Shopify (SHOP -1.39%) stock soared 13% in May, according to data provided by S&P Global Market Intelligence. It reported well-received earnings results, and it benefited from an ease in tariff raises -- for now.
Best-in-class e-commerce services
Shopify is an e-commerce services provider, offering everything from full website development to single components for omnichannel retailers, including physical hardware. It's gone from its niche of small businesses to become a full commerce giant supporting large, well-known brands with many of its solutions.
Like any company that's become top of its industry, it's experienced ups and downs. It has recovered from an ill-fated expansion into delivery services that hurt its bottom line, and it's now in a phase of strong growth and rising profits. With lots of opportunity, it should stay in that place for many years.
In the 2025 first quarter, revenue increased 27% year over year to $2.4 billion. Gross merchandise volume increased 23% to nearly $75 billion, very close to Amazon's e-commerce sales. Operating income more than doubled to $203 million, and free-cash-flow margin was 15%, up from 12% last year. These are strong results that demonstrate Shopify's dominance in e-commerce, a growing industry.
The market was also happy about the temporary pause on high tariffs on Chinese goods. As a global e-commerce provider, Shopify has millions of merchants across the world who rely on its platform, and it could be negatively impacted by raised tariffs and a global trade war. Management explained that it has released a tariff tracker that makes it simple for merchants to source goods from different countries based on tariff information, powered by artificial intelligence (AI). That can help them avoid raising prices while continuing to generate sales, and the market gave that update a thumbs-up.
Image source: Getty Images.
Opportunity abounds
These are just short-term factors, but the real reason to buy Shopify stock is its long-term potential. Shopify is the top e-commerce platform in the U.S., with about 30% of the market, giving it a robust edge against competitors. As e-commerce increases as a percentage of retail sales, it provides organic tailwinds for Shopify's business.
At the same time, it has huge opportunities in capturing greater market share internationally. International sales only account for 30% of Shopify's business, giving it a long growth runway as it expands and offers more services outside of the U.S.
The market was rewarding Shopify's recent wins, but investors should buy it for the long-term opportunity.
