Is It Time to Buy Shopify on the Dip?

Shares of Shopify (NASDAQ: SHOP) sank after the e-commerce software company reported solid overall results, but loan losses ate into its earnings. The stock is still up more than 50% year to date, and has more than doubled over the past year, as of this writing.

Let's take a closer look to see if this small dip is a good time to buy the stock.

Solid results and positive outlook

Despite tariff headwinds and a sluggish consumer, Shopify continues to see robust growth. The company credited artificial intelligence (AI), saying it's transforming its business. More than 750,000 shops are now using its Sidekick AI assistant, while it called out recent AI agent partnerships with OpenAI, Microsoft, and Perplexity as a big potential growth driver.

It said that AI-driven traffic to Shopify-powered stores is already up seven-fold since January and that orders stemming from AI searches are up 11-fold. The company noted that newer features it has introduced, such as Catalog, Universal Cart, and Checkout Kit, make it easier for AI agents to find items on behalf of a buyer.

The company also highlighted the strength of Shop Pay, which grew its processed gross merchandise volume (GMV) to $29 billion in the quarter, up 67%. About 65% of its customers now use Shopify Payments as its payment processor. Overall, the company's Q3 revenue climbed by 32% to $2.84 billion, which surpassed the $2.76 billion analyst consensus, as compiled by FactSet.

GMV on its platform also rose by 32% to $92 billion, driven by a 41% increase in international GMV. Europe once again was strong, with GMV surging 49%, or 42% in constant currencies, and now making up 21% of its total revenue. B2B GMV nearly doubled, while offline GMV climbed 31%.

Overall, merchant solution revenue jumped 38% to $2.15 billion, largely driven by the increase in GMV growth. Subscription revenue, meanwhile, grew by 15% to $699 million, largely from customers choosing higher-priced subscription plans.

Shopify continues to do a great job of attracting large brands to its platform, recently adding Estée Lauder, e.l.f., Fanduel, and Welch's, among others. Meanwhile, it said brands like UGG Australia, owned by Deckers Outdoors, are using its platform both online and offline.

Despite the strong revenue growth, adjusted EPS fell slightly from $0.36 to $0.34. This was largely due to higher loan losses, which came in at 5% of its revenue, above historical norms. Shopify said this was because of some experimentation with onboarding and that it was already returning to more normal levels.

The only other negative in the quarter was monthly recurring revenue (MRR), which is the value of all its subscription plans at period end. MRR came in at $193 million, which was below expectations of $195 million.

Looking ahead, Shopify forecasts that fourth-quarter revenue will grow at a percentage rate in the mid-to-high 20s, which is what it also forecast for Q3 before easily beating that guidance. Analysts were looking for growth of 24%.

Image source: Getty Images.

Should investors buy the dip?

The company continues to put up strong growth, and it looks particularly well-positioned for agentic commerce after the deals it has struck and the innovations it has introduced. Meanwhile, it continues to attract larger brands and see strong growth in newer areas like B2B.

Shopify's platform is also resonating with international merchants and seeing particularly strong growth in Europe. This should bode well for future growth, as the U.S. and Canada still make up the bulk of its GMV.

Turning to valuation, Shopify shares now trade at a forward price-to-sales (P/S) ratio of more than 15 based on 2026 analyst estimates. That's a tad high, although not outrageous.

Overall, while I like the opportunity in front of Shopify, the company is not immune to a consumer slowdown, and its valuation is on the high side. As such, I'd prefer to wait to buy the stock on a further pullback.

Geoffrey Seiler has positions in e.l.f. Beauty. The Motley Fool has positions in and recommends Deckers Outdoor, FactSet Research Systems, Shopify, and e.l.f. Beauty. The Motley Fool recommends Flutter Entertainment Plc. The Motley Fool has a disclosure policy.