Shopify High Growth: PayPal Under Pressure, Adyen Has Mixed Outlook
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Shopify High Growth: PayPal Under Pressure, Adyen Has Mixed Outlook
Shopify Q1 GMV accelerated YoY by 35%; its payment penetration and rapid Shop Pay expansion create negative competitive pressure on PayPal, while impact on Adyen is mixed.
- Shopify Q1 GMV grew 35% YoY to over $400 billion annualized, international business accelerating
- Shopify Payments penetration reached 67%, Shop Pay penetration in payments rose to 52%
- Shop Pay expansion directly erodes PayPal's high-profit share in SMB market
- Shopify's expansion in Europe may have caused PayPal's recent weakness in the region
- PayPal rated Market-Perform, TP $45; Adyen rated Outperform, TP $18.63(ADR)/€1,600
Report interpretation
Overview
Bernstein analyzed Shopify (non-covered) FY2026 Q1 performance to extrapolate cross-industry impact on two payment leaders PayPal and Adyen. Shopify Q1 report showed strong momentum, especially in international markets and rapid increase in payment penetration. The report believes this growth trend creates negative competitive pressure on PayPal as Shop Pay erodes its market share; for Adyen it is mixed, with both competitive squeeze effects and industry-wide digital payment pull factors.
Core views
Negative Impact on PayPal: Shopify and PayPal are partners, but Shop Pay penetration in Shopify Payments continues rising (Q1 reached 52%), directly eroding PayPal's share in SMB market. SMB market is indeed PayPal's most profitable segment. Additionally, Shopify's strong expansion in Europe (Europe GMV reported growth 48%) may be one reason for PayPal's recent weakness in Europe region, where it also faces competition from emerging forces like Klarna, Revolut Pay. Against backdrop of guest checkout mode gradually being phased out, still questionable how PayPal Branded business turns things around in tough competitive environment. Mixed Outlook on Adyen: Compared to direct squeeze on PayPal, Shopify's growth impact on Adyen is relatively complex, existing positive and negative factors (puts and takes), belongs to mixed situation. However report did not elaborate specific positive or negative driver details. New Trend in Agentic Commerce: As founding member of Google UCP protocol (for Agentic Commerce), its product catalog has structured attributes for over 1 billion products. According to company disclosure, catalog-driven AI search traffic conversion rate is 2x general AI search traffic, this emerging trend worth close monitoring.
Analysis framework
This report adopts a Cross-boundary mapping (Read-across) analysis approach: by observing quarterly performance and business metric changes of a major ecosystem platform (Shopify), to deduce potential impact on upstream/downstream or competitors. In specific deduction, analysts grabbed Shopify core operational data—GMV growth, payment penetration (Shopify Payments as % of GMV) and core payment tool penetration (Shop Pay as % of Shopify Payments), using them as proxy indicators for measuring competitive intensity. By confirming Shop Pay penetration rise in SMB and Europe markets, logically mapped this supply-side change to judgment that PayPal share in high-profit segment is squeezed.
Methodology notes
Payment Penetration Analysis
Refers to ratio of payment processing service to total platform transaction volume (GMV). Report tracks continuous rise of Shopify Payments penetration (reached 67%) and Shop Pay penetration (reached 52%) to judge Shopify is internalizing more payment business, thus directly squeezing third-party payment providers' survival space.
Price-to-Earnings (PE) and Price-to-Earnings-to-Growth (PEG) Valuation Method
Report uses PE valuation for PayPal, giving 8.5x FY27E PE (based on $5.30 EPS forecast); for high-growth Adyen uses PEG valuation, giving 1.6x PEG (based on 23% expected earnings CAGR). PEG compares valuation rationality of companies with different growth rates by dividing PE by earnings growth.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- PayPal Holdings Inc (PYPL)Damaged: Shop Pay penetration rise directly erodes its SMB market share and profit
- Strengths
- Still holds high market share in Europe (e.g. Germany) and enjoys higher cross-border transaction profits
- Weaknesses
- Branded business turnaround difficult, core guest checkout mode gradually being phased out, market share eroded by Shop Pay
- Comparison
- On defensive in competition with Shopify, high-profit SMB business squeezed
- Risks
- Increased competition causes core transaction volume slowdown; eBay business loss faster than expected; Macro and FX impact on cross-border transaction volume
- Adyen NV (ADYEY / ADYEN.NA)Mixed: Shopify's growth impact is positive and negative
- Strengths
- High earnings growth expectation (FY25-27 CAGR 23%), receives Outperform rating
- Comparison
- Less directly impacted by Shopify compared to PayPal, impact relatively complex
- Risks
- POS business execution weak; Hard to win more share from existing merchants; Competition environment intensifies; Greater pricing pressure
Key data
- Shopify GMV Growth Rate35% YoYQ1 GMV accelerated growth to exceed $400 billion annualized
- Shopify International GMV Growth Rate45% YoYEurope market reported growth 48%, constant currency growth 35%
- Shopify Payments Penetration Rate67%Higher than same period last year 64%
- Shop Pay GMV$35 billionQ1 YoY growth 59%
- Shop Pay Penetration Rate52%Share within Shopify Payments, higher than 46% same period last year
- PayPal Target Price$45.00Based on FY27E 8.5x Non-GAAP PE (includes SBC), EPS forecast is $5.30
- Adyen Target Price€1,600 / $18.63Based on FY27E 1.6x PEG, FY25-27 earnings CAGR expectation is 23%
Impact & implications
The report believes Shopify plays an increasingly central aggregator role in e-commerce transactions. E-commerce platforms other than Amazon and Shopify may show quite weak growth. For PayPal, this means its core SMB merchant business faces structural pressure, making it harder to turn around branded business to profitability. Meanwhile, Shop Pay's rise demonstrates huge power of e-commerce platform internalizing payment processes, which will continue reshaping profit distribution landscape in digital payment market.
Risks
- Sensitivity of macro economy to revenue and valuation multiples
- FX volatility and its impact on cross-border transaction volume
- Increased competition and market maturity causing accelerated slowdown in core transaction volume
- Execution issues during cooperation implementation
- eBay business loss speed faster than expected
- Greater pricing pressure
- POS business opportunity execution poor
- Hard to win more share from existing merchants
What to watch
- Impact of Shopify's continued expansion in Europe market on PayPal's business in that region
- Progress on PayPal Branded business turnaround and performance of non-brand payment cooperation with Shopify in France
- Progress of Shopify Agentic Commerce and Google UCP protocol and AI search conversion rate trends
- Attractiveness of PayPal new checkout experience (Fastlane, PayPal Everywhere) and buyback strength
- Progress on Adyen POS business execution and expanding share from existing merchants