A Stranger Things hoodie from Netflix. A Barbie or a Hot Wheels set from Mattel. A box-logo tee from Supreme. A bodysuit from SKIMS. Every one of these stores runs on Shopify.

None of these brands lacks the resources to build its own. Supreme ran a custom-built site for years before moving to Shopify in 2023. And they are far from alone. Millions of merchants in 175+ countries now use Shopify, reaching roughly 900M shoppers.

It started as a side project. In 2004, Tobi Lütke wanted to sell snowboards online under his own brand. He tried Yahoo! Stores, Miva, and osCommerce, but none were good enough. So he built his own storefront. Soon, other merchants wanted one too.

Shopify was built for merchants who don’t want to be just another product among Amazon’s 600M+ SKUs, but want to give consumers a better shopping and brand experience with their own digital storefront. When Shopify started, Amazon was already at a scale of ~$6.9B in sales, selling everything from books to electronics, but that didn’t stop Shopify from becoming one of the fastest-growing e-commerce companies today.

As Shopify scaled, it stuck to the same problem, helping people build their own brands, and expanded from a simple digital storefront to global payments integration, checkout optimization, working-capital credit, tax calculation, inventory management, advertising strategies, and more.

As AI progresses to reshape retail shopping, Shopify is already positioning itself as the leading enabler of independent online retailers. AI-driven traffic to Shopify stores and orders from AI-powered searches grew nearly 3x YoY in 2Q 2026.

Morgan Stanley chart on agentic commerce — *Source: Morgan Stanley Research*

The question is whether AI agents make Shopify more essential or easier to replace. Agents don't care about storefront design. They need a catalog they can query, a checkout they can call, and a payment they can settle. Shopify is building all three, and it switched on every eligible US merchant by default 6 months ago.

But at ~110x earnings, the stock already prices in 30%+ GMV growth and margins of 20%+. Below, we break down how Shopify makes money, why agentic commerce could widen its lead, how durable its moats are, and what we think the stock is actually worth.

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Business Model:

Shopify has 2 major revenue streams: subscription solutions and merchant solutions.

Subscription solutions: They first onboard a retail merchant by giving them a basic digital storefront, which includes a website, checkout, and inventory management. They charge a largely fixed subscription fee for managing these services. Their subscription prices have four main tiers, with Basic priced at $29/mo (billed annually), Grow at $79, Advanced at $299, and Plus for large firms from $2,300. This is a high-margin business with ~80% GM.

Merchant solutions: Once a merchant purchases a subscription, Shopify sells additional services like payment processing, shipping, advertising solutions, etc. Shopify makes money in this stream only if merchants make money. They take a simple cut of merchant sales for most of their products here. The gross margin of this business is ~40%.

Payments is their largest contributor to merchant solutions. Shopify processed ~$248B of payments in FY25, or ~66% of total GMV, up from 45% in 2020. This segment has a significant runway, as they launch in new geographies like India and LatAm ex-Mexico, where Shopify Payments isn’t available today. In mature markets like North America, close to 90% of merchants already use Shopify Payments.

Their other services in merchant solutions are still smaller / in early stages:

Shopify Capital: ~$2.2B loan book, with ~$1.6B deployed in Q2’26 alone.
Shop Pay Installments: BNPL product, GMV grew by 53% YoY in Q2’26.
Shopify ads (Shop Campaigns): Merchants running live campaigns tripled YoY in Q1’26, and for some small merchants it drives up to a quarter of GMV.
POS hardware: GMV grew 32% YoY in Q2’26.

Agentic Commerce & Shopify’s Role:

Consumer AI is graduating from simple chat inference to complex task handling. Meta’s Muse launch has accelerated this process, with Muse being downloaded 5 million times within 22 days vs. the ChatGPT app’s 5 million in 56 days.

Consumers, on average, take ~26 days from their first search on platforms like Amazon to decide on and purchase a product. Consumers have to compare multiple product features, along with prices and payment offers, before deciding on the final purchase.

AI agents excel at exactly these kinds of comparative tasks. But, as with all AI applications, clean data with better context will improve the efficiency and accuracy of these systems.

Traditional digital shopping infrastructure is built around websites optimized for human clicks and eyeballs to improve conversions. This is not the most efficient infrastructure on which AI agentic commerce can run.

Agentic Infrastructure:

An agent can browse a store the way a person does, but it’s slow and brittle. It has to read pages built for humans, and a layout change or bot check can break the purchase. Agents work best when each step of the purchase is a machine call. Search becomes a catalog it can query. Checkout becomes an API, where the merchant still prices tax and shipping. A stored card becomes a payment token capped to one purchase and amount. A saved password becomes account access granted by permission.

For agents to transact with millions of shops, everyone in the stack — the consumer’s agent and the retailer’s systems — needs to speak the same machine language. Two open standards have been built to solve this: OpenAI and Stripe’s Agentic Commerce Protocol (ACP, September 2025) and Google’s Universal Commerce Protocol (UCP, January 2026), co-developed with Shopify.

Both protocols cover the same journey: discover product, build cart, check out, and track order. ChatGPT uses ACP mainly to ingest merchant catalogs, and final payment occurs at the merchant’s checkout. Google uses UCP to close the full loop, as it integrates with agentic payment solutions such as Google Pay and the Agent Payments Protocol (AP2).

Every eligible U.S. Shopify merchant was switched on by default on March 24, 2026, with out-of-the-box access to ChatGPT, Copilot, AI Mode, and Gemini, and zero integration work. A non-Shopify merchant has to set this up through its own platform or build its own AI-readable catalog, or risk losing the demand coming from these agents.

Google, OpenAI, and now Meta are building the surfaces where the asking happens. Shopify is building the catalog, the cart, and the settlement underneath, with Shopify Catalog feeding ChatGPT and Shopify checkout embedded in Copilot.

Agentic Commerce Value Unlock:

Historically, search has favored bestsellers and products with high ad spend. Agents can parse detailed queries against product attributes, so a niche product that better fits the brief can win in the agentic commerce world.

In 2025, 71% of AI-attributed orders on Shopify came from outside its top 100 categories (long-tail orders), compared with about 55% of sales overall. The long-tail share of AI-attributed orders increased to 75% in 2Q26, reflecting a clear benefit for niche products and categories.

Amazon typically charges sellers a 15% referral fee, and many also spend on Amazon ads to stay visible. Niche products will find it difficult to pay such costs at low volumes. Selling direct gives brands more room to offer better value, while agents can find these products more easily than shoppers searching the web.

The AI catalog itself is just another subscription feature for Shopify. The bigger opportunity comes from any additional GMV that agents send to long-tail merchants, from which Shopify makes money through payments, credit, etc.

Business Moats

Shopify’s moats come from its improving product scale, higher switching costs and lower customer acquisition costs:

Scale:

Shopify has been built over 2 decades by refining its product suite. Shopify says its checkout converts up to 36% better than competing platforms, thanks to these optimizations against billions of real transactions and customer behavior data.

A new entrant building a checkout from scratch is starting at zero on this learning curve. The same applies to fraud detection and payment routing — these systems improve with data volume, and Shopify’s data advantage over a new entrant is a significant moat.

As agentic commerce grows, agents can cover a far wider search landscape than humans, but at the end of the day they run on limited compute and cannot look at and compare every product. So companies that help retailers become more discoverable to these agents will gain an advantage and build a moat. Just as earlier data moats were built around human behavior on retail shopping apps, tomorrow’s could be built around agentic behavior with retail SKUs.

As shoppers shift to agentic commerce, some of these traditional scale and data moats can diminish. But Shopify is the leading commerce platform building catalogs for AI agents, and it has a lead in driving better conversion through them: Shopify says AI searches powered by its Catalog convert at 2x the rate of those using scraped data.

Switching costs:

Shopify doesn’t just hold the products and prices customers can buy. A store also carries customer reviews and accounts that a retailer stands to lose in an abrupt switch. Customer passwords can’t be exported at all, so every shopper has to reset their login on the new platform. Hundreds of product listings also need to be migrated and remapped, and the theme and apps built around them rebuilt. This will inevitably lead to some loss of customers and revenue, and the last thing a retailer wants is to lose business.

Add-on services such as inventory financing through Shopify Capital, repaid automatically from a share of the store’s daily sales, make merchants stickier still. When a merchant cancels its Shopify subscription, it has to switch all merchant services: the digital storefront, payments, credit and inventory management tools.

While Shopify’s switching costs are not as high as those of enterprise SaaS, the breadth of its product suite and its integration into nearly every business process of a retailer make it difficult to switch. This is reflected in its retention rate of ~92% among merchants doing over $1 million a year and 97% above $10 million.

Customer acquisition costs:

When a new retailer looks for a digital storefront, Shopify is often the first name they encounter through Search, YouTube tutorials, business media, and word-of-mouth from other merchants.

This is the result of years of brand and community building, combined with the simple fact that millions of successful merchants have publicly credited Shopify with their success. Retailers like Gymshark and Kylie Cosmetics are advertising for Shopify, whether they intend to or not.

Market Opportunity & Competitive Dynamics

The global retail market is estimated at about $31 trillion, and e-commerce adoption is still limited at ~20% of sales, and 12.8% outside China. In the US, e-commerce penetration is 17.1% (Q2’26), up from a ~14.5% average in 2020, and the trend is expected to continue for the foreseeable future.

Shopify has been gaining share within e-commerce as independent and enterprise brands drive more direct volume. Its share of US e-commerce has risen from roughly 8.6% in 2020 to over 14% in 2025.

We think Shopify has a long growth runway, with tailwinds from rising e-commerce penetration, more independent brands and continued share capture. Those tailwinds helped it grow GMV 29.5% in 2025, versus an estimated ~9% for Amazon.

Competitive Dynamics:

Amazon is the only company with the merchandise breadth and merchant relationships to compete with Shopify at scale; together the two account for about half of US e-commerce. But Amazon gives brands on its platform little identity of their own, and that is costing it ground as retailers open their own digital storefronts on Shopify while continuing to sell on Amazon. Shopify’s GMV has grown from 40% of Amazon’s marketplace GMV in 2020 to 66% in 2025.

Wix, Squarespace, WooCommerce and others also help retailers build a digital storefront with some commerce features like basic payments. But none matches the breadth of Shopify’s products. In other words, while competition for storefront design is heavy, few have built the scale to provide everything from payments and ad services to discounted shipping. Wix, for instance, processed $14.3 billion in payments in 2025, versus roughly $248 billion through Shopify Payments.

We believe Shopify can be challenged by these players only at the low end of the long tail and, even if a retailer starts on a low-end rival, it will shift to Shopify as it scales, sells globally and needs credit. Hence we believe Shopify will continue to lead among high-value retail merchants.

At the high end, Shopify also competes with enterprise suites like Salesforce Commerce Cloud and Adobe Commerce. But we see their parents as too diversified to focus on the single problem of the shopping experience, and their products need more plumbing than an end-to-end service like Shopify.

Profitability:

Shopify has a largely predictable Cost of Goods Sold, with ~20% of revenue for its subscription business, as most of the costs here are hosting and support costs. Its merchant solutions COGS is around ~60% of revenue. A large part of this COGS goes toward fees paid to card networks (Visa, Mastercard) and processors like Stripe for supporting payments, etc.

While Gross Margins are largely stable at ~48–50%, they are seeing significant scale benefits in their S&M and R&D expenses. Their S&M expense was $1.66bn in 2025, up 19.4% vs. 2024, while revenue grew by 30.1%. Similarly, their R&D expense was $1.54bn in 2025, up 12.4% vs. 2024.

Over 2021–25, OpEx scale benefits from these two segments enabled operating margins to improve from ~5% in 2021 to 12.7% in 2025. We expect them to continue gaining OpEx scale benefits going forward.

Shopify’s long-term operating margin can be as high as ~25%, compared to mid-teen margins today. This is reflected in its incremental operating margins (profit per $ increase in revenue) of ~30%+, which it achieved in the past.

Shopify also provisions for credit losses and any payment fraud/failures as an operating expense (transaction and loan losses). As its analytical engines improve, its products will better detect losses and fraud, and it will see a lower transaction loss rate. This expense increased from ~1.8% to ~3.5% over the years as payment volumes scaled. We expect it to stabilize and scale down over time as payment adoption reaches ~90% and its analytics products continue to improve.

Valuation:

Shopify valuation depends on 4 major factors:

New retailers onboarding, i.e., subscription growth. Subscription growth has historically been ~10–20%, driven by new business openings and additional product purchases/upgrades. We expect this growth to stabilize over time at ~10%, driven by sustained new business growth in the US.
How much in fees they can collect from customers’ GMV for additional services. Currently, their merchant solutions business collects ~2.40% of GMV, up from 1.86% in 2021. We expect their merchant fee collection to continue to grow as more customers adopt their solutions and payments adoption increases from the current ~68% toward ~90%.
GMV growth among retailers using the Shopify platform. Historically, most retailers have been able to grow their GMV by ~10%+. This provides a baseline for GMV growth on the platform. Agentic AI can drive this baseline growth higher and create additional value. In our base case, we assume existing retailers will be able to grow ~20% on aggregate due to better discovery, taking overall GMV growth to ~25%. In the bear case, we maintain ~10% GMV growth for existing retailers, taking total GMV growth to ~15%.
Operating leverage: Shopify EBIT margin increased from 5.8% in 2021 to 12.7% in 2025. We expect their high growth will enable more operating leverage and expect an EBIT margin of ~20% by 2030 in the base case and ~19% in the bear case.

Based on our valuation model (treating SBC as an expense), we arrive at a base-case valuation of ~$130 using a 30x P/E in 2030 and a bear-case valuation of ~$100 using a 25x P/E.

Today is trading at ~$160 with a ~110x P/E. The market is already pricing in sustained GMV growth of 30%+ and operating margins improving to ~20%+.

Given the market already prices in significant GMV growth partly driven by agentic discovery, we would like to wait for a tactical entry around our base-case valuation of ~$130 if the share price drops due to interest rates or any other short-term factors.

Additionally, we will reassess our entry valuation based on how Shopify’s GMV growth is trending and what portion is attributable to agentic commerce versus macro changes.

Shopify Model

Risks:

Trade barriers: Rising geopolitical tension and higher trade barriers could slow cross-border shopping on Shopify. That would hit both its global volume and its payments network, one of its key moats.

Consumer spending & Interest rates: Shopify is ultimately a discretionary consumption-driven business, and higher interest rates weigh on consumer spending. Its stock also trades at a high growth multiple, so higher rates can hurt the stock through lower growth expectations and the negative impact of higher rates on valuation.

In 2022, as rate hikes took effect and pandemic-era e-commerce unwound, GMV growth slowed to 12% from 47% the year before, and the stock fell ~80% from its November 2021 peak before recovering over time.

Payments disruption: Agentic commerce and payments are evolving fast, and blockchain technology and cryptocurrencies are being floated as the next major shift. Payment processing fees make up the bulk of Shopify’s merchant solutions revenue. A move to public-blockchain and crypto payment rails could affect its payment product pricing.

New-merchant pull: AI is making it easier for retailers to build their own tools. Shopify’s adjacent services (payments, Credit, logistics etc.) keep existing merchants sticky, but its ability to attract new retailers could diminish over time.

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Deep Dive: Shopify ($SHOP)