After a big run in 2025, e-commerce platform and digital payments specialist Shopify (SHOP 2.26%) is leaving investors with a dilemma: It's a great business, but is it worth its high price?
Shares rose more than 50% last year as revenue growth accelerated and investors bought into hype around the idea of agentic commerce, or the use of AI (artificial intelligence) agents that work independently to execute on behalf of merchants and sellers, ultimately speeding up processes and adding value. AI agents, for instance, can not only recommend products but also write marketing copy. Additionally, they will actually take actions -- like helping a shopper find a product and complete the checkout process, or helping a merchant set up and run a virtual store with fewer manual steps.
The company is well-positioned for this era of agentic commerce, thanks to its "scale and agility," explained Shopify president Harley Finkelstein in the company's third-quarter earnings call.
So, with so much to be excited about, can the growth stock soar again in 2026? Or has the stock's big move higher already priced in the potential upside to Shopify's business?
Image source: Getty Images.
Accelerated business momentum
After reporting two yearsof 26% year-over-year revenue growth, Shopify saw its top-line growth rates accelerate throughout 2025. In Q1, revenue grew 27% year over year; this was followed by 31% growth in Q2 and 32% growth in Q3.
Shopify's third-quarter momentum was driven primarily by a 32% year-over-year increase in gross merchandise volume (GMV), highlighting how well the company's e-commerce platform is performing with both merchants and customers.
Further, the company's model continues to generate substantial cash. Its free cash flow was 18% its third-quarter revenue.
And as a cash cow, the company is able to maintain an excellent balance sheet. As of the end of Q3, Shopify was sitting on about $6 billion of cash and marketable securities -- and had no debt.
Hype meets valuation
But does the stock really deserve to trade at a price-to-earnings ratio of 123 and a forward price-to-earnings of 89?
If the company can keep up its strong growth while simultaneously capitalizing on opportunities presented by AI, maybe.
The company seems to think that AI's impact on its business is transformational. In a December press release about new Shopify platform features and enhancements, the company detailed a new Sidekick AI tool that is "evolving from a reactive assistant to a proactive collaborator" that can predict merchant needs and even suggest actions. The same release described "Shopify Agentic Storefronts," aiming to put merchants' products into AI conversations on platforms like ChatGPT and Perplexity, allowing customers to discover products and make purchases without leaving the chat. Features and tools like these could strengthen merchant loyalty and increase the payment volume processed through its platform over time.
NASDAQ: SHOP
Key Data Points
But with the stock's surge last year driving the Shopify's market capitalization to about $219 billion as of this writing, I think both the company's business momentum and the hype around these new features may already be priced in. Further, what if these new features and tools prove to be overhyped -- and they don't truly accelerate Shopify's business? For instance, what if product purchases that occur within AI chats are just replacing lost purchases on other platforms as consumers change their behavior? Additionally, the digital payments space is fiercely competitive. As other payment platforms similarly participate in agentic commerce and make products available for purchase in AI chats, will this erode Shopify's growth opportunity?
And there's a more concrete reason to be cautious. Management guided for a deceleration in its revenue growth rate in Q4. Specifically, management said it expected revenue in its fourth quarter to grow at a rate in the mid-to-high 20s year over year. If growth does decelerate in Q4, and if management guides for a further deceleration in Q1, investors may no longer be willing to pay such a high premium for the stock.
Ultimately, Shopify is a great business, but its stock seems overvalued. Can shares keep rising sharply this year? Absolutely. But there's also a chance they could fall. The better question investors should be asking is, are shares attractive today? I personally don't think so. The stock's current valuation leaves little room for error.
