Why Is Shopify Stock Sinking Tuesday?

Shopify Inc. (NASDAQ:SHOP) stock plunged in Tuesday’s premarket trading after the e-commerce software company reported mixed third-quarter results.

Earnings topped Wall Street estimates, but revenue fell slightly short. Investors also weighed pressure on gross margins and the company’s fourth-quarter outlook.

Shopify Beats Earnings Estimates, Revenue Falls Short

Shopify reported adjusted earnings of 49 cents per share, beating the analyst estimate of 46 cents.

Revenue rose 32% year over year to $3.742 billion, slightly below the $3.747 billion consensus.

Gross merchandise volume (GMV), the total value of goods sold through Shopify’s platform, increased 29% to $119.15 billion from $92.01 billion a year earlier.

Growth reached 30% on a constant-currency basis.

Merchant solutions revenue climbed 35% to $2.91 billion, while subscription solutions revenue increased 20% to $836 million.

Monthly recurring revenue rose 19% to $230 million from $193 million.

Gross profit increased 28% to $1.78 billion. However, gross margin narrowed to 47.6% from 48.9% a year earlier.

Operating income jumped 66% to $568 million from $343 million.

Net income rose to $462 million from $264 million. Adjusted net income, excluding the impact of equity investments, increased to $584 million from $367 million.

Operating cash flow reached $818 million, while free cash flow totaled $816 million. Free cash flow margin improved by 400 basis points to 22%.

Shopify Forecasts Strong Fourth-Quarter Growth

Shopify expects fourth-quarter revenue of $4.810 billion to $4.884 billion, above the $4.758 billion analyst estimate.

The fourth-quarter outlook raised concerns about slowing growth during the key holiday shopping season.

The company expects revenue growth in the low-30% range, compared with growth of about 34% earlier in 2026. Gross profit is projected to grow in the high-20% range.

The outlook, combined with pressure on gross margins and the stock’s elevated valuation, may have contributed to investor concerns about Shopify’s ability to sustain its growth momentum.

The company projected operating expenses to account for 29% to 30% of revenue.

Shopify expects stock-based compensation of $155 million and a free cash flow margin consistent with the fourth quarter of 2025.

President Harley Finkelstein highlighted the company’s growing commerce platform and efforts to integrate shopping across AI-powered channels.

Chief Financial Officer Jeff Hoffmeister attributed the company’s performance to multiple growth drivers and an expanding addressable market.

SHOP Price Action: Shopify shares were down 15.09% at $132.63 during premarket trading on Tuesday, according to Benzinga Pro data.

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