I am wondering if Magento can hold unlimited number of products. Is there any limit in Magento about amount of products we can have?

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At a base technical level, the self-installed software will support an unlimited number of products. But as your catalog grows, you may start running into resource limitations that'll require hosting upgrades, etc. That link has some discussion around the matter.

The hosted Magento Go service does have catalog limitations, based upon what plan you go with.

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