Shopify still has a 37% upside, this analyst says

ATB Capital Markets analyst Martin Toner says Shopify’s (Shopify Stock Quote, Chart, News, Analysts, Financials TSX:SHOP) Q2 results should show whether the company can sustain its growth momentum while expanding its use of artificial intelligence.

In a July 20 preview, Toner maintained his “Outperform” rating and $240.00 target on Shopify. His target implies a 37% return.

Shopify is scheduled to report Q2 results before market open on Aug. 5.

“We believe if SHOP discloses higher AI spend, investors will conclude that the spend has attracted ROI and new revenue streams,” Toner said.

Shopify reported 34% revenue growth in Q1 to $3.17-billion, while gross merchandise volume surpassed $100-billion.

For Q2, management guided for year-over-year revenue growth in the high-20% range and gross profit dollar growth in the mid-20% range. Operating expenses are expected to be 35% to 36% of revenue, with stock-based compensation of about $145-million and free cash flow margins in the mid-teens.

Toner said investors will focus on gross merchandise volume as a measure of transaction activity across Shopify-powered stores. Subscription solutions revenue will be watched for signs of merchant acquisition and retention of larger enterprise customers, while merchant solutions revenue will show adoption of services such as Shopify Payments, capital offerings and delivery tools.

AI adoption will also be a key focus.

“We are tracking how deeper merchant engagement with the platform’s core AI assistant, Sidekick, translates into retention and software upgrade cycles,” Toner said.

The analyst expects updates on newer AI features, including Sidekick Pulse, natural-language workflow automation and custom app generation. Toner said investors will look for evidence that those tools are improving storefront conversion rates or reducing churn among small and midsize merchants.

Toner also expects management to discuss capital allocation after increasing its share repurchase program by $3.0-billion, along with foreign exchange pressure, international sales and spending plans for the rest of 2026.

He expects Shopify to generate Adjusted EBITDA of $2.03-billion on revenue of $14.47-billion in fiscal 2026, improving to Adjusted EBITDA of $3.63-billion on revenue of $17.74-billion in fiscal 2027.

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