AI search opens incremental opportunities among long-tail merchants, while Shopify’s growth and share-gain trend continues

Overview

The report reiterates a positive view after Shopify reported second-quarter 2026 results. The company’s share price rose 18% intraday, reflecting accelerating revenue growth and third-quarter guidance that significantly exceeded expectations. Goldman Sachs believes Shopify has the characteristics of strong customer stickiness, continuous innovation, and high user engagement; even after the share price increase, its valuation remains misaligned relative to its medium- to long-term growth trajectory. AI search and agentic commerce are still in the early stages, while enterprise business and the partner ecosystem continue to expand, adding to broad-based growth across existing merchants, regions, and channels.

Core views

First, AI search can match buyers based on richer product attributes and constraints, improving discovery efficiency for non-hit and differentiated products, and therefore is particularly beneficial to Shopify’s SMB and long-tail merchants. Second, Shopify Catalog, as a structured data layer connecting merchants with AI agents, is the company’s core differentiated capability in AI search. Third, while Sidekick and Campaigns are not directly monetized, they can indirectly contribute platform revenue by improving merchant operating efficiency and GMV. Fourth, Shopify’s GMV growth continues to significantly outpace the U.S. e-commerce market, indicating that company-specific share gains are continuing. Fifth, supported by strong core business performance and the gradual scaling of new growth drivers, Goldman Sachs expects constant-currency revenue growth to remain above 30% for the rest of 2026.

Analysis framework

The report compares second-quarter actual results with consensus expectations and combines this with third-quarter management guidance to assess near-term growth momentum; evaluates share changes by comparing Shopify GMV growth with U.S. e-commerce GMV growth; analyzes the commercial impact of product innovation using AI-attributed orders, traffic, conversion rates, and Sidekick usage data; raises 2026–2028 revenue, earnings, and cash flow forecasts in the financial model; and derives the 12-month target price using a 63x valuation multiple on Q5–Q8 unlevered free cash flow forecasts.

Methodology notes

• Business quality frameworkHigh-quality sticky business framework

  Buy sticky companies that continuously innovate, are loved by customers, and have high engagement when share prices are mispriced.

  Goldman Sachs views Shopify as a representative high-quality sticky business, believing that its product innovation, merchant engagement, and ecosystem expansion can support durable growth.

• Market share analysisGMV growth multiple

  Measure the platform’s relative growth and share momentum by dividing Shopify’s constant-currency GMV growth by U.S. e-commerce GMV growth.

  The current multiple is approximately 3.0x; although it narrowed sequentially, it still improved year over year. This metric has remained above 2.5x for eight consecutive quarters, aligning with the timing of the company’s increased investment since the first quarter of 2024.

• Valuation methodsUnlevered free cash flow multiple method

  Apply a target valuation multiple based on future Q5–Q8 unlevered free cash flow forecasts.

  The target price uses a 63x Q5–Q8 unlevered free cash flow valuation, above the previous 60x, with the adjustment based on factors including higher comparable-company valuation multiples.

• Multi-factor assessmentGS Factor Profile

  Comprehensively compare growth, financial returns, and valuation multiples, and form an integrated percentile metric.

  Growth metrics are based on forward sales, EBITDA, and EPS growth; financial returns are based on ROE, ROCE, and CROCI; and valuation metrics include P/E, P/B, EV/EBITDA, and EV/FCF, among others.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• SHOP.US

  Core recommended security

  Strengths

  Growth in the core merchant business is broad-based, and GMV growth continues to outpace the U.S. e-commerce market; Shopify Catalog, Sidekick, and the partner ecosystem constitute product and data advantages in the AI era; cash flow and profitability are expected to continue improving.

  Weaknesses

  Current agentic transaction scale remains small relative to overall GMV, valuation still depends on relatively high sustained growth expectations, and gross margin is forecast to gradually decline from 48.1% in 2025 to 45.0% in 2028.

  Comparison

  Shopify currently trades at approximately 40x in the upside scenario described in the report, while peers growing above 30% trade above 60x; its GMV growth multiple relative to the U.S. e-commerce market is approximately 3.0x.

  Risks

  Deterioration in the consumer environment, investments failing to translate into durable growth, margin dilution from additional investments, and intensifying competition.

Key data

• Second-quarter GMV versus expectations3% higherCompared with consensus expectations.
• Second-quarter revenue versus expectations4% higherSecond-quarter constant-currency revenue growth accelerated by approximately 100 basis points.
• Second-quarter EBIT margin versus expectationsApproximately 100 basis points higherBased on FactSet consensus expectations.
• Third-quarter revenue growth guidanceLow 30% range year over yearMarket expectations were approximately 27%.
• Third-quarter GAAP operating expense ratio guidance33%–34% of revenueManagement guidance.
• Long-tail distribution of AI-attributed orders75%In the second quarter, 75% of AI-attributed orders came from outside Shopify’s top 100 product categories.
• Share of AI-referred sessions landing directly on product detail pages50%Approximately 2.5x that of traditional search.
• Shopify Catalog product scaleMore than 1 billion itemsCatalog automatically standardizes and enriches data for products and their variants.
• Conversion rate of AI search supported by CatalogApproximately 2xRelative to AI search using web-scraped data.
• AI traffic and order growthBoth grew to approximately 3x year over yearAgentic transactions remain small relative to the current GMV base.
• Shopify GMV growth multiple3.0xConstant-currency GMV growth relative to U.S. e-commerce GMV growth; it has been above 2.5x for eight consecutive quarters.
• Sidekick activityDaily active merchants 3.6x, daily sessions 4.8xBoth are year-over-year changes; nearly 34 million conversations were processed in the second quarter.
• Sidekick custom appsMore than 36,000Above 12,000 in the first quarter.
• Effect of Sidekick personalized guidance+8%Increase in the share of merchants reaching five orders within 15 days.
• 2026–2028 revenue forecasts$15,251mn / $19,318mn / $24,149mnPreviously $14,818mn, $18,258mn, and $22,138mn, respectively.
• 2028 free cash flow$4,859.1mnCorresponds to a free cash flow per share forecast of $3.81.
• 12-month target price$194Previously $170, implying 57.3% upside from the current price.

Impact & implications

If AI search continues to shift from keyword ranking toward intelligent matching based on complete product attributes, it will increase exposure and conversion opportunities for long-tail products and smaller brands. With a structured Catalog of more than 1 billion products and a broad merchant base, Shopify is well positioned to become important infrastructure for AI agents to obtain product information and complete transactions. Because agentic transactions currently have the same economics as online store transactions, growth in AI traffic can translate directly into incremental platform GMV and revenue. Meanwhile, Sidekick’s support for analytics, reporting, marketing, and third-party app operations may improve operating efficiency for mature merchants and reinforce Shopify’s position as the primary merchant interface. If the company maintains growth above 30% and expands profit and free cash flow, its current valuation discount relative to high-growth peers may narrow.

Risks

• A deterioration in the consumer spending environment could weaken merchant GMV and payment activity.
• Investments in AI, products, and the ecosystem may fail to translate into higher and sustainable revenue growth.
• Continued increases in investment could dilute margins and delay the realization of operating leverage.
• Competition could intensify in e-commerce platforms, payments, marketing software, and AI agents.
• Agentic transactions are currently small in scale, and high growth in AI traffic may not translate into a meaningful revenue contribution as expected.
• The target price uses a 63x unlevered free cash flow valuation, making it sensitive to changes in growth expectations and comparable-company valuation multiples.

What to watch

• Whether third-quarter revenue can reach guidance in the low 30% range year over year, and whether the GAAP operating expense ratio can be controlled at 33%–34%.
• Whether constant-currency revenue growth can remain above 30% for the rest of 2026.
• The actual scale of AI-attributed traffic, orders, share of new buyers, and agentic transaction GMV.
• Search conversion rates and merchant monetization effects after Shopify Catalog connects to more AI agents.
• Sidekick daily active merchants, session volume, number of custom apps, and incremental contribution to merchant GMV.
• Whether Shopify’s GMV growth multiple relative to U.S. e-commerce GMV growth can continue to remain above 2.5x.
• Enterprise customer expansion, partner ecosystem growth, and cross-region and cross-channel growth.
• Whether gross margin, EBIT margin, and free cash flow can deliver on the raised forecasts.