Key Takeaways
- On October 28, CEO Tobi Lütke said Shop Pay, which he says 400 million people use, now works inside AI agents and at stores not on Shopify.
- None of that reaches the third quarter. Shopify reports before the open on November 3, and 34% growth is the bar after two straight quarters at that pace.
- Free cash flow has outgrown revenue, but AI cloud costs are pulling gross margin down, and management guided gross profit growth below revenue growth.
- The open question is what Shopify earns when Shop Pay checks out at stores off its platform.
Shopify (SHOP) CEO Tobi Lütke wants Shop Pay to be everyone’s checkout. That means stores that don’t run on Shopify, and shoppers who are AI agents rather than people. Meta’s (META) Muse agent already checks out with it.
In a post on X on Wednesday, October 28, the day Shopify released its new Edition, Lütke wrote: “A lot happening with Shop Pay. It works in personal agents and you can use it to check out from stores that aren’t on Shopify.” He added that “400 million people use Shop Pay and now it’s in the hands of developers everywhere.”
That’s a big pitch to make less than a week before Shopify reports third-quarter results, which come before the open on Tuesday, November 3. None of it can show up in that report, so the quarter has to prove the business is keeping pace on its own.
Why Shop Pay Matters to Shopify
Shopify earns most of its money after a shopper decides to buy. Merchant solutions (payment fees, lending and the like) brought in 76% of 2025’s $11.6 billion of revenue, and that line moves with the value of merchants’ orders.
Shop Pay was already the fastest-growing part. Its GMV grew 53% in the second quarter, against 32% for Shopify’s GMV as a whole. That growth has come mostly from Shopify’s own merchants, who management says already account for over 14% of US e-commerce. Shop Pay has worked at some stores off Shopify since 2021, but a Shop Pay that works at any store, or inside an agent, can go after the rest.
The early agent numbers help. Management says AI-driven orders to Shopify stores tripled in the second quarter, and that those orders earn Shopify the same as orders on a merchant’s own store. Muse checks out with Shop Pay at Shopify’s usual Payments rates.
Analysts Already Expect a Lot
The consensus has revenue reaching $15.3 billion this year, up 32% from 2025, and $19.2 billion in 2027.
That full-year figure needs about 31% growth in the second half, after 34% in the first, which sits right at management’s “low 30s” guide for the third quarter. Investors are paying more than 100 times profits for that path.
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34% Is the Number to Beat
Growth sped up to 34% in each of the first two quarters of 2026, from 31% in the fourth quarter of 2025.
Shopify has come in above the top of its guided range in each of the last three quarters, so the market will treat the low 30s as a floor. Another 34% on last year’s $2.8 billion would mean about $3.8 billion of revenue, and a fourth straight quarter above the range. Growth under 30% would leave Shopify behind even the second-half slowdown analysts already expect.
The Cost Side of the Pitch
Free cash flow has grown faster than revenue. It reached $654 million in the second quarter, from $422 million a year earlier, lifting the margin to 18% from 16%.
Part of that gain is accounting. Since April, merchant cash advances sit in investing rather than operating cash. On the old basis, the quarter was closer to $617 million, still up about 46%. For the third quarter, management guides to a margin in the high teens to low 20s, against about 18% a year ago.
The pressure shows up a line higher. Subscription gross margin slipped to 79.7% in the second quarter from 81.6%, as cloud costs, including AI usage, rose $37 million. Management also guided third-quarter gross profit growth to the mid-to-high 20s, below the low-30s revenue growth, so overall gross margin is set to slip again.
An open checkout network will add to those costs. If the free cash flow margin falls back to the mid-teens, Shopify is paying for the bigger network with margin.
What Shopify Hasn’t Said About Shop Pay
For Tuesday, the bar is clear. Growth of 34% or better, with the free cash flow margin holding in the high teens, would show the base business keeping pace before the network adds a dollar. The stock will likely trade more on the holiday-quarter outlook, and on any first number for agent orders as a share of GMV.
The bigger unknown is what Shopify earns when Shop Pay checks out at a store that isn’t on Shopify. Management has only addressed agent orders at its own merchants. Muse isn’t locked in either: a leaked Muse checkout in September listed Meta Pay beside Shop Pay. If Shopify gives a take rate for off-platform checkouts on Tuesday, that number matters more than the 400 million.
So what is Shopify stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
