Strong Performance Drives Forecast Upgrades
Shopify Inc., the leading e-commerce platform provider, continues to demonstrate robust growth momentum as it positions itself at the forefront of artificial intelligence-driven commerce. The company’s second quarter performance exceeded expectations, with both revenue and adjusted profit after tax and minority interests surpassing forecasts due to stronger-than-expected gross merchandise value growth and broad-based merchant momentum.
Revenue climbed 34% year-on-year, supported by growth across both subscription solutions (+23% YoY) and merchant solutions (+37% YoY). The merchant solutions growth was particularly driven by strong GMV expansion and higher Shopify Payments penetration. However, margins declined 90 basis points year-on-year due to a mix shift toward lower-margin merchant solutions revenue and increased AI and large language model costs.
Analyst Outlook and Recommendation
Phillip Securities Research has downgraded its recommendation from Buy to Accumulate, citing recent share price movement, whilst raising the target price to US$170 from US$160. The research house has increased its FY26 revenue and profit forecasts by 3% and 1% respectively to reflect the stronger-than-expected GMV growth, whilst maintaining unchanged terminal growth and weighted average cost of capital assumptions.
AI Integration Strengthens Competitive Position
The positives surrounding Shopify’s strategic direction are compelling. AI is increasingly emerging as a significant tailwind for the platform, with traffic on agentic and AI-attributed orders both tripling year-on-year in the second quarter. Sidekick daily active users rose 3.6 times year-on-year, whilst catalogue conversion rates are double those of general search.
The company’s Catalogue feature could become a structural competitive advantage as AI-driven shopping gains traction. It provides AI agents with richer, structured product data to match products with specific consumer intent rather than simply ranking by keywords. This particularly benefits Shopify’s long-tail merchants, with 75% of AI-attributed orders coming from outside its top 100 categories.
Additionally, as AI agents and other channels create a more fragmented commerce environment, Shopify’s ability to manage complex transaction flows across taxes, discounts, inventory, fulfilment, and payments provides critical infrastructure. Shop Pay GMV grew 53% year-on-year, whilst Shopify Payments penetration reached 68% of GMV, up from 65% in the prior year period.
Frequently Asked Questions
Q: What was Shopify's revenue growth in the second quarter?
A: Shopify's revenue grew 34% year-on-year, supported by growth in both subscription solutions (+23% YoY) and merchant solutions (+37% YoY).
Q: What is Phillip Securities Research's current recommendation and target price for Shopify?
A: Phillip Securities Research has downgraded from Buy to Accumulate with a target price of US$170, increased from the previous US$160.
Q: How is artificial intelligence impacting Shopify's business performance?
A: AI is emerging as a significant tailwind, with traffic on agentic and AI-attributed orders both tripling year-on-year, whilst Sidekick daily active users rose 3.6 times year-on-year. Catalogue conversion is double that of general search.
Q: What factors contributed to Shopify's margin decline?
A: Margins declined 90 basis points year-on-year due to a mix shift toward lower-margin merchant solutions revenue and higher AI and large language model costs.
Q: How is Shopify Payments performing?
A: Shopify Payments penetration reached 68% of GMV, up from 65% in the second quarter of 2025, whilst Shop Pay GMV grew 53% year-on-year.
Q: Why did the analyst upgrade revenue forecasts?
A: Phillip Securities Research increased FY26 revenue and profit forecasts by 3% and 1% respectively to reflect stronger-than-expected GMV growth.
Q: How does AI benefit Shopify's long-tail merchants?
A: 75% of AI-attributed orders come from outside Shopify's top 100 categories, positioning the platform well as agentic AI reshapes product discovery and benefits smaller merchants.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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