Shopify falls on Q4 outlook, higher spend

Shopify (SHOP) shares fell 6.65% in premarket trading to $145.83, down from a previous close of $156.22, after the company issued its outlook for the key holiday quarter. The decline came even as the stock remained above its 52-week low of $94, though it traded about 19.4% below its 52-week high of $180.88.

The market reaction followed a quarter in which Shopify modestly exceeded profit expectations but only met revenue forecasts, and paired that with guidance that included rising operating expenses. Investors focused on the balance between continued high growth and stepped-up spending ahead of the holiday season.

In the third quarter of 2026, Shopify posted adjusted earnings per share of $0.49, topping the $0.47 consensus estimate. Revenue reached $3.74 billion, matching Wall Street’s forecast and rising 32% year over year, reflecting continued expansion across its merchant base and payments ecosystem.

Gross merchandise volume for the quarter increased 29.5% to $119 billion, extending a run of strong transaction growth on the platform. Gross profit grew 28% year over year, and gross margin was 47.6%, unchanged from the prior quarter, as the company balanced investments with efficiency gains.

Free cash flow came in at $816 million, representing a 22% margin. Management said structural operating discipline and expense leverage contributed to an improvement in free cash flow margins, supported by efficiencies in areas such as payments and advertising products.

For the fourth quarter, Shopify expects revenue growth in the low 30% range, compared with 29% constant-currency growth in the same period a year earlier. The company projects gross profit dollars will grow in the high 20% range, indicating continued expansion but at a slightly slower pace than revenue.

Operating expenses are expected to rise to 29% to 30% of revenue in the fourth quarter. The increase reflects higher marketing spending and infrastructure investments ahead of Black Friday and Cyber Monday, as well as other holiday-related activity. Shopify also expects free cash flow margin to be in line with the prior year’s fourth quarter.

Management emphasized that some marketing spend had shifted into the fourth quarter and framed the higher expense levels as aimed at supporting growth rather than signaling a change in strategy. Nonetheless, the combination of rising costs and only in-line Q3 revenue appeared to weigh on sentiment.

Alongside its financial results, Shopify highlighted ongoing momentum in AI-driven and so-called agentic commerce, enterprise merchant wins, offline retail and international expansion. The company pointed to rising AI-related traffic and orders and noted that it is integrating with major AI channels to support discovery and purchasing.

Shopify reported that AI traffic was up 2.6 times year over year in the third quarter, with orders growing 3.3 times, and said AI-attributed purchases were skewed toward a broad range of product categories. Management also reiterated that it expects cumulative gross merchandise volume on the platform to surpass $2 trillion by the end of 2026.