Will Shopify Stock Be Worth More Than Amazon by 2035?

Shopify (SHOP -1.28%) stock may have finally positioned itself for a full recovery. A solid third-quarter earnings report on Nov. 12 sent the softoware-as-a-service stock to its highest point since early 2022. Although it is still 38% below its 2021 high as of the time of this writing, the 21% gain in the trading session following the report shows a change in sentiment.

This is arguably the most consequential e-commerce stock in North America, next to Amazon (AMZN -1.86%). For now, Amazon remains a far larger company, boasting a market cap of over $2.2 trillion versus Shopify's market cap of approximately $140 billion.

Nonetheless, Amazon's online sales business has slowed considerably as Shopify reaches multiyear highs. Does this mean investors should expect Shopify to surpass Amazon in market by 2035?

Shopify vs. Amazon

Investors should remember that Shopify and Amazon are not direct competitors, for the most part. Shopify offers an e-commerce platform and an ecosystem to help online sellers. It is primarily a software provider enabling merchants to sell online independently.

In contrast, Amazon's largest source of revenue is online selling. It sells goods it buys and operates a logistics network to move products. Investors may remember that Shopify attempted to enter the logistics business, only to decide it was not a profitable move, and went back to selling software.

The part of Amazon that more closely competes with Shopify is its third-party seller services. It allows merchants to list goods on its site and then claims a fee or a percentage of the sales revenue for each item sold. Although merchants can capitalize on Amazon's website to sell goods, the fees can become quite costly, creating some incentive to operate a website on an independent platform like the ones Shopify supports.

Despite that advantage, Shopify is a much smaller operation as the market cap difference implies. In the first nine months of 2024, Shopify's $6.1 billion in revenue was 23% higher than the year-ago period. In contrast, Amazon reported $371 billion in North American and international revenue for the same period. Still, that grew by only 10%.

Additionally, Shopify reported an operating margin of around 10%. Due to Amazon's high fixed costs, the operating margins of the two segments I mentioned came in under 5%, appearing to give Shopify an advantage.

Why Amazon might have an advantage

Investors comparing Amazon and Shopify can't forget about Amazon's AWS, the company's cloud computing arm. Through AWS, Amazon pioneered a second major tech-related segment that transformed an entire industry. Although competitors like Microsoft and Alphabet emerged, Amazon claims the largest market share in the cloud computing space.

Additionally, the rise of artificial intelligence (AI) has enhanced this advantage. While Amazon has had to spend heavily to stay competitive in AI, AWS runs AI-driven workloads, making it a critical part of a cutting-edge industry.

During the first nine months of 2024, AWS revenue was almost $79 billion, and it reported an operating margin of 38%. That allowed AWS to account for $29 billion of Amazon's $47 billion operating income.

Hence, when one compares the total operating margin of the two companies, Amazon claims a margin of 11%, slightly ahead of Shopify's 10%. This means Amazon's enormously larger size is not slowing it down despite its need to put forth more output to earn higher growth percentages.

Is Shopify going to catch up to Amazon by 2035?

Despite Shopify's impressive growth and increased importance in the e-commerce industry, investors should not expect it to surpass Amazon's market cap by 2035.

A smaller company like Shopify is in a better position to grow faster, and it could surpass Amazon's growth rate on a percentage basis and experience faster stock price growth over the next 11 years.

Nonetheless, Amazon is almost 16 times the size of Shopify, as measured by market cap, and it won't be standing still as the years rolls on. Moreover, the AWS side of Amazon's business is on track for rapid growth, which will significantly increase the size of Amazon's overall business. Those factors mean Shopify is unlikely to surpass Amazon anytime in the foreseeable future.