Is Shopify Falling Behind in the AI Race?

Shopify’s latest earnings report has reignited concerns about the future of traditional software companies in an AI-driven market. After missing revenue and earnings expectations for Q4 2025, SHOP stock plunged nearly 18% within 24 hours, wiping out significant market value and signalling investor unease.

While the headline numbers showed only modest misses, the underlying concerns run deeper. Rising customer acquisition costs, slowing international expansion and increasing merchant churn suggest structural pressures building within Shopify’s business model. More importantly, management acknowledged intensified competition from AI-native e-commerce solutions, highlighting a broader shift in how merchants access advanced tools.

AI-driven platforms are increasingly offering standalone solutions such as inventory optimisation, dynamic pricing and personalised marketing without requiring full SaaS ecosystems. This shift is contributing to what traders describe as the “great rotation”, where capital is flowing away from legacy software stocks and into AI-first infrastructure plays.

Although Shopify has introduced AI features such as Shopify Magic, the question remains whether these additions are enough to defend margins and maintain competitive advantage.

Read more on how AI-driven competition and sector rotation are reshaping Shopify’s long-term outlook