Despite a record-breaking revenue beat and a pledge to position itself as a leader in AI-driven commerce, investors reacted negatively to Shopify’s Q4 results.
E-commerce is seeing the start of a “new normal” as AI reaches commerce.
Harley Finkelstein, Shopify
The Ottawa e-commerce giant announced its Q4 earnings, which it reports in US dollars, before the markets opened today. In a traditionally busy quarter for retailers, Shopify posted adjusted earnings of $0.48 per share, shy of consensus estimates of $0.51, but recorded $3.67 billion in revenue—the highest quarterly amount in the company’s history—beating estimates of $3.59 billion.
Revenue growth blew by internal expectations of a mid-to-high-twenties percentage increase, hitting 31 percent for the quarter and 30 percent for the year. Shopify also claimed it represents over 14 percent of e-commerce in the US today.
“It was another year of durable growth, faster product shipping, and disciplined cash generation,” Shopify president Harley Finkelstein said on an earnings call this morning.
The company is projecting continued revenue growth in the low thirties for the first quarter of 2026, but its free cash flow margin to be in the mid-to-low teens. That’s slightly lower than Q1 of last year and due to lower merchant sales, affecting both revenue and cash flow, and a higher effective tax rate compared to previous years.
The company also announced a $2-billion share repurchase program, which CFO Jeff Hoffmeister said builds on Shopify’s move last quarter to settle its convertible notes in cash, instead of shares.
“Both of these decisions reflect our confidence in our long-term value,” he said, adding that Shopify has a strong, debt-free balance sheet.
In recent weeks, Shopify’s stock price has been hit by a broader market trend of falling software stocks, triggered by fears of disruption from new AI capabilities, which expanded to broader tech volatility.
Despite strong revenue and the big share buyback, Shopify shares still fell after the earnings call. Before earnings, Shopify was trading at $172.54 on the Toronto Stock Exchange (TSX), down roughly 20 percent since the beginning of 2026. Optimistic earnings triggered a pre-market rally, which may have set the stage for a reversal. Since the end of the earnings call, shares have fallen more than 10 percent on the TSX.
AI reaches e-commerce
Martin Toner, an analyst at ATB Capital Markets, told BetaKit this morning he was “surprised” by the sell-off, given that Shopify positioned itself as “a winner as agentic AI changes digital commerce.”
“It’s possible this selloff is a function of their reticence to tie it to near-term revenue,” he said.
Shopify and its e-commerce peers are betting that agentic AI will transform online shopping, while large tech firms and Shopify partners like OpenAI, Google, and Microsoft appear to view agentic commerce as a potentially lucrative path to monetizing their chatbots.
During the quarter, Shopify doubled down on building AI tools into its products for merchants. It also introduced agentic storefronts, which allow merchants to opt to sell their products through AI chatbots such as ChatGPT. In January, the company announced it had co-developed an open standard for AI agent-based shopping with Google, and said it’s launching a new customer plan to expand its product catalogue to non-clients.
Finkelstein said on the earnings call that e-commerce is seeing the start of a “new normal” as AI reaches commerce.
“No one is better positioned to lead in this new era” than Shopify, Finkelstein said. “We believe we have a more diverse commerce dataset than anyone else on the internet. And data, of course, is what AI is fuelled by.”
Shopify has seen orders starting from AI searches increase 15-fold over the past year, Finkelstein said.
“To me, Shopify is trending in the direction that [AI] would be a positive, not a negative,” Toner said. “That’s why I’m surprised we got this sudden turn.”
Several analysts had upgraded their ratings ahead of today’s earnings results as the stock rallied yesterday. Michael Morton, analyst at New York City’s MoffettNathanson, wrote in a client note that Shopify is unlikely to be affected by merchants using AI to write their own software—instead, the company will win the “AI commerce wars.”
Record-breaking holiday sales
Shopify, which sells e-commerce software solutions to both small businesses and large enterprises, is Canada’s most valuable tech company, with a market cap of $224 billion CAD.
The company saw $123.8 billion in gross merchandise volume (GMV) in the holiday quarter, making up just under a third of the $378 billion value of products sold through its merchants for the year. Annual GMV was three times that of 2020, while GMV year-over-year growth was at 29 percent. This was due in part to another record-breaking Black Friday and Cyber Monday for Shopify merchants, despite technical hiccups, with 27-percent more sales than the year before.
The company continued its streak of double-digit free cash flow margins in Q4, with $715 million free cash flow at a margin of 19 percent (in line with its previous projections). It recorded $2 billion in free cash flow at a margin of 17 percent for the year overall.
It saw a 96-percent growth in sales through its business-to-business (B2B) clients annually, which have become a key growth driver as the company targets large brands like Canada Goose and Skims. At the same time, it saw a 62-percent GMV growth through its consumer marketplace app, Shop Pay.
In 2025, merchants faced “daunting challenges” such as US-imposed tariffs, the removal of the de minimis exemption, and a changing geopolitical landscape, Hoffmeister, Shopify’s CFO, said. He added that Shopify rolled out tools to help merchants.
Shopify also laid off dozens of employees in the past months, including reportedly more than 50 people in partnership roles early this year. This followed revelations that roles had been cut on Shopify’s sales team last summer related to internal fraud issues. Since then, the company overhauled how it pays its salespeople.
Operating expenses were $1 billion in Q4, making up 29 percent of revenue—a three-point improvement over the year before. Hoffmeister attributed this to “disciplined headcount management,” claiming the company has accelerated its product development capacity without growing its team.
Disclosure: BetaKit majority owner Good Future is the family office of two former Shopify leaders, Arati Sharma and Satish Kanwar.
Feature image courtesy Shopify.