Key Takeaways
- Shopify shares fell 15% after third-quarter GMV and subscription revenue missed estimates, though revenue grew 32%.
- The business had a solid quarter, and the stock fell because revenue growth landed inside guidance for once.
- PayPal’s quarter shows no crack in online spending, and Affirm’s Thursday report will show how Shop Pay Installments held up.
- Fourth-quarter guidance has gross profit growing more slowly than revenue again.
Shopify (SHOP) sank 15% today after its third-quarter GMV and subscription revenue came in short of Wall Street’s estimates. That’s going to matter as well for Affirm (AFRM), which powers Shop Pay Installments, and PayPal (PYPL), which lives on the same online spending.
President Harley Finkelstein said in the release that Shopify is “uncommonly good at operating in two realities at the same time.”
Investors cared about one reality today: a stock up 35% this year needed a beat.
The misses were small
- Revenue grew 32% to $3.74 billion, matching consensus.
- GMV rose 29% to $119.1 billion, against the $120.1 billion analysts expected.
- Subscription revenue grew 20% to $836 million, below the $850 million estimate.
Both misses were under 2%, and operating income jumped 66% to $568 million. The bigger change: Shopify guided to low-thirties revenue growth and delivered 32%, after topping its range in each of the three quarters before.
Analysts expect revenue to more than double from 2025 to 2028.
Their $15.3 billion for 2026 is 32% growth, in line with this quarter and the fourth-quarter guide, so I don’t see much here to move those estimates.
Gross profit lags revenue again
Gross profit grew 28%, as merchant solutions revenue (up 35%) outgrew subscriptions. Its gross margin slipped from 51.7% to 47.7% over the eight quarters to June.
It was 47.6% in the third quarter, from 48.9% a year earlier, and the fourth-quarter guide has gross profit growing in the high twenties against revenue’s low thirties. Spending covers the gap: operating expenses fell to 32% of revenue from 37% a year earlier.
TIKR tracks 54 analysts on Shopify. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Shopify, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Shopify’s Analyst Ratings
No sign online spending cracked
PayPal’s payment volume grew 6% in the third quarter, and it raised its full-year guidance. Shopify’s GMV grew nearly five times as fast, so the miss is about Wall Street’s bar for Shopify.
Affirm reports Thursday, after 37% GMV growth in its fiscal year to June 30. With Shopify’s GMV still up 29%, I’d expect Shop Pay Installments volume to hold up.
A cheaper stock, same business
Shopify traded at 74x forward earnings at Monday’s close, near its average since late 2023, for a business that still hadn’t grown into its multiple. Today’s drop takes it to about 63x, close to its June 30 low of 60x.
At that price, Shopify only has to hit its guidance, and I like that setup a lot better than yesterday’s.
Of course, if February’s report only matches a low-thirties guide again, the multiple could fall further.
So what is Shopify stock actually worth?
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