Table of Contents
1. Shopify (SHOP) – Earnings Review
Shopify offers a full suite of services to take the headache out of managing a business for their merchants. They call it the commerce operating system, with tools that range across web building, payments, cross-border compliance, advertising, and so much more.
My Shopify deep dive can be found here. You may want to read a few of the more recent earnings reviews for a more current overview of the product suite, but that offers a great overview of the overarching business and approach.
a. Key Points
Strong North American acceleration.
AI is providing real merchant and financial value today.
The free trial subscription solutions headwind is now behind the company.
Growth from AI shopping surfaces is soaring.
b. Demand
Beat revenue estimates by 2.5% & beat low-30% revenue growth guidance.
32% constant currency (CC) revenue growth beat 31% growth estimates.
Revenue growth was 33% in North America compared to 28% growth last quarter, as their largest market accelerates Q/Q.
Beat Merchant Solutions revenue estimates by 2.9%.
Beat subscription solutions revenue estimates by 0.9%.
Subscription solutions growth was held back by free trial lengthening last year. Shopify has now lapped this headwind, and growth will normalize next quarter.
Beat gross merchandise value (GMV) estimates by 2%.
European GMV was highlighted as a standout with 35% CC growth. This follows mid-30% growth throughout 2025, as Shopify builds on the momentum.
Offline GMV rose by 33% Y/Y vs. 29% growth last quarter and 23% Y/Y growth last year. Really nice acceleration.
Business to Business (B2B) GMV rose by 80% Y/Y vs. 84% growth last quarter and 100%+ Y/Y growth last year.
Beat gross payments volume (GPV) estimate by 1.4%.
Shop Pay (their checkout accelerator) generated 59% Y/Y volume growth as it rapidly takes share from PayPal and others.
Beat $211M monthly recurring revenue (MRR) estimates by $1M.
c. Profits & Margins
Beat 48.4% GPM estimates by 40 basis points (bps; 1 basis point = 0.01%).
Beat 38.2% merchant solutions GPM estimate by 80 bps.
Missed 80.7% subscription solutions GPM estimate by 40 bps.
GPM outperformance was thanks to revenue outperformance and, to a lesser extent, a temporary tailwind from a change in developer revenue share structure.
The economies of scale are driving GPM leverage, while hefty investments in AI product improvements are offsetting some of this expansion by design.
Beat GAAP EBIT estimates by 16% & beat operating expense guidance.
OpEx rose by 32% Y/Y, which was higher than expected due to variable costs associated with revenue outperformance.
OpEx was 37% of revenue vs. 41% Y/Y.
Loan loss rate fell Y/Y.
Headcount is not growing much and that’s expected to be a theme going forward.
They’re enjoying material marketing performance improvements (Especially in Europe) that are prompting more aggressive spending.
Beat FCF estimates by 8%. Beat $0.33 EPS estimates by $0.03 or 9%.
d. Balance Sheet
$5.7B cash & equivalents.
$4.9B in investments.
No debt.
0.6% Y/Y dilution.
e. Guidance & Valuation
Guided to “high-20%” revenue growth compared to 26.5% growth estimate.
Growth rates are supposed to be similar compared to Q1, but the foreign exchange tailwind will shrink from 200 bps to 50 bps, which is why the company did not again guide to a low-30% growth rate.
Guided to “mid-20%” gross profit growth compared to 24% growth estimate.
Ongoing GPM contraction is as expected and via structural mix shift to its lower-margin merchant solutions category.
Operating expenses as a percentage of revenue are expected to be 35.5% vs. 38% Y/Y.
Guided to “mid-teens” FCF margin compared to a 16% margin estimate.
FCF margin is going to get a 50 basis point tailwind from a reclassification of its capital loans based on changing Canadian regulation.
f. Call & Release
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