When a company trades at a staggering 128 times earnings, most value investors instinctively mutter “too expensive” and flip to the next earnings report. But Shopify (TSX:SHOP) just delivered a set of results that forces even valuation-focused investors to pause and reconsider a fundamental question: when it comes to truly great companies, what does “cheap” really mean?
Shopify’s fourth-quarter 2025 results were nothing short of jaw-dropping. Revenue came in at $3.67 billion, up 31% year over year. For the full year, revenue reached $11.56 billion, also growing at a 30% clip. Even more striking, full-year free cash flow surged past the $2 billion mark to $2.01 billion, while operating income hit $1.47 billion.
These numbers send a clear signal: Shopify is no longer just the pandemic-era darling that burned cash in pursuit of growth. It has matured into a company that can scale rapidly while funding itself. “That’s the key point,” one long-time Shopify fund manager noted. “The market’s biggest fear was whether Shopify’s high growth could last. Now we see that not only has the growth sustained, but the quality of profitability has arrived as well.”
If 30% top-line growth is impressive, the underlying details reveal just how wide the company’s moat has become.
International revenue rose 36%, offline revenue climbed 27%, and B2B gross merchandise value (GMV) jumped an astonishing 96%. This isn’t a business relying on a single market or a single product line; it’s firing on all cylinders. Meanwhile, subscription solutions contributed $2.75 billion, while merchant solutions accounted for $8.8 billion. The heavier weight of merchant solutions suggests that merchants aren’t just using Shopify to build a website—they are entrusting the platform with payments, logistics, and marketing.
“We are becoming the operating system for commerce, not just a website builder,” Shopify President Harley Finkelstein emphasized during the earnings call. That statement reflects a fundamental redefinition of Shopify’s role—and a critical pillar of its valuation story.
So back to the original question: is 128 times earnings too rich?
If you’re looking in the rearview mirror, the answer is an easy “yes.” But investing is about looking through the windshield, not the rear glass. For the first quarter of 2026, Shopify expects revenue growth to remain in the “low thirties” percentage range. For a company that already generates over $11 billion in annual revenue and is consistently profitable, sustaining that kind of growth is a rarity even among global tech giants.
What’s more, Shopify’s current valuation sits well below the speculative frenzy of late 2021. Back then, expectations were stretched to the breaking point, leaving no room for error. Today, Shopify is a much larger, more profitable, and more disciplined business—yet its stock trades significantly lower than that peak. In a recent note, analysts at RBC Capital Markets summed it up: “The market is now pricing Shopify as a mature growth company, not as a speculative dream stock. That shift is exactly the kind of opportunity long-term investors should be paying attention to.”
In today’s macro environment, “growth stocks” have fallen somewhat out of favor. After the tech pullback earlier this year, many investors have rotated into low-multiple, high-dividend defensive names. But as the old investing adage goes: be greedy when others are fearful. Shopify is becoming a textbook case that high growth and a seemingly demanding valuation don’t have to be mutually exclusive.
When a company combines double-digit expansion, substantial free cash flow, a durable market position, and a clear strategic vision, a high P/E may simply reflect the scarcity of such qualities.
Of course, owning Shopify isn’t without risk. For any richly valued stock, a deceleration in growth could invite sharp price volatility. But for investors with a three-, five-, or even ten-year horizon, short-term valuation fluctuations often fade into the background noise of a long-term compounding journey. As Shopify founder Tobi Lütke once put it, “We’re not building a sprinter. We’re building a hundred-year company.” For a business with that kind of ambition, a valuation premium may never be the real issue—it may simply be the price of admission.
