Shopify (SHOP) Up 14% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Shopify (SHOP). Shares have added about 14% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Shopify due for a pullback? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Shopify Inc. before we dive into how investors and analysts have reacted as of late.

Shopify Q4 Earnings Meet Estimates, Revenues Increase Y/Y

Shopify reported fourth-quarter 2025 non-GAAP earnings of 38 cents per share, which missed the Zacks Consensus Estimate by 7.32%. The bottom-line figure increased 9.1% year over year.

Revenues of $3.67 billion surpassed the Zacks Consensus Estimate by 2.55%. The top line soared 30.6% year over year.

SHOP’s Top Line Rides on Growing Merchant Base

Gross Merchandise Volume (GMV) in the fourth quarter was $123.84 billion, which increased 31.1% year over year. Offline GMV increased 29% year over year while B2B GMV jumped 84%. International GMV grew 50% year over year, with Europe’s GMV rising 45% year over year (35% on a constant currency basis).

Shopify is benefiting from strong growth in its merchant base. Merchant solutions revenues in the fourth quarter were $2.89 billion and accounted for 78.8% of Shopify’s total revenues. On a year-over-year basis, merchant revenues increased 34.9%, driven by strong GMV and increased penetration of Shopify payments.

Shopify Payments’ GMV penetration hit 65.6% for the full year 2025. Shop Pay GMV increased 62% year over year to $43 billion in GMV.

Subscription solutions revenues in the fourth quarter were $777 million and accounted for 21.2% of Shopify’s total revenues. On a year-over-year basis, subscription solutions revenues increased 16.7%.

Monthly Recurring Revenue (MRR) in the fourth quarter was $205 million, which increased 15.2% on a year-over-year basis. The Plus category accounted for 34% of MRR in the reported quarter.

SHOP’s Q4 Operating Details

In the fourth quarter of 2025, gross profit was $1.69 billion, up 25.2% year over year. Gross margin contracted 200 basis points (bps) year over year to 46.1% due to unfavorable mix shift from Subscription Solutions to Merchant Solutions and strong results from the low-margin payments business.

Subscription Solutions’ gross profit grew 18% year over year, while Merchant Solutions’ gross profit increased 30%. Subscription Solutions’ gross margin was 81%, up on a year-over-year basis, mainly due to a reduction in support costs as the company continues to operate more efficiently. Merchant Solutions’ gross margin came in at 36.8%.

Total operating expenses were $1.06 billion, up 19.7% year over year. Sales & Marketing (S&M) expenses increased 24.4% year over year to $433 million. Research & Development (R&D) expenses rose 11.1% year over year to $390 million. General & Administrative (G&A) expenses surged 11.6% year over year to $125 million.

However, as a percentage of revenues, total operating expenses declined 260 bps to 28.9%. S&M expenses as a percentage of revenues decreased 60 bps year over year to 11.8%. As a percentage of revenues, R&D expenses decreased 190 bps year over year to 10.6%. G&A expenses as a percentage of revenues decreased 60 bps to 3.4%.

Consequently, SHOP reported an adjusted operating income of $760 million, up 29.9% year over year. Operating margin contracted 10 bps year over year to 20.7%.

SHOP’s Balance Sheet Details

As of Dec. 31, 2025, Shopify had cash and cash equivalents (including marketable securities) worth $5.78 billion compared with $6.35 billion as of Sept. 30.

Free cash flow increased 17% year over year to $715 million. The free cash flow margin contracted 230 bps year over year to 19.5% in the reported quarter.

SHOP Offers Q1 Guidance

For the first quarter of 2026, Shopify expects revenues to grow at a low-30% rate on a year-over-year basis. Gross profit is anticipated to grow at a high-20% rate on a year-over-year basis.

Shopify expects GAAP operating expense as a percentage of revenues to be in the 37-38% range.

Free cash flow margin is expected to be in the low-to-mid teens, slightly below first-quarter 2025.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Shopify has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending downward for the stock, and the magnitude of these revisions looks promising. Interestingly, Shopify has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Shopify is part of the Zacks Internet - Services industry. Over the past month, Uber Technologies (UBER), a stock from the same industry, has gained 2.5%. The company reported its results for the quarter ended December 2025 more than a month ago.

Uber reported revenues of $14.37 billion in the last reported quarter, representing a year-over-year change of +20.1%. EPS of $0.71 for the same period compares with $3.21 a year ago.

For the current quarter, Uber is expected to post earnings of $0.71 per share, indicating a change of -14.5% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

Uber has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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