The Canadian stock market has recently staged a strong rebound, with the S&P/TSX Composite Index rising more than 10% from its lows of the previous month and now sitting just 0.5% below its 52-week high. Easing geopolitical tensions, including progress toward a ceasefire between the United States and Iran and ongoing peace talks, have provided support for this recovery.
Against this backdrop of a recovering broader market, however, shares of global e-commerce infrastructure provider Shopify (TSX:SHOP) have fallen nearly 19% year to date. Macroeconomic uncertainty, valuation concerns, and market apprehensions about the potential impact of artificial intelligence on the software industry continue to weigh on investor sentiment.
Shopify delivered strong results in the fourth quarter. Gross merchandise volume (GMV) increased 31.1% year over year to $123.8 billion. Revenue grew 30.6% to $3 billion, with both merchant solutions and subscription solutions contributing solid growth. Merchant solutions revenue rose 34.9% to $2.9 billion, driven by higher GMV and increased adoption of payment services; subscription solutions revenue grew 16.7% to $777 million, primarily due to a higher proportion of merchants upgrading to premium plans and an increase in platform fees.
Strong revenue growth drove gross profit up 25.2%. However, gross margin declined 190 basis points to 46.1%, mainly because of a higher mix of lower-margin payment businesses and a reduction in third-party referral and transaction fees. Encouragingly, operating efficiency improved, with operating expenses as a percentage of revenue falling to 28.9% from 31.5% in the same period last year, reflecting the company’s disciplined cost management. The company also leveraged AI and automation technologies to enhance product development capabilities without expanding its headcount.
In terms of net profit, Shopify reported net income of $743 million. Excluding the impact of equity investments, adjusted net income increased 29.7% year over year to $594 million. The company also generated $715 million in free cash flow, representing 19% of revenue, slightly below the same period last year.
The ongoing transformation of omnichannel commerce is creating significant long-term growth opportunities for Shopify. The company continues to invest in innovative integrated solutions, including AI-powered tools, while expanding its payments platform into new markets and strengthening its presence in the direct-to-consumer and B2B segments.
At the same time, Shopify remains focused on improving operational efficiency through disciplined headcount management, AI, automation, and proprietary project and talent management systems—initiatives that are expected to further support profit growth.
Based on these favorable factors, management expects revenue growth in the low 30% range for the first quarter of 2026, with gross profit growth in the high 20% range. Operating expenses are likely to account for 37% to 38% of revenue, and free cash flow margin may be in the low to mid-teens (10%–15%). Overall, Shopify’s outlook points to steady and sustained growth in the coming quarters.
With its share price under pressure, Shopify is trading approximately 30% below its all-time high. Despite the significant pullback, the stock remains relatively expensive, with price-to-sales and price-to-earnings ratios of 11.7x and 72x, respectively, over the next 12 months. However, given its high growth prospects, investors with an investment horizon of more than three years may consider gradually buying the stock.
