Hey guys. About 15 hours into the work day after a marathon day yesterday. If there's an extra typo or two in here, I apologize.

The brief AMD snapshot is for everyone. The detailed Shopify and Coupang reviews are for paid readers. Upgrade to read the full article.

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In case you missed it:

A review of its most recent Investor Day can also be found here (section 4). The deep dive can be found here.

“We build what merchants need, we ship relentlessly, and we grow consistently.” – Shopify President Harley Finkelstein

Merchants with $25M+ in GMV outpaced the growth of other cohorts, as it added large brands such as ELF and Estée Lauder while enjoying strong ramps for recently migrated enterprises. Other large merchant wins included Welch’s, FanDuel and Stokke. When looking at regions, Europe was again the standout as expected, as GMV soared by 42% constant currency (CC) Y/Y. And while that continent showed great promise, North America was very strong as well. All in all, this marks the fastest pace of GMV growth since 2021.

Slower subscription solutions growth is related to the ongoing change from 1-month paid trials to 3-month paid trials. This will remain a material comp headwind for this revenue bucket and MRR until next summer. They enjoyed their first normal Q/Q comp since the change and growth recovered exactly as anticipated, adding confidence that this snapback is inevitable. The team remains highly confident that this will be positive for structural subscription growth once the comps are lapped. It’s granting merchants more time to explore the product suite and set their operations up for success and longevity.

Subscription solutions GPM contracted Y/Y mainly due to higher AI and hosting costs.  Merchant solutions GPM contracted Y/Y due to the expanded PayPal relationship, with this profit headwind set to diminish going forward. They’re also lapping higher non-cash partnership revenue, which comes with very high GPM. Finally, the ongoing shift to Shopify Payments, which rose to 65% of revenue vs. 62% Y/Y. They’re more than fine with this trend, as it drives strong cross-selling and still solid EBIT margin on its own. Overall GPM fell because of these same items and ongoing revenue mix-shift towards merchant solutions.

Transaction and loan losses were a bit high at 5% of revenue this quarter. That’s related to “some testing and experimentation with merchant onboarding." Growth in Shopify Capital at slightly elevated loss rates hurt as well, although Q4 is “trending below Q3 and year-to-date” levels.

GAAP net income is noisy for SHOP. It’s better to focus on FCF and GAAP operating income, as EPS is a byproduct of mark-to-market equity valuation swings. They do not make non-GAAP adjustments to exclude this. My GAAP net income margin data below excludes the noisy equity investment item.

Shopify trades for 95x forward EPS. EPS is expected to compound at a 28% clip through 2026 and 2027, following 17% growth in 2025 (ex-equity investment help from this quarter). 2025 EPS estimates are up 5% year-to-date. 2026 estimates are flat year-to-date.

A lot of the prepared remarks were spent talking about Shopify’s holistic merchant support. They extensively reviewed Shopify’s value-building products across every facet of merchant operations and how they “take the headache” out of starting a business. For those interested in that qualitative commentary, I’d refer you to the deep dive linked to the top of this article.

Tariffs, the Consumer & Macro:

Shopify isn’t seeing macro weakness like so many other parts of the consumer economy are. Tariffs and the elimination of de minimis exceptions haven’t slowed this business down. They’ve seen some merchants raise pricing but volume – including cross-border – was robust.

“Shoppers keep buying and returning. Demand remains really resilient across channels and categories.” – Shopify President Harley Finkelstein

More Product Updates:

Merchant adoption of its campaign building and management tool (fittingly named Shopify Campaigns) rose 4x Y/Y while budget commitments rose 9x Y/Y. They added more objectives to optimize for and upgraded the AI ranking algorithm with “good early results in terms of performance gains.” Next, it sounds like ads will be a growing focus area for the roadmap next year. Harley hinted at ad product expansion being an increasingly prioritized GMV growth opportunity for the company. For context, around 20% of its merchant spend is on advertising, yet it’s a tiny fraction of that for Shopify GMV.

Shopify also added several new shipping partnerships. It has worked hard to build out this roster, following the correct decision to sell Shopify Fulfillment Network (SFN) a few years ago. As covered in recent weekly articles, they partnered with Amazon Multichannel Fulfillment and DHL Fulfillment Network for more fulfillment options and several new carriers, including Royal Mail. Several of these partnerships delivered duty paid (DDP) formatted, eliminating customs delays in international trade that materially weigh on conversion rates.

AI:

As a reminder, last quarter Shopify debuted ShopLite as a suite of apps and integrations with AI providers that seamlessly plug merchant catalogs into chatbot databases via Catalog. Merchants can also use Checkout Kit to add their checkout pages right to LLM responses and Universal Cart to store several different products in a cart across several different merchants for a single, native checkout. This already has tight integration with Microsoft Copilot and ChatGPT. Finally, they’re hard at work on post-purchase tools to drive repeat purchasing and better customer service.

As AI pushes commerce from search to conversational engagement, Shopify is clearly making sure their merchant products show up, regardless of how traffic evolves. Along those lines, they’ve inked partnerships with OpenAI and Perplexity for the Catalog product to ensure their customers will not be left behind if agentic commerce proliferates, and with AI-driven traffic to Shopify merchant stores up 7x year-to-date, that’s happening.

Aside from “helping merchants sell everywhere,” AI is making merchants more efficient. Its AI Sidekick (appropriately named “Sidekick” – how do they come up with this stuff?) enjoyed 750,000 new merchant users during the quarter. It’s gaining rapid adoption and showing that Shopify can ship AI-powered innovation that actually creates real value. Generally speaking, more automation with product onboarding and usage is reducing website creation friction ever further, allowing Shopify to incrementally grow the market while taking meaningful share.

Shopify has also used AI internally to make merchant feedback organized and searchable while expediting employee insight forming. Generally speaking, they’re finding numerous ways to deploy this technology both for internal cost savings and better product work.

“Hundreds of thousands of merchants are running core parts of their business using Sidekick. In fact, conversations can cover everything from analytics and building new customer segments to automating better SEO and so much more.” – Shopify President Harley Finkelstein

Payments & Checkout:

Shop Pay GMV (its accelerated consumer checkout product) rose 67% Y/Y to $29B. Its cross-border management product (Managed Markets) added a new Shop Pay integration, while it introduced installment payments in the UK. Accordingly, the pace of payment product rollouts globally has noticeably picked up. It launched its point of sale offering in 3 more countries, its tap-to-pay feature in 7 new countries and doubled Shopify’s Capital’s (credit product) global footprint year-to-date. The Shop App (its consumer-facing shopping app) also entered new markets with automated language translation in 6 new markets.

Shopify Payments as a portion of total GMV in Europe picked up momentum. It rose 50% faster than the rate of growth last year and powered Europe’s rise to 21% of GMV vs. around 20% last year.

Great quarter. They’re shipping with unmatched velocity, rapidly expanding globally, successfully cross-selling all of their products, sharply accelerating growth and taking material market share. We’ve all been trained to expect that from Shopify, but now they’re doing all of this with strong GAAP margins and ramping cash flows. There is nothing in here to pick at. The only issue for this company is the sky-high valuation. That is why a masterful report like this one wasn’t cheered by Mr. Market and why I’ve trimmed shares of this position more aggressively than any other name this year.

Coupang is an e-commerce and logistics giant in Korea. It’s quickly expanding into food delivery, entertainment, financial services and also more countries. The company “exists to deliver new moments of WOW for customers,” which is why its membership program is called “WOW.” Coupang’s Product Commerce offerings include its budding marketplace and fulfillment services.

The firm has two selling formats for their merchants. First, they operate a traditional marketplace where 3rd-party vendors can list products. A big piece of this is Fulfillment & Logistics by Coupang (FLC). FLC is quickly growing as a percentage of its overall product offering and business. It’s very similar to Amazon’s 3rd-party seller business, as it allows merchants selling through its platform to use Coupang’s world-class network. Coupang does all of the storage, packing, shipping and returns for them. They get to enjoy the same conversion-optimizing assets that Coupang has painstakingly built through large infrastructure investments – without enduring the hefty CapEx. It also has a 1st-party business. Here, it buys goods from brands and other supply chain partners via wholesale arrangements to enrich and strengthen its e-commerce site’s assortment. 

Rocket delivery is a Wow service where Coupang taps into all of its logistics capacity to power its own quick delivery. Rocket relies on Coupang’s fulfillment network to place more inventory closer to customers, which cuts cost to serve, shortens delivery times and raises conversion rates. In turn, that fosters unique operating efficiencies that unlock more investment in differentiated customer service. As all of these competitive advantages compound, it finds itself able to keep improving the user experience, pushing engagement higher and spinning the flywheel.

The Developing Offerings segment includes everything else. Its food delivery business, streaming product, Taiwan endeavor, Farfetch and all other new bets preside here.

Gross profit dollars are probably a better gauge of demand for this company than revenue. It’s rapidly shifting to 3rd-party, FLC-based Product Commerce business. 3rd-party sales entail commissions that are lower than Coupang selling a product directly and collecting all of the money. That’s a growth drag, but these commissions are virtually all gross profit. That makes gross profit growth a better metric for measuring marketplace demand at this point. Gross profit dollars rose 24% Y/Y CC vs. 22% Y/Y growth last quarter.

Consolidated margins contracted Q/Q due to seasonal weather-related impacts and aggressive Taiwan investments to scale that newer business. These headwinds were partially offset by its Product Commerce tech investment cycle beginning to ease. Like every quarter, they told investors that pace of margin expansion would be non-linear but margins would keep expanding on an annual basis.

The company reiterated 20% Y/Y CC revenue growth expectations for the year. They now expect developing offerings and EBITDA losses of $950M vs. $925M previously. This is based on promising Taiwan trends motivating them to spend more. Coupang trades for 29x forward EBITDA and 81x forward EPS. EPS is set to fall by 17% Y/Y this year via a 62.5% 2025 effective tax rate. That’s related to early Taiwan's growth and related losses. EPS growth is expected to be 232% next year and 65% the following year. EBITDA is expected to grow by 31% this year, 74% next year and 42% the following year.

As always, this was a very short call. It lasted 37 minutes in total and the team didn't give much concrete forward commentary (as per usual).

Korean Resilience:

Korean growth remains wonderfully strong across all cohorts. They continue to find steady existing customer engagement gains to power the near-term financial engine, while outperforming on new customer additions to set the foundation for more growth. While Korean e-commerce penetration rates are higher than most countries, there’s still plenty of adoption left to be enjoyed. Its ability to provide best-in-class fulfillment service and assortment should mean it’s best positioned to enjoy continued maturation.

On the Product Commerce side, it’s accelerating 1st-party assortment onboarding and establishing more direct relationships with vendors. Cutting out the middlemen should improve timely inventory availability and cost structure, paving the way for more delight to profitably be passed onto CPNG customers. 3rd-party and FLC continues to comfortably outgrow the rest of the business and provide another avenue for more assortment breadth. It’s how CPNG is entering new categories like sporting goods, which will be a key enabler of engagement, e-commerce penetration and lifetime value gains.

Grocery also was a point of strength for Coupang. That was good to hear, following Naver (internet giant there) partnering with Curly to enter fresh food delivery.

Logistics Investments:

Like Amazon, Mercado Libre, Sea Limited and other global marketplaces, Coupang is sharply leaning into fulfillment center automation. While it’s early, the investments have already boosted operating efficiency and customer service. They think they’re behind global counterparts in this regard, which means the margin opportunity is ahead of them. 

Separately, they’ve expanded use of eco bags to non-fresh deliveries. This allows more shipments to be fulfilled without boxes, cutting waste and cost without sacrificing experience. The list of things they can do to extract more margin from their core business is extensive.

Taiwan:

Taiwan keeps rocking and rolling. Customer and engagement trends were fantastic as growth eclipsed 100% Y/Y and momentum accelerated. They’re firmly in assortment and logistics capacity growth mode to begin emulating the elite service they provide in Korea. Long way to go, but good start and an even better Taiwanese response to that start. They’ve also begun rolling out their 3rd-party merchant product listing process there, extending beyond the 1st-party wholesale model and unlocking a lot more products to sell. They’ve also begun building a last-mile fulfillment network and are notching strong gains in self-fulfilled order rates. Overall, leadership is adamant that Taiwan looks very similar to Korea at a similar stage of maturity. While there was some concern about its ability to disrupt a deeply entrenched convenience store network in that country, things look great.

More Notes:

Another rock-solid quarter of wonderfully boring execution for this world-class company. The fantastic team continues to show us just how capable they are… quarter after quarter. Taiwan as a growth opportunity is wildly exciting and to pursue that opportunity while expanding most margin lines Y/Y is quite impressive to me. I have aggressively built out my stake in this name since starting the position late last year. I am very confident in this as a core holding and would entertain adding into any material multiple compression. A forward PEG of 0.75x looks like a good place to do that potential accumulating, which would be a share price of around $28.