Shopify’s incredible earnings + bad narrative

🧠 Takeaways:

Shopify's stock is crashing after a great performance but a bad narrative.

1. No one knows how to place their AI narrative.

2. It’s time to figure out payments.

3. They’re launching a $2b stock buy back. 👋👋 growth era.

+ We’re hiring our first team of AI agents.

LBAB Community:

AI (Claude) + AI agents (OpenClaw) are good enough that they are replacing hires or at least delaying them for us across everything I’m working on.

A couple examples: 

1) The new Claude code + Webflow connector fixed 15 bugs + updates on our site. Diagnosed, planned, and executed in the browser. 

That wasn’t necessarily gonna be an FT hire, but we would have needed to hire an agency in the near future.

Now, I don’t see the need for one for a while. 

2) YouTube Script writer.

I’m launching a new YouTube show where there’s a lot of research and script writing as prep. 

(Going to be a big evolution of this newsletter.) 

It’s gotten good enough that it did the research, wrote the outline, took the feedback, and turned into a script that sounds like how I talk. 

It’s honestly 90% of the way there in terms of feedback, coaching, and editing from me. We won’t need to bring in a producer/researcher to get going.

3) UX/UI Designer

Between my Claude Spec scopes and our developers’ Claude code builds, we can ship things so efficiently we don’t need a UX/UI designer for research, designing, prototyping, and specing. I’m doing all of it.

The craziest part here is how smart and how fast it’s moving from here. 

In the next 3 months, we will be able to use five more AI agents to do the functions that we may or may not hire this year, but we probably would’ve next year.

Openclaw is the Agent moment. 

Just like ChatGPT was for LLMs back in 2022.

Let’s Examine This Biz

Note: As always, none of what follows is legal, tax, investing, financial, or any other sort of advice. And I was never here.

Shopify just dropped their 2025 earnings and the market’s volatile reaction is a good summary for a company that has strong growth, investing a ton in AI, and running stock buy backs.

• Share price: $110

• Market Cap: $144B

• L5 Performance: -24%

• P/E Ratio: 117x

The stock has had a considerable sell-off since the start of the year, but Shopify has been shipping Features, AI, Revenue, Profits, FCF. 

Financial Summary

2025 Financial Statements (YoY Comparison)

Sales: $11.6B (+30%) 😮
Gross Profits: $5.5B (+25%) 💪
OPEX: $4B (+17%) 👍👍
Net Income: $1.5B (+50%) 😍

FCF: $2B (+25%) 🤤

Link to Company’s earnings

TLDR Analysis: Money Machine is printing

• Rev growth ~2x OPEX YoY Growth. HELLO AI!! 🤩

• Net Income up 50% YoY!! FOR THE YEAR! 😍🤤

• Gross Profits not growing as fast as Rev. 😶

This is what top of the game operating looks like. 

To be accelerating growth at this scale is impressive but also shows how profitable a true software biz can be at scale when you flip the switch. 

This is every VC’s dream endstate when they invest in the couple of people in a garage.

Let’s TLDR This Biz

You know where Shopify got started, the rise, and where it currently is.

Let’s Discuss This Biz

Here are the 3 actual insights into Shopify’s stock.

1) Everyone is missing Shopify’s AI Play

Investors selling the stock because of their investing (too much of their free cash flow in AI + over general fear of AI) shows how little investors understand about AI and Shopify’s position in that landscape.

Everyone misses this in the SaaS versus AI debate. You’re not gonna wanna pay a monthly usage fee for your product catalog and basic sales infrastructure. 

A monthly recurring platform model is the best value aligned model for everyone.

Why?

In the past 2 weeks, I've run a $500/week bill on Claude (Code + Openclaw) because it’s a usage basis model. It’s doing tasks for me, not keeping my core business operating. 

The AI pricing model doesn’t work for core ecom platforms. 

Brands aren’t going to want a variable fee every month for their product catalog.

Most ecom brands would implode if their core platform fees varied 20–500% week over week.

Brands will continue to pay Shopify for the product catalog and syncing to any other sales venue (Site, Social, Agent). 

Whether AI is getting more or less expensive, bigger or smaller, Shopify has positioned themselves as the platform to connect to in any future AI paradigm.

Brands will continue to use it as the central nervous system, and until AI can disrupt the core payment infra of the world, they’ll still collect their 2.9% + $0.30.

Takeaway: Too much AI noise. Not enough substance

2) Now we need to deal with Payments

The Stripe-Shopify partnership might go down as one of the most successful growth tactics of all time. 

But at Shopify's scale, it's time for them to figure out a better solution.

80% of Shopify’s $11.5B annual rev from Payments means Shopify paid Stripe ~$5.5B last year. 

Take a minute.

Remember that Shopify’s TOTAL ANNUAL Gross Profit was $5.5B. 

There will always be some cost to payment processing.

But let’s say Shopify uses all that AI + I don't know, maybe $2B in cash sitting around to live out every AI thotboi’s dream of building out their OWN payment processing system.

Let’s say that it still costs them $2B/yr to process payments from all the costs of running this themselves. 

We still just added $3.5B in pure Gross Profits every year at the current Rev scale without changing anything else about the biz.

Now, this is an enormous undertaking and would require a ton of work, but…

They are firing on all cylinders. AI tooling makes these types of enormous moves possible. Payments is overtaking the entire biz.

SaaS subscriptions are only 20% of their rev. This isn’t a SaaS biz anymore.

Takeaway: Turn your greatest cost center into a profit center.

3) I hate the buy back

This is what big old steel companies (that have no idea what to do with their cash) do or what Apple (who doesn’t know how to invest in the future) does.

It doesn’t make sense when Shopify has massive growth investments to make to chase the huge AI future. 

Why not keep the $2B in cash, go after big R&D projects like potentially building an AI version of a payment processor (largest profit lever possible), building game changing new AI features, or acquiring new hot up-and-coming companies.

I get that they’re giving the finger to the market and that they think that the stock price is undervalued (and they want to increase it), but it’s just such a bad move when you have this massive market shift so many things are in flux. 

That $2 billion would be put to such better use to grow the business and hit hyperscaler scale, which is now a legitimate conversation.

Takeaway: Buy Backs signal the end of the growth era.

Final Thought

This is another quarter of unbelievably strong growth and performance from Shopify, but it got caught in a poor narrative. 

They’re investing heavily in AI, which brought down FCF for last year and projections for upcoming quarters, but they’re also buying back $2 billion in stock.

They’re in this weird no man’s land where they’re both investing too much and not enough in the future. 

Anyone’s opinion on “the right amount” doesn’t matter, but they need a clearer story on which strategy they are pursuing.

They have not flipped the switch into absolute cash machine because they see growth opportunities.

It’s a painful part of the transition process, but their numbers still look good. 

People are upset that they missed their adj EPS by $0.02 while their GAAP EPS beat expectations. 

I cannot tell you how much that bothers me. 

Adjusted numbers are made up, non-verifiable information that isn’t regulated because we have an entire accounting and financial system based on the appropriate ways to look at the numbers.

The real numbers (Rev and Profits) crushed, but since the adjusted numbers were slightly off, the stock took a hit. 

It’s ridiculous but goes back to why Shopify really needs to clear up the narrative. 

Are we still completely investing in the AI future, making it all about growth and hitting next-level scale, potentially becoming a hyper scaler, or do we want to pull back and leverage the cash that we have and become an absolute ATM?