Don’t look now, but the holiday shopping season is already in full swing. That’s just part of the reason why Shopify (TSX: SHOP), as one of the best-known tech stocks on the market, expects another busy quarter.
Shopify provides the platform for businesses to sell and market their products. This gives the company exposure to spending across millions of merchants around the world.
The e-commerce giant is calling for revenue growth in the low-30s percentage range for Q4 2026. But reaching that goal is dependent on whether merchants can sustain their momentum through the holiday shopping season, which includes Black Friday, Cyber Monday and the year-end shopping rush.
Here’s what I’d watch as Shopify heads into that next test.
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Shopify expects another strong holiday quarter
In the most recent quarter, Shopify reported third-quarter revenue growth of 32%. That pushed revenue to US$3.7 billion in the quarter. The company expects to see a similar growth rate during the holiday quarter.
Shopify also expects gross profit dollars to grow at a high-twenties percentage rate. That gives another benchmark for judging the holiday results apart from revenue alone.
By comparison, let’s look at how the company performed in the same period last year. In the last quarter of 2025, Shopify saw revenue top US$3.7 billion, which was a 31% increase over the prior year.
This means that the company is looking to deliver another strong quarter from an already strong holiday period.
How holiday spending reaches Shopify’s bottom line
For those unfamiliar with the business, Shopify earns revenue through subscriptions and merchant services, which include payment processing. That gives the company a recurring revenue stream from businesses that use its platform in addition to revenue from selling activity.
During the third quarter, gross merchandise volume hit US$119.1 billion. That reflects an impressive 29% improvement over the same period last year. Merchant solutions generated revenue of US$2.9 billion in the quarter, and subscriptions brought in US$836 million.
That highlights an important point. Merchandise volume measures the value of the orders traversing the platform. Shopify keeps only the revenue earned from its services.
This means that the expected uptick in Holiday shopping volume can increase the activity flowing through the platform.
Another area to mention is cash generation. Shopify produced US$816 million in free cash flow during the third quarter, representing a 22% margin. Looking ahead to Q4, management expects its free cash flow margin to be consistent with the same period last year.
Specifically, last year’s holiday quarter delivered a 19% free cash flow margin and US$715 million in free cash flow. In other words, the outlook is a lower margin than the last quarter, while remaining steady year-over-year.
What should investors watch next?
One of the biggest areas to watch is whether Shopify can deliver on the revenue growth it outlined. Confirming whether the company’s gross profit growth and free cash flow are within expectations is the next step.
Together, those results help show if the holiday surge is producing profitable growth.
For long-term investors, the holiday results will show whether Shopify can keep up the growth that management expects.
