Valued at a market cap of $260 billion, Shopify (TSX:SHOP) is among the largest companies in Canada. The tech stock went public in May 2015 and has since returned 6,300% to shareholders. Over the last 12 months, SHOP stock has returned nearly 90%, outpacing broader market returns, as it has consistently beaten earnings and revenue estimates.
Since historical returns don’t matter much to current or future investors, let’s examine whether Shopify stock remains a good buy today.
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How did Shopify perform in Q2 of 2025?
Shopify stock surged more than 20% following its second-quarter (Q2) results, which exceeded estimates. The Canadian e-commerce platform reported adjusted earnings of US$0.35 per share with revenue of US$2.68 billion. Analysts forecast revenue at US$2.55 billion with earnings of US$0.29 per share in the June quarter.
Notably, revenue growth accelerated to 31% year over year, up from roughly 20% in the prior year period. This acceleration underscores the company’s expanding market share and successful execution across multiple growth initiatives.
Gross merchandise volume (GMV) reached US$87.8 billion, representing 29% growth and exceeding Wall Street’s US$81.5 billion projection. Net income jumped dramatically to US$906 million from US$171 million year over year, demonstrating the company’s improving operational leverage.
CFO Jeff Hoffmeister noted that anticipated tariff impacts failed to materialize, as sales originating from the U.S. accelerated in Q2. While several Shopify merchants have raised prices, the platform hasn’t experienced demand destruction or drastic changes in cross-border transactions.
Shopify’s strategic investments in artificial intelligence (AI) are gaining traction. Recent product launches include an AI store builder and tools to support agentic commerce, which position the company at the forefront of conversational shopping trends.
These innovations should make it attractive to larger companies while maintaining its niche in the small- and medium-sized business segment.
Management expects revenue growth of at least 25% in Q3, which is higher than the consensus growth estimate of 21.7%. Shopify should continue to reduce its operating expenses and benefit from economies of scale as it is poised to gain traction in several international markets.
Shopify has maintained flat headcount for two years while achieving 31% revenue growth. Hoffmeister also emphasized that Europe now accounts for approximately 25% of Shopify’s business, and merchants in this region are outperforming local e-commerce growth rates by a factor of four.
This international success stems from strategic product rollouts, including the expansion of payments to 15 new European countries and the launch of capital services in Germany and the Netherlands.
Is Shopify stock still undervalued?
Management’s measured approach to free cash flow margins, which optimizes for business health rather than maximizing profitability, positions Shopify to capitalize on multiple S-curve growth opportunities simultaneously, thereby reducing its dependency on any single revenue driver.
Analysts tracking the TSX tech stock forecast revenue to increase from US$8.88 billion in 2024 to US$24.5 billion in 2029, indicating an annual growth rate of 22.5%. During this period, adjusted earnings are forecast to increase from US$1.26 per share to US$3.10 per share, while free cash flow is expected to improve from US$1.60 billion to US$5.34 billion.
Today, SHOP stock trades at a forward free cash flow multiple of 83.3 times, above the 12-month average of 73 times. If Shopify’s forward FCF multiple normalizes to 40 times, which is reasonable, it could return just 15% over the next four years. It’s possible that Shopify stock may lag behind the broader market in the near term, given its lofty valuation.
