TLDR
- Shopify stock tumbled 11% following Q4 earnings despite revenue climbing 31% to $3.67 billion, topping analyst expectations
- Q1 guidance calls for low-30s revenue growth versus 25.1% analyst estimates, while company authorized $2 billion share repurchase
- Buy ratings jumped to 70% from 59% as analysts dismiss AI disruption concerns, citing Shopify’s sticky end-to-end platform
- Orders from AI searches increased 15-fold since January 2025 with partnerships expanding across Gemini, ChatGPT platforms
- Shares trade at 57 times forward earnings following 30% year-to-date drop, below three-year average of 107 times
Shopify shares fell 11% this week despite posting fourth-quarter results that beat Wall Street forecasts. The company reported revenue of $3.67 billion, up 31% from last year and ahead of the $3.58 billion analyst consensus.
The stock drop wasn’t performance-related. Shopify became collateral damage in a broader software sector panic over AI disruption fears. Markets worry that businesses will bypass platforms like Shopify by building storefronts directly through AI assistants like ChatGPT and Gemini.
Wall Street analysts say this concern misses a key point. Shopify isn’t just storefront software. The platform manages payments, fulfillment, logistics, and inventory as an integrated service.
J.P. Morgan’s Reginald Smith defended the company Thursday. He said investors underestimate how sticky Shopify’s platform is and the value of its AI tools trained on millions of merchant transactions.
New client wins support this view. Shopify signed deals with Starbucks, Estée Lauder, Coach, and E.l.f. Cosmetics this quarter. Demand remains robust despite the AI narrative.
Q4 Results Show Strength Across Metrics
Gross merchandise volume rose 31% to $123.84 billion in the quarter. Europe drove growth with GMV up 45%, or 35% in constant currency terms. B2B GMV surged 84%. Offline GMV grew 29%.
Merchant solutions revenue jumped 35% to $2.9 billion. Subscription revenue climbed 17% to $777 million on plan upgrades. Monthly recurring revenue reached $205 million, up 15%.
Shopify Payments handled $84 billion in GMV, representing 68% of total platform volume. That marks a 38% increase with four percentage points of share gains.
Company Delivers Upbeat Q1 Forecast
Management expects Q1 revenue to grow in the low-30s percentage range. That significantly exceeds the 25.1% growth analysts projected. The company also unveiled a $2 billion buyback authorization.
President Harley Finkelstein said Shopify holds “pole position” in agentic commerce. AI-generated orders exploded 15-fold since January 2025 as partnerships with major AI platforms expanded.
Wall Street Grows More Bullish Post-Earnings
Buy ratings increased to nearly 70% from 59% in late January according to FactSet. Average price targets fell to $163.11 from $181.48, but analysts view the decline as a chance to accumulate shares.
TD Cowen analyst John Shao upgraded the stock to Buy from Hold Friday. Historical patterns show similar valuation compressions typically preceded rebounds, he noted.
Loop Capital’s Anthony Chukumba warns volatility may persist. It could take multiple quarters of solid execution before markets recognize AI fears as overblown.
The stock now trades at 57 times forward earnings after its 30% year-to-date slide. That compares to a three-year average of 107 times and one-year average of 76 times. The forward price-to-sales multiple sits around 11 times 2026 projections, which analysts consider reasonable given growth rates.
Shopify executives say years of AI infrastructure investments are paying off. The groundwork positions them ahead as agentic commerce gains traction across the industry.
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