By Aditya Raghunath at The Motley Fool Canada
Shopify (TSX:SHOP) just delivered one of its strongest quarters in years, and the market took notice.
The TSX tech stock surged roughly 20% following the report, as investors digested a rare combination of accelerating growth and expanding profitability.
In this article, I break down how Shopify performed in Q2, why artificial intelligence is a real growth lever for the business, and whether SHOP stock still deserves a spot in your portfolio today.
Shopify’s Q2 earnings by the numbers
Shopify processed US$116 billion in GMV (gross merchandise value) during the quarter, up 32% year over year.
Revenue climbed 34% to US$3.6 billion, and free cash flow margin came in at 18%. Every major metric – GMV, revenue, gross profit, operating income, and free cash flow – grew more than 30%.
Shopify has now strung together five consecutive quarters of GMV growth in the 29% to 30% range, even as the company gets larger and comparisons get tougher. Merchant Solutions revenue, which includes payments, grew 37%, while Subscription Solutions revenue rose 22%.
Payments penetration, the share of GMV running through Shopify’s own payment system, reached 68% of global GMV, up three points from a year earlier. Shop Pay, the company’s accelerated checkout, grew GMV by 53% and passed US$400 billion in lifetime volume in June.
Looking ahead, Shopify guided for revenue growth in the low 30s for the third quarter, with free cash flow margin expected in the high teens to low 20s.
AI is a key driver for Shopify stock
Traffic and orders tied to Shopify’s AI shopping assistants tripled year over year in the quarter, and new buyer orders from those channels came in at nearly twice the rate of other channels.
Three quarters of AI-attributed orders in Q2 came from outside Shopify’s top 100 product categories. In plain terms, AI shopping tools are steering buyers toward smaller, specialized products, the kind of niche items that account for most of Shopify’s merchant base.
Company president Harley Finkelstein explained why this matters for the business model, stating:
“We unlock more places for our merchants to sell, and we earn on those sales the way we always have. There’s no new fees, there’s no separate pricing. But more agentic GMV means more Shopify revenue, and that’s the model. It’s been working really well for almost two decades.”
Shopify’s AI assistant for merchants, Sidekick, is also gaining traction fast. Daily active merchants using the tool grew 3.6 times year over year, and it handled nearly 34 million conversations in the quarter.
Merchants who use Sidekick during onboarding reached their first five orders 8% faster, a small detail that tends to predict longer-term retention.
Big retail names continue to move onto the platform. Guess, Avon and the fashion label Fred Segal signed on this quarter, while e.l.f. Cosmetics, Claire’s, Burton and Suitsupply went live. Finkelstein also mentioned that the luxury retailer Balmain completed its migration to Shopify in a matter of weeks.
This enterprise momentum backs up one of Shopify’s most attractive traits: retention. Over the past five years, merchants who reached US$1 million in annual GMV had 92% retention, and that rose to 97% at the US$10 million level.
Once larger merchants commit to Shopify, they tend to stay and expand into more of its products, like point of sale, B2B tools and payments.
Is Shopify stock a buy right now?
I believe Shopify stock remains a top buy for investors with a multiyear time horizon. The combination of accelerating GMV, expanding free cash flow margin, and a genuine AI growth driver is rare among companies of Shopify’s size.
Analysts tracking SHOP stock forecast free cash flow to expand from US$2 billion in 2025 to US$7 billion in 2030. If SHOP stock is priced at 40 times forward FCF, it could be valued at a market cap of US$280 billion, indicating an upside potential of almost 50% from current levels.
The Canadian tech stock isn’t cheap, and a 20% pop in a single day means some of that good news is already priced in.
Investors buying today should expect volatility along the way. But the underlying business, one that keeps growing faster while becoming more profitable, is what long-term investors should want to own.
The post Up 20% After Earnings, Is Shopify a Good Stock to Buy Now? appeared first on The Motley Fool Canada.
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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.
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