Shopify (SHOP -2.15%) has been on fire in 2025. Its strong financial results have helped lift shares by 52% year to date, and the stock recently jumped following the announcement of a new partnership with OpenAI that could boost its business. However, after that excellent run, some might argue that it's too late to invest in Shopify. Is that the case?
Understanding the deal with OpenAI
ChatGPT has become a part of everyday life for the many people who regularly use it to find information about a variety of topics. Some tap the artificial intelligence (AI) chatbot to help them generate and refine ideas about the products they want to buy. Insofar as these AI conversations lead to purchasing decisions, some of these transactions might as well go directly through ChatGPT.
That will soon be possible thanks to the new partnership between Shopify and OpenAI. U.S. merchants on Shopify's platform will be able to sell to people directly through ChatGPT conversations without them needing to leave the app (or the website) at all. The merchants will pay commissions to OpenAI for these transactions.
Image source: Getty Images.
Why could this partnership be important? ChatGPT's popularity has skyrocketed. Shortly after its launch, it took the title of the fastest app ever to reach 1 million downloads, and its associated website now ranks among the top 20 most visited worldwide. In the U.S. alone, an estimated 67.7 million people use ChatGPT. We do not know how many of them do so for shopping purposes, but this vast network of users should bring at least some additional business to Shopify.
Shopify's prospects remain bright
Shopify's most recent financial results were excellent. In the second quarter, its revenue increased by 31% year over year to $2.7 billion. Gross merchandise volume (GMV) jumped 30.6% to $87.8 billion. Shopify's net income (minus the unpredictable impact of equity investments) was up 16.2% to $338 million. Free cash flow totaled $422 million, 26.7% higher than in the year-ago period, while free cash flow margin remained flat at 16%.
How will its partnership with OpenAI affect its results? Shopify has built its business by marketing itself as a one-stop shop that can provide all the services that merchants require to operate online storefronts. One of its strengths is that it has seamlessly integrated the ability to sell across major social media platforms and other popular digital channels. Now, Shopify has added ChatGPT to that list, granting its merchants a potentially lucrative new avenue to reach customers and sell products, which helps cement its leading position in this niche of the e-commerce industry.
However, it's worth noting that OpenAI has also made a similar deal with Etsy, another leading e-commerce platform. And, eventually, OpenAI might offer even more e-commerce options to its users. In my view, there is a good chance that will happen. And if many e-commerce platforms integrate with ChatGPT, it's likely that the ones that wind up getting the largest benefits out of these deals will be the ones that were already doing well beforehand. So although this partnership may grant Shopify an advantage in the short term, it hardly adds to its long-term investment thesis.
To figure out whether Shopify looks like a buy now, we need to examine the fundamentals of its business and its prospects beyond this new development. Thankfully, Shopify's future already looked highly promising. It benefits from a powerful economic moat thanks to the high switching costs that sellers would face if they left the platform, as well as its app store's network effect.
These advantages, combined with its competitive suite of services, have contributed to the generally reliable growth in the number of merchants on its platform. Furthermore, the company is capitalizing on the rapid growth of e-commerce, which remains surprisingly underpenetrated in most countries. Even in the U.S., online transactions accounted for just 16.3% of total retail transactions in the third quarter.
China's e-commerce penetration is at 47% -- but in most regions, it's much lower than in the U.S. That presents a massive worldwide opportunity for companies like Shopify as e-commerce sales increase their share of total retail sales. Shopify is well-positioned to benefit from this trend. That's why the stock is attractive.
