Shopify did almost everything Wall Street asked for in the third quarter. Investors sold the stock anyway.
Shares fell as much as 13.2% on Nov. 3 after the e-commerce platform reported results, The Motley Fool reported. Revenue rose 32% to $3.74 billion, and free cash flow hit $816 million, according to Shopify.
So why the selloff? A Deutsche Bank research report shared with TheStreet points to a problem most companies would love to have. Shopify has trained investors to expect beats, and this time the company only almost matched expectations.
Three numbers that spooked Shopify investors
Deutsche Bank analyst Bhavin Shah summed it up in a Nov. 3 note titled “3Q26 First Take; In-line quarter not enough.”
“While ~30% GMV [gross merchandise volume, which means the value of goods sold through Shopify] and revenue growth remains impressive, the lack of upside will be viewed as disappointing given (1) outperformance has been the norm and (2) the belief there could be very modest benefit from agentic commerce,” wrote Shah.
Here’s where the quarter came up short.
Merchandise volume. GMV rose about 29.5% to $119.1 billion. Wall Street expected a rise of 30.5%, to about $120.08 billion, the consensus target cited by InvestorsHub.
That’s a miss of under 1%.
Subscriptions. Subscription revenue rose 20% to $836 million, short of the $850 million expected. Shah wrote that the miss “could indicate potentially slower platform fee growth.”
Next quarter’s profit. Shah’s estimated guidance implies about $892 million in non-GAAP operating profit, versus a Wall Street consensus of $999 million. By my math, that’s roughly $107 million, or 11%, short. But these are estimates, not actual results.
Related: Morgan Stanley sees golden buying opportunity in a battered stock
None of these is a disaster on its own. Together, they broke the beat-and-raise streak investors had been paying up for.
Shah kept his Buy rating and $185 price target. The stock closed at $156.22 on Nov. 2, the note showed, so the target implied about 18% upside before the drop.
Where Shopify’s AI money is going
Non-GAAP operating profit reached $715 million, a 19.1% margin, ahead of Wall Street’s $678 million, Shah wrote–so Shopify beat that profit forecast.
The pressure shows up in costs. Infrastructure spending rose $40 million from a year earlier, including cloud hosting, infrastructure software and large language model usage. That’s up from a $37 million increase in the second quarter.
“In our view, the increase likely reflects higher platform usage and rising AI-related costs,” wrote Shah.
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Shopify’s pitch is that the spending is already paying off. AI-driven traffic to Shopify stores rose 2.6 times from a year earlier, and AI orders rose 3.3 times, Shopify President Harley Finkelstein said on the Q3 earnings call.
“Agents don’t just recommend products, but they’re also buying on behalf of some of the users,” Finkelstein said.
That last part matters for you as a shopper. If an AI agent ever checks out for you on a Shopify store, treat it like any purchase you made yourself and review the cart, price and return policy first.
For investors, the catch is timing. Shopify is paying for AI today, but agent shopping hasn’t yet moved GMV enough to show up as a beat.
Shopify is spending into the holidays
The fourth-quarter outlook gave investors something on both sides.
Revenue is guided to grow at a low-30s percentage rate, which Shah pegs at about 32% at the midpoint. Wall Street expected 30%.
Spending is the trade-off. Shopify guided operating expenses to 29% to 30% of revenue, above Wall Street’s 28%, the note showed.
CFO Jeff Hoffmeister said some third-quarter spending simply slid into the holiday quarter. “Some of the reduced spend will effectively shift to Q4, but nothing has changed about our marketing approach,” he said on the call.
Cash should hold up. Shopify guided its free cash flow margin to match the fourth quarter of 2025, which Shah puts at about $1.02 billion, ahead of Wall Street’s $984 million.
Before the call, Shah said investors would focus on four questions:
- Where GMV growth is coming from, and where it’s weak
- Early signs of agentic commerce in GMV and the financial model
- How much Shopify plans to invest in the fourth quarter
- How Shopify will make money from Sidekick, its AI assistant for merchants
My take: this looks more like a reset of expectations than a crack in the business. GMV growth in Europe and North America held steady at 30% and 28%, which Shah wrote “likely indicates momentum on key initiatives remains intact.”
The test comes next quarter. If agent-driven orders start lifting GMV, today’s AI bill will look cheap. If they don’t, that $107 million profit gap could become a pattern.
Related: Shopify’s booming sales come with a costly catch