Shopify’s (TSX: SHOP) strong Q2 results boosted its stock, with shares up more than 47% over the past three months. Now, as the Canadian tech giant will report its third-quarter (Q3) earnings on November 3, the obvious question is whether it is a good stock to buy now.
Shopify has already offered a glimpse into its Q3 outlook, signalling continued momentum. While the latest guidance is encouraging, Shopify’s elevated valuation remains a key factor for investors weighing whether the stock has further upside.
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SHOP’s Q3 outlook points to solid revenue growth
Shopify expects revenue to grow about 30% year-over-year in the third quarter, reflecting resilient demand for its omnichannel commerce platform despite a challenging comparison to last year. Growth is expected to be supported by merchants across different business categories, geographic markets, and sales channels.
In the second quarter, Shopify delivered strong results. Gross merchandise volume (GMV) increased 32% to US$116 billion. Revenue rose 34% to US$3.6 billion, while its free cash flow margin reached 18%.
Shopify is also growing gross profit dollars faster than operating expenses, which could improve profitability and generate stronger free cash flow. For the third quarter, the company expects gross profit dollars to grow in the mid-to-high 20% range. Strong revenue and operating leverage are expected to significantly boost Shopify’s bottom line in Q3.
It also projects a free cash flow margin in the high teens to low 20% range, highlighting its focus on driving efficiency.
Factors driving Shopify’s Q3 growth
Shopify’s growth is supported by merchants of all sizes. Merchants generating between $2 million and $25 million in annual sales accounted for the largest share of incremental GMV. Meanwhile, merchants with annual sales over $25 million represented the fastest-growing segment.
This trend suggests that Shopify is attracting larger businesses, potentially expanding its revenue opportunities and strengthening its competitive position.
Growth is also extending beyond traditional online retail. Offline GMV increased 32%, while business-to-business (B2B) GMV surged 76% in Q2. Continued momentum in these channels will support its growth and broaden its addressable market.
Merchant solutions revenue advanced 37% in Q2, supported by higher GMV and increased adoption of Shopify’s payment services. Payments penetration rose three percentage points year over year to 68% of global GMV.
Shop Pay GMV grew 53%, highlighting the increasing importance of Shopify’s integrated checkout and payments ecosystem. Further adoption of these services could create additional monetization opportunities across existing merchants and international markets.
Is Shopify stock a buy now?
Shopify’s Q3 outlook remains solid. The company is expected to benefit from strong merchant demand, expanding B2B and offline commerce, and increasing adoption of its payments ecosystem. Expected revenue growth of around 30%, improving operating efficiency, and a resilient free cash flow margin support its investment case.
Overall, Shopify’s long-term prospects remain solid, supported by its investments in artificial intelligence (AI) capabilities. However, Shopify stock is not cheap, as it has gained significantly in recent months and is trading near its all-time high. Investors may want to wait for a price pullback, which could offer a more attractive entry point.
