year, reflecting improved monetization and merchant engagement. 

In 2025, Alibaba announced that Taobao and Tmall Group have strengthened their partnership with lifestyle content platform Xiaohongshu, enabling merchants to embed product links from their Taobao and Tmall stores directly into Xiaohongshu content posts.

Amazon’s “Buy with Prime”, which combines its payments and fulfillment services and makes them available at checkout on other websites and promises faster delivery for Prime members, intensifies competition for Shopify. In the first quarter of 2025, Amazon set new delivery speed records for Prime members and delivered more items same-day or next-day than in any previous quarter.

SHOP’s Share Price Performance, Valuation and Estimates

Shopify shares have surged 8.3% year to date (YTD), outperforming the broader Zacks Computer & Technology sector’s return of 2.4%. The Zacks Internet Services industry declined 3.9% in the same time frame.

SHOP Performance

SHOP stock is trading at a premium, with a forward 12-month Price/Sales of 12.14X compared with the industry’s 5.31X. SHOP has a Value Score of F.

SHOP Valuation

The Zacks Consensus Estimate for second-quarter 2025 earnings is pegged at 28 cents per share, which has decreased by a penny over the past 30 days, indicating a 7.69% increase year over year.

Shopify Inc. Price and Consensus

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

The consensus mark for 2025 earnings is pegged at $1.40 per share, unchanged over the past 30 days, suggesting 7.69% year-over-year growth.

SHOP 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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