Shopify Q2 2025 Earnings Report

Shopify EPS Results

• Actual EPS: $0.35
• Consensus EPS: $0.29
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: $0.26

Shopify Revenue Results

• Actual Revenue: $2.68 billion
• Expected Revenue: $2.55 billion
• Beat/Miss: Beat by +$133.08 million
• YoY Revenue Growth: +31.10%

Shopify Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 8:30AM ET

Shopify (NYSE:SHOP), a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, Australia, China, and Latin America. The company's platform enables merchants to displays, manages, markets, and sells its products through various sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces; and enables to manage products and inventory, process orders and payments, fulfill and ship orders, new buyers and build customer relationships, source products, leverage analytics and reporting, manage cash, payments and transactions, and access financing. It also sells custom themes and apps, and registration of domain names; and merchant solutions, which include accepting payments, shipping, and securing working capital. The company was formerly known as Jaded Pixel Technologies Inc. and changed its name to Shopify Inc. in November 2011. Shopify Inc. was incorporated in 2004 and is headquartered in Ottawa, Canada.

Shopify Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Shopify delivered 31% year-over-year revenue growth to $2.7 billion and produced a 16% free cash flow margin, driven by a 31% rise in Gross Merchandise Volume (GMV).
• Positive Sentiment: International GMV accelerated to 42% growth, led by Europe, while Shopify Payments expanded into 16 new countries and achieved 64% global penetration.
• Positive Sentiment: Shopify launched AI commerce infrastructure—Catalog API, Universal Cart and CheckoutKit—enabling seamless shopping integrations with partners like Microsoft Copilot.
• Positive Sentiment: Shop Pay GMV jumped 65% to $27 billion, reinforcing its position as a fast, secure checkout choice for millions of buyers and merchants.
• Positive Sentiment: Major brands such as Starbucks, Canada Goose and Burton Snowboards signed on to Shopify’s unified commerce platform, underscoring its appeal to large enterprises.

Presentation

[Carrie Gillard, Head - IR at Shopify]

Good morning, and thank you for joining Shopify's second quarter twenty twenty five conference call. I'm Carrie Gillard, Director of Investor Relations, and joining us today are Harley Finkelstein, Shopify's President and Jeff Hoffmeister, our CFO. After their prepared remarks, we will open it up for your questions. We will make forward looking statements on our call today that are based on assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected. Undue reliance should not be placed on these forward looking statements.

[Carrie Gillard, Head - IR at Shopify]

We undertake no obligation to update or revise these statements except as required by law. You can read about these assumptions, risks and uncertainties in our press release this morning as well as in our filings with U. S. And Canadian regulators. We also speak to adjusted financial measures, which are non GAAP and not a substitute for GAAP financial measures.

[Carrie Gillard, Head - IR at Shopify]

Reconciliations between the two are provided in our press release. And finally, we report in U. S. Dollars, so all amounts discussed today are in U. S.

[Carrie Gillard, Head - IR at Shopify]

Dollars unless otherwise indicated. With that, will turn the call over to Harley.

[Harley Finkelstein, President at Shopify]

Thanks, Carrie, and good morning, everyone. Now before we get into the numbers, I want to do something a little bit different today. I want to start by looking back at Shopify's last few earnings calls. Eighteen months ago, I said that we would power up our offline and our b two b on ramps, creating a truly unified commerce platform. Well, fast forward to today, our offline GMV is up 29% year over year.

[Harley Finkelstein, President at Shopify]

Our b to b GMV is up a 101%, and we're bringing the biggest brands in the planet to the platform through our unified commerce offering. 12 ago, I said we would continue to deliver both growth and profitability. In this past quarter, we delivered $2,700,000,000 of revenue, up 31% year over year, and our free cash flow margin was 16%. And finally, six months ago, we committed to expanding our reach across all geographies and particularly in Europe. Well, our international GMV for this most recent quarter was up 42% year over year, accelerating from Q one, driven largely by outperformance in Europe.

[Harley Finkelstein, President at Shopify]

Now the strong results you see today come from seeds we planted years ago. Past investments are now paying off, and the ones we are making today will drive results for years to come. So if you take one thing away from this call, let it be this. Shopify delivers. We do what we say we're going to do.

[Harley Finkelstein, President at Shopify]

That consistency, follow through, and durable growth, that is Shopify's MO. Now I want to call this out at the top of this call because we've had a lot of wins this quarter, which we'll get into next. But this quarter to quarter consistency is really what matters. This is how generational companies are built, and this is what you're seeing from Shopify. Okay.

[Harley Finkelstein, President at Shopify]

Now let's get into the wins and the progress we made in q two specifically. As I mentioned earlier, we delivered q two revenue of 2,700,000,000.0, up 31% year over year, and free cash flow margin was 16%. GMV was up 31% accelerating from Q1, and this strong GMV result was driven by continued outperformance in Europe as well as momentum in our largest market, The US. This is the outcome of a clear strategy executed really well. Agility and ease of use are now prerequisites for any modern commerce company, and that's why we've become a strategic advantage to all businesses in today's unpredictable market.

[Harley Finkelstein, President at Shopify]

In this quarter, we signed up some iconic global brands, including Starbucks, Canada Goose, and Burton Snowboards. And I love getting to speak to this diversity of brands choosing Shopify because it really reflects the flexibility of the platform, The world's biggest coffee chain, the biggest name in luxury outerwear, and the most iconic brand snowboarding, they're all migrating to Shopify because we give them agility, innovation, speed, and exceptional value. Now speaking of innovation, let's talk about product. Shopify's superpower is that we always are at the center of where commerce is happening. We've consistently proven to be experts in anticipating where consumers will be showing up next and building accordingly.

[Harley Finkelstein, President at Shopify]

That means our merchants are better prepared to stay a step ahead. Now I'll give you a few examples. We were ahead of the curve with social commerce, building early integrations for Instagram and YouTube. We saw the opportunity for commerce to meet culture, so we built a Spotify integration. And more recently, we predicted the rise of shopping in the metaverse with a Roblox integration that's already growing quickly.

[Harley Finkelstein, President at Shopify]

So, of course, Shopify has been building infrastructure to power agent to commerce. As AI platforms become the new way people discover products, consumers are not just searching, they're having conversations with agents to find what they need. But powering seamless shopping across millions of brands is a massive technical challenge, and that's where Shoplite comes in. We've built a suite of products that make it easy for AI platforms to bring shopping to their agents from discovery to checkout, and our merchants are front and center. Now let's start with discovery.

[Harley Finkelstein, President at Shopify]

We launched catalog in q two to give AI partners and shopping apps real time access to millions of products from across our global merchant network, all through a single connection available as an API or an MCP server. Shopify catalog simplifies the process for apps and AI agents to search and pull product data so the results are clear, accurate, and up to date. Shopify is uniquely positioned to build this because the brands consumers love and want more of are all on Shopify. And every day, more of the world's favorite brands are joining, making our catalog the richest and the most dynamic anywhere. Now let's also talk about Universal Cart, which literally launched yesterday in early access.

[Harley Finkelstein, President at Shopify]

Universal Cart holds items from multiple stores all in one spot so that shoppers can easily track all their items they wanna buy within the chat. And when it comes time to purchase, we've built a new and improved version of CheckoutKit, and it's already being used by Microsoft Copilot, a huge player in the AI space. CheckoutKit lets partners embed the merchant's checkout right in their agent. Now we're also giving partners the power to theme the checkout kit so it matches their application's look and feel, creating the seamless experience, and they don't have to worry about payments, taxes, or regulations. We take care of all the complexity for them.

[Harley Finkelstein, President at Shopify]

Let me bring this to life for you. When a shopper asks an agent for the best travel bag, it instantly searches Shopify's catalog and shows the top products, live prices, descriptions, and inventory. The shopper adds their choice to the cart. They don't have to check out right away. They can keep shopping.

[Harley Finkelstein, President at Shopify]

Everything they want is pulled into a single cart. And when they're ready, the shopper completes their checkout without ever having to leave the chat. Now this unlocks a whole new kind of commerce. For partners, we've made it easier than ever to integrate commerce without having to build the hard parts. For our merchants, we're making sure they stay at the forefront of wherever commerce is happening.

[Harley Finkelstein, President at Shopify]

And for shoppers, we're powering conversation driven product recommendations from all of their favorite brands. This is yet another example of how Shopify is always leading the way. Now let's talk about our most exciting AI product offering for our merchants, Sidekick. Sidekick's unique ability for data analysis continues to shine through, helping merchants address their toughest business challenges. For example, a merchant in the kids clothing category recently shared with me that Sidekick delivers the kind of actionable insights they used to spend hours searching for.

[Harley Finkelstein, President at Shopify]

Questions like, how can optimize my inventory to avoid sellouts and boost cash flow? Or why am I seeing more customer churn from subscriptions in the last three months? Or even help me compare results from our last three BFCM campaigns and suggest improvements for the next one. They are all answered, explained, and visualized in seconds. So instead of wrestling with spreadsheets or digging through endless tabs, merchants on Shopify get instant clarity of what's working, what's not working, and where to focus next, all without having to leave Shopify.

[Harley Finkelstein, President at Shopify]

Here's another example. A skincare merchant recently told us that in real time, Psychic helped them pinpoint exactly where they were experiencing customer churn down to the cohort, city, and even purchase behavior in seconds. Insights like these used to take hours or days to uncover if they were found at all. Sidekick is doing exactly what we set out for it to do. Merchants are leaning in and leveraging the power of Sidekick for data analysis and performance insights, freeing them up to focus on strategic business decisions and helping them make sure those decisions are right for their business.

[Harley Finkelstein, President at Shopify]

And of course, as I've talked about on previous calls, that's on top of all the other ways Psychic helps merchants like writing product descriptions, generating logos and images, streamlining workflows, and customizing their storefronts, and so much more. And this quarter, we also launched an AI store builder that can create a custom online store in seconds, literally in seconds from a single phrase. Now all you need is an idea and a description of the product you want to sell, like stylish athleisure apparel for women, and Shopify will do the rest. We are continuing to make the barrowed entry lower than it's ever been in history, and we are not done. Okay.

[Harley Finkelstein, President at Shopify]

That was a lot on AI. As you can tell, we're really excited about the velocity of innovation happening at Shopify. Now let's turn our attention to payments. On our last call, we discussed the expansion of our payments product into more countries. 16 so far this year alone, nearly doubling the markets where it's accessible.

[Harley Finkelstein, President at Shopify]

Many of these new markets are in Europe and are already seeing solid adoption contributing to our global payments penetration of 64% in q two, up from 61% last year. At Shopify editions in May, we also rolled out multi entity support in Shopify payments. Now this means that merchants can now sell from multiple business entities all within a single shop, which is particularly valuable for a higher volume global merchants. No more juggling separate stores for each country or channel. This streamlines operations, it cut costs, and it removes barriers to global growth.

[Harley Finkelstein, President at Shopify]

And I've heard directly from some of our biggest global brands that the multi entity unlock is a breakthrough. And for those of you that have followed us for a while, you know that this was a pain point we had not yet solved until now. Now as you know, we are laser focused on building the future of commerce, especially as cross border transactions become more important. This quarter, we introduced a new USDC stable coin option, giving merchants and buyers more choice and security, especially for national payments. We partner with Coinbase to bring the core features of commerce like authorized capture, void, and refunds to crypto payments.

[Harley Finkelstein, President at Shopify]

So in plain terms, these are the steps that make card payments safe and flexible. Now with smart contracts and blockchain, stablecoin payments can work the same way. And with the built in off ramp to local currency, merchants can accept USDC without dealing with new crypto friction. Payment preferences are changing fast, and Shopify is making sure our merchants are ready for what is next. Now a quick note on Shop Pay.

[Harley Finkelstein, President at Shopify]

Over the past two and a half years, the user base has more than doubled as more buyers and merchants make it their go to checkout. That momentum is showing up in the numbers. In fact, in q two, Shop Pay, Jimmy, increased by 65% to 27,000,000,000. Shop Pay is quickly becoming the standard for fast, secure, seamless payments, trusted by millions of consumers and merchants, including leading brands like Michael Kors, the latest to sign up for Shop Pay commerce component. Honestly, most of you listening have probably used Shop Pay at least once in this past week alone.

[Harley Finkelstein, President at Shopify]

That is how deep the reach is. Now let's turn to the Shop app, the all in one shopping destination for the brands that buyers are passionate about. The shop app saw a 140% year over year growth in native GMV fueled by high impact shopping events, including shop week where sales more than doubled compared to last year's event. And sign ins through shop increased by 46%, thanks to improved availability and a much smoother user experience. AI powered enhancements to shop search and the home feed ensure buyers see the right products at the right time, driving higher engagement and conversion.

[Harley Finkelstein, President at Shopify]

And unlike traditional marketplaces, shop puts brands front and center, fostering genuine customer relationships without the burden of marketplace fees. With tools like shop minis, shop cash, and sign in with shop, we're helping merchants engage, convert, and retain buyers seamlessly from personalized recommendations and wish lists to in app checkout and real time order tracking and buyer rewards. And our collaborations with brands like Glossier, Summer Fridays, and J Balvin are strengthening Shop's position in beauty and entertainment, pushing the boundaries of customer engagement. So mark my words, shop is the future of direct to consumer shopping, and we're just getting started. Now let me speak briefly on advertising because I know you'll ask.

[Harley Finkelstein, President at Shopify]

Shopify campaigns is opening up new ways for merchants to reach buyers and grow. We are scaling risk free advertising across shop, online stores, meta, and Google, giving merchants efficient access to new audiences. And the earlier results are really promising. Brands like Caraway, Liquid IV, Kizzic are seeing real impact. And as we continue to unlock more inventory and refine our recommendation algorithms, campaigns are getting more personalized and more effective.

[Harley Finkelstein, President at Shopify]

And there is a ton of excitement at Shopify on what we are building and look forward to sharing more about this on future calls. Okay. Now, let's shift our focus to some other key growth drivers and how we're executing. First up, point of sale or our offline business. Q2 was another strong quarter for Shopify point of sale with offline GMV up 29%.

[Harley Finkelstein, President at Shopify]

We launched a newly redesigned version of our POS app, making it faster and simpler for in store staff and enhancing the connection between in store and online. Retail staff are already benefiting from the new version with a more intuitive experience, faster checkouts, and shorter training time. This new release of our retail platform includes a suite of features that merchants requested. Things like cash rounding, more granular staff permissions, more ways to build card customizations, and store credit for instant customer retention. Direct API access now allows our developers and partners to customize Shopify point of sale workflows more efficiently.

[Harley Finkelstein, President at Shopify]

And it's these continuous enhancements that are further solidifying Shopify's reputation as a leader in a retail point of sale software. Shopify point of sale was named as a leader in retail point of sale software by IDC and a new report shows it's driving real revenue growth for merchants. And the results speak for themselves. Our investments are paying off, and merchants on Shopify are reaping the benefits. Q two saw more great brands during Shopify in part for offline offering from swimwear to furniture to car accessories.

[Harley Finkelstein, President at Shopify]

And I said at the start, a special newly inked deal that's very close to my heart. The iconic Canadian brand Canada Goose is making the switch. On a personal note, I've been in talks with the CEO Danny for a long time. And incredibly, the deal actually closed on Canada Day this year, which made it feel extra special. After years of building and refining our unified commerce platform, they have chosen to move to Shopify to power both their online business and about 50 physical stores beginning in 2026.

[Harley Finkelstein, President at Shopify]

This win is a clear signal for leading brands trust Shopify to deliver what modern commerce demands. The progress in retail is evident, and we are confident that we are still in the early stages of what we will achieve. Moving on to international. We keep talking about our international business because the opportunity is so massive, and our team and merchants are knocking it out of the park. Our international regions are contributing more to our growth each quarter, becoming a vital part of Shopify's mission to support entrepreneurs worldwide.

[Harley Finkelstein, President at Shopify]

In q two, Europe led the way with strong GMV growth from both new merchants joining the platform as well as our existing merchants continuing to outperform their respective ecommerce markets. You've heard us talk about getting more of our products into more countries, and so far in 2025, we have made really great progress. Shopify Capital is now available in Germany and The Netherlands providing more merchants with access to growth funding. We also launched shop pay installments into Canada allowing more merchants to offer flexible payment options which contributed to the strong 38% increase we saw in q two for our shop pay installment GMV. At the core of our growth is our commitment to enabling merchants to sell seamlessly across borders, shown by q two cross border GMV at 15% of total GMV while also winning at home.

[Harley Finkelstein, President at Shopify]

With recent rollouts like multi entity support and multi currency payouts, we are making this a reality. These features are now available for Plus and enterprise merchants in most countries where Shopify payments operate. This is big because by simplifying operations to one single shop, they avoid extra fees and the need for duplicate apps or integrations. And that's why organizations like Fiskars Group, one of Europe's oldest companies and the owner of brands like Wedgewood and Waterford, recently chose Shopify to migrate five of their distinct ecommerce businesses from multiple brands into a single one on Shopify. It is a clear signal that Shopify is the platform for global growth.

[Harley Finkelstein, President at Shopify]

We got here in a very intentional and thoughtful way. The wins we see today are a direct result of the groundwork we've laid in international expansion, especially in Europe from product development to marketing over the past few years. Our aim is to keep this momentum going and unlock even more growth opportunities in the years ahead. Okay. Now on to one of my favorite parts of the call.

[Harley Finkelstein, President at Shopify]

You all know that I love talking about winning larger merchants. Our upmarket strategy is continuing to deliver results. On top of the brands I mentioned earlier, Starbucks, Burton, and Canada Goose, we also signed brands like luxury skincare company owned by Unilever, Tatcha, the high end home appliance manufacturer, Miele, Amazon's daily deal site, Woot, the leading fitness and nutrition brand, Beachbody, and one of the world's largest diamond retailers, Signet Jewelers. Now there's another brand I wanna highlight, and not because you'll know them, but actually because you probably don't know them. We just signed on the global leader in mining drilling services, Boart Longyear.

[Harley Finkelstein, President at Shopify]

Now a few years ago, we wouldn't have imagined talking about drilling services and Shopify in the same breath, but that's how far we've come. Our roster keeps getting stronger, winning the brands people love across every major vertical and bringing on more names from industries you might not expect. Amongst these are the biggest brands you've ever heard of. They're not household names to consumers, but they dominate their verticals. And they're choosing Shopify for our scalability, for our speed, flexibility, and the tools they need to grow.

[Harley Finkelstein, President at Shopify]

And this diversity makes us even more resilient and fuels our growth, expanding our addressable market and the ways we power commerce. No matter how the market shifts, Shopify is built to thrive. We're expanding our reach. We're deepening our offerings, and we're laying the groundwork for long term success from entrepreneur to enterprise. When you look at our q two results and when you look at what we've achieved each quarter before, one thing should be clear.

[Harley Finkelstein, President at Shopify]

The Shopify playbook delivers. We've built a product that helps every kind of merchant in every market win. We built a business model that means when our merchants win, we do too. And we've built a road map that's focused on the future of commerce so our merchants are always a step ahead. Shopify is executing consistently.

[Harley Finkelstein, President at Shopify]

We're building the right products consistently. We're growing in the right places consistently, and we're investing for the long term consistently. Our business model is durable, our opportunity is vast, and our focus is unwavering. And with that, I'm gonna turn the call over to Jeff for a deeper dive into the numbers and trends that we're seeing.

[Jeff Hoffmeister, CFO at Shopify]

Thanks, Harley. Q two was an exceptional quarter, and it represents a manifestation of the excellent product building, product market fit, and go to market momentum that our teams set in motion many quarters ago. We're delivering in the areas that matter most for our long term success, helping merchants grow and reach more buyers, expanding the diversity of our merchant base, and innovating continuously to provide products that help merchants run and scale their businesses. A few items to highlight before we dive into the numbers. First, The US delivered standout results in Q2.

[Jeff Hoffmeister, CFO at Shopify]

Year over year growth rates for both GMV and revenue accelerated in Q2 versus Q1. We saw growth across all major verticals and merchant segments. Second, our international regions, particularly Europe, are thriving. In most countries in Europe, our merchants' GMV growth continues to outpace the overall e commerce market by an average of four to five times, if not greater, and even accelerated in Q2 from already strong trends. This success underscores the effectiveness of our strategic investments in product expansion and localization over the past few years.

[Jeff Hoffmeister, CFO at Shopify]

Merchant GMV accelerated across all sizes and GMV bands in Q2, highlighting broad based momentum throughout our platform. Notably, merchants above 50,000,000 in annual GMV and those under 2,000,000 in annual GMV show particular acceleration in the quarter. Lastly, our products are growing and expanding, creating more opportunities to support our merchants, drive growth and unlock new verticals. Growth is coming from every angle: offline, B2B, capital, tax and more. These areas are gaining real traction.

[Jeff Hoffmeister, CFO at Shopify]

And while still on the earlier side of their growth curves, the potential remains incredibly compelling. With that context around some key observations and trends this quarter, let's turn to our Q2 financial results. All growth rates mentioned are year over year, unless specifically stated otherwise. GMV in Q2 was $88,000,000,000 up 31% or 29% on a constant currency basis. This GMV outperformance was driven by strength in North America, with particular strength among Plus merchants, and continued strength in Europe, with GMV up 49%, 42% on a constant currency basis.

[Jeff Hoffmeister, CFO at Shopify]

In both North America and Europe, we saw broad based growth led by our existing merchants, as well as growth from adding new merchants with it tilting towards more same store sales growth this past quarter. Offline was up 29% driven primarily by larger retailers joining the platform. And finally, while we had anticipated some benefit from FX in our outlook, the tailwind turned out to be stronger than expected as the quarter unfolded. As we continue to expand our platform's capabilities, add new products, and build for our commerce is heading, Shopify is becoming even more compelling to a wider range of businesses than ever before. This growth opportunity is reflected in the strength we're seeing across a diverse set of categories.

[Jeff Hoffmeister, CFO at Shopify]

In Q2, apparel and accessories, our largest and most established category, continue to perform well. At the same time, we're seeing strong momentum in health and beauty, home and garden, and food and beverage. We're also experiencing rapid growth in emerging segments such as pet supplies, furniture, and arts and entertainment. Revenue for the second quarter was up 31%, driven by the exceptional GMV growth across geographies. Our merchants are succeeding.

[Jeff Hoffmeister, CFO at Shopify]

These results exceeded expectations driven by the outperformance in North America and Europe. And importantly, we had factored into our guidance some potential impact from tariffs, which did not materialize. Looking at the two components of revenue. Merchant solutions revenue increased 37%, with the strength in GMV driving the significant majority of the growth. To a lesser extent, we also saw increased penetration of Shopify Payments, which reached 64% for the quarter.

[Jeff Hoffmeister, CFO at Shopify]

Several factors powered the quarter's higher GPV penetration, including continued adoption of payments by more merchants around the world and the strong performance of those merchants, The expanded partnerships with PayPal and Klarna and the availability of payments in more countries. These items were partially offset by our ongoing strong performance in Europe, which accounted for a larger share of GMV, but has a lower gross payments volume penetration compared to North America. Over time, this should become less of an impact for payments penetration as we continue launching payments in more countries. Subscription solutions revenue grew 17%, primarily driven by a larger percentage of subscriptions coming from higher priced plans and, to a lesser extent, higher variable platform fees. As we have mentioned previously, in 2025, we expect subscription solutions growth to be impacted by the headwinds from extended paid trials, which affect our year over year growth rates.

[Jeff Hoffmeister, CFO at Shopify]

Q2 MRR was up 9% year over year, led by growth in our Plus plans, which represented 35% of MRR for the quarter. The shift back to three month trials for standard plans had a larger impact on Q2 than Q1, as these changes were rolled out to North America and our largest markets in Europe at the end of Q1, meaning that throughout most of Q2, new merchants were still within their initial three month trial period. As a reminder, in Q2 of last year, MRR benefited from the move from a three month to a one month paid trial, which drove MRR higher and makes for a tougher comparison this year. As a result, MRR growth for standard merchants this quarter showed only a slight increase. As we examine the data that we have regarding the efficacy of these trials, we believe that they are working well.

[Jeff Hoffmeister, CFO at Shopify]

By giving merchants more time to explore Shopify, we increase the likelihood that they launch their businesses with a better understanding of the full capabilities of our platform and how we can help them succeed, reaching key GMV milestones earlier and enhancing their probabilities of long term success. Gross profit grew 25%, coming in ahead of expectations driven by the outperformance in revenue. Gross profit for subscription solutions grew 15%, slightly less than the 17% revenue growth for subscription solutions. This slightly lower growth rate vis a vis the revenue growth rate was from higher hosting costs needed to support higher volumes and geographic expansion. And secondly, the impact of the change back to three month paid trials.

[Jeff Hoffmeister, CFO at Shopify]

While subscription solutions gross margin declined year over year, it remained above our five year historical median of 80%, plus or minus a couple 100 basis points in any given quarter. We do not anticipate this trend changing in the near term. Gross margin for subscription solutions for the quarter was 81.6%. Gross profit for merchant solutions grew 32%, with gross margin coming in at 37.9% compared to 39.1% in 2024. The decrease was primarily driven by the same factors that we have seen the past two quarters, including the impact from the expanded partnership with PayPal, where the year over year comparison differential will persist through Q3, and lower noncash revenues from certain partnerships, which carry a high gross margin.

[Jeff Hoffmeister, CFO at Shopify]

This brings our overall Q2 gross margin to 48.6% compared to 51.1% in the prior year. Operating expenses were $1,000,000,000 for the quarter, or 38% of revenue, which is down from 39% in Q2 of last year on a GAAP basis, or down from 42% when you exclude from the year over year comparison the reversal of a $55,000,000 legal accrual from Q2 of last year. The 400 basis points year over year improvement demonstrates our continued efforts to drive operational efficiencies, all while supporting our 31% top line revenue growth. Our disciplined approach to headcount continues to drive strong operating leverage. Our return based strategy in marketing remains unchanged.

[Jeff Hoffmeister, CFO at Shopify]

We continue to execute with discipline, using data, testing, and the power of our internally built models to adjust our investments quickly and efficiently based on clear return metrics and payback periods. Transaction loans and losses, the smallest of the operating expense categories in our income statement, was 3% of revenues. The year over year increase stems from higher volumes in our payments and capital businesses. Our capital business continues to grow, supported by recent product innovations that enhanced our suite of credit offerings and expanded our geographic reach, including launching capital in Germany and The Netherlands. We've introduced new tools that give merchants more choice in how they manage and select loan options, providing greater flexibility to meet their financing needs.

[Jeff Hoffmeister, CFO at Shopify]

Note that loss rates have remained consistent with prior quarters. This is about the successful, thoughtful expansion of capital. Operating income for the quarter was $291,000,000 or 11% of revenue. This 11% compares to a 9% operating income margin last year and yields a 56% year over year growth rate when excluding the impact of last year's legal accrual of $55,000,000 which was a one time lift to last year's Q2 profit. Stock based compensation for Q2 was 120,000,000, and capital expenditures were 6,000,000 for the quarter.

[Jeff Hoffmeister, CFO at Shopify]

Q2 free cash flow was $422,000,000, or 16% of revenue. Our commitment to operating discipline gives us the ability to achieve our desired free cash flow margins even as we periodically face gross profit pressure, such as those discussed earlier regarding PayPal and the paid trials. Quarter after quarter, we continued to deliver balanced growth and profitability, with investments that support long term growth in key areas like our core platform, international expansion, enterprise, and offline. This disciplined approach works. We have driven eleven consecutive quarters of positive free cash flow, eight of which have been in the double digits.

[Jeff Hoffmeister, CFO at Shopify]

We're building for the long term, delivering results today while making Shopify stronger and more durable for the years ahead. Now shifting to the broader macroeconomic environment and tariff implications before discussing our Q3 outlook. Through Q2 and into early August, our merchant base has remained resilient. Merchants are adapting to changes in the economic landscape and continue to perform well, supported by the flexibility and capabilities of our platform. This resilience highlights the strength of our commerce solutions in helping merchants navigate challenges and pursue new opportunities.

[Jeff Hoffmeister, CFO at Shopify]

As our merchants grow and evolve, our platform continues to support their success and scalability in a dynamic market, just as it always has. Last quarter, I shared some observations about our merchants and our business in the context of the trade environment. Fast forward to today, and those same observations hold. We haven't seen any drops in US demand, whether inbound, outbound or local. In fact, The US accelerated in Q2, as I mentioned previously.

[Jeff Hoffmeister, CFO at Shopify]

Cross border GMV remained consistent at 15% of our total GMV in Q2. One change that we have seen is that many of our merchants have raised prices. We are tracking that in relation to overall inflation levels in The US. The US government's recent announcements regarding the de minimis exemption for other countries beyond China is still in the very early stages. Importantly, only approximately 4% of our GMV globally is currently shipped under de minimis exemptions, and we've not seen any significant changes in our GMV levels relating to merchants that shipped products under the de minimis exemptions for China since those rules were changed back in May.

[Jeff Hoffmeister, CFO at Shopify]

We'll continue monitoring these trends closely, staying focused on supporting our merchants in an evolving environment. Turning to our outlook for the third quarter. Merchant GMV remains strong and continues to reinforce our confidence in outperforming the broader market. This momentum has carried into Q3, with core trends across our merchant base remaining stable. We expect Q3 revenue growth in the mid to high 20s year over year, driven by the same factors that supported our strong results in the first half, led by continued growth in merchant solutions.

[Jeff Hoffmeister, CFO at Shopify]

While we anticipate some FX tailwinds, they are expected to be similar to what we experienced in Q2. We expect gross profit dollars to grow in the low 20s, trailing revenue growth due to the continued strength in payments, the accounting impact from PayPal, and the changes to paid trial links. We anticipate that our Q3 operating expenses will be 38% to 39% of revenue. On a dollar basis, operating expenses are increasing year over year primarily due to three things: higher planned marketing spend, higher compensation as a result of both mix shift to higher paying roles like R and D and our biannual merit increases, and higher losses from the expected volume growth of payments and capital. Marketing is the largest driver year over year.

[Jeff Hoffmeister, CFO at Shopify]

It's important to note that our marketing investments in Q3 last year were lower than intended as we chose to focus on testing and refining new approaches. The increase this year is largely going to be in performance marketing. As we have continued to test and refine our models, we are discovering new audiences and are unlocking higher value in the merchants we bring on. Moving to stock based compensation. Q3 SBC is expected to be 130,000,000.

[Jeff Hoffmeister, CFO at Shopify]

Finally, on free cash flow. For Q3, we expect our free cash flow margin to be in the mid to high teens. Let me repeat what I said last quarter: we continue to focus on driving growth, not optimizing for near term margin. We believe that the free cash flow margin profile that we've achieved over the past several quarters strikes the right balance between profitability and investments in building the best products for our merchants today and into the future. There are simply too many compelling growth opportunities ahead.

[Jeff Hoffmeister, CFO at Shopify]

One other item regarding our cash flow and cash management. Our convertible note matures November 1 before our next earnings call, so a couple of things to mention. We expect to settle the $920,000,000 principal in cash. To the extent that there is any excess value above par, we also expect that to be settled in cash. Our disciplined execution has delivered eleven consecutive quarters of positive free cash flow and the financial strength to enable us to make this choice.

[Jeff Hoffmeister, CFO at Shopify]

This decision is a clear demonstration of our belief in Shopify's long term growth and resilience, and Shopify being mindful of dilution to shareholders. Quarter over quarter, we're proving that our approach works, consistently executing, delivering for our merchants, and maintaining double digit free cash flow margin, even as we invest for the long term. This is what sets Shopify apart: durable growth, disciplined execution, and a track record of results. With that, I will turn the call back over to Carrie.

[Carrie Gillard, Head - IR at Shopify]

Thanks, Jeff. We will now take your questions before turning the call back to Harley for some final words. Please use the raise hand feature in Zoom to ask your question. If you are dialing in by phone, you'll need to press 9 to join the queue and 6 to unmute yourself. We ask that you limit yourself to one question so we can try to get to as many questions as possible.

[Carrie Gillard, Head - IR at Shopify]

Our first question comes from Brian Peterson at Raymond James.

[Brian Peterson, Managing Director at Raymond James Financial]

Sorry, I tripped up by that mute button, but congrats on the really strong quarter. Jeff, I appreciate all the comments on the macro. I know you mentioned that you saw The US accelerate. How would you characterize the demand? And did you see any potential pull forward for consumers that may have wanted to take advantage of pricing before tariff increases? Would love to get any comments there. Thanks, guys.

[Jeff Hoffmeister, CFO at Shopify]

Yeah, no, Brian, very good question. We have not seen any real pull forward of demand. I think you can see some of that when you look at the results that we delivered in Q2. You compare that to the guidance and see that consistency of performance. And obviously, any guidance that we give is going to be reflective of the information that we have going into the call.

[Jeff Hoffmeister, CFO at Shopify]

And so as we look at what we've seen in July and the consistency of strength, the consistency of merchant success in July is kind of what we've seen in Q2. So from a tariff perspective, I also alluded to it briefly on the call that we haven't seen any meaningful changes in the various elements in terms of cross border activity, in terms of what we're seeing on buyer behavior. So, the business remains in very good shape. I don't have anything where I have anything in our internal data which says to me, hey, there's been a pull forward. So, the business is simply continuing to perform very, very well.

[Jeff Hoffmeister, CFO at Shopify]

I mentioned obviously the strength in Europe, the strength in North America, the strength across all the different GMB bands, strength across the products. I think that's just our business performing at a very, very high level.

[Carrie Gillard, Head - IR at Shopify]

Thank you for your question. Our next question comes from Arjun Bhatia at William Blair.

[Arjun Bhatia, Co-Group Head - Technology, Media & Communications at William Blair]

Perfect. Thank you. I will add my congrats here on a great quarter. This might be a little bit difficult to answer, but obviously the international growth is very strong. You have a very broad platform.

[Arjun Bhatia, Co-Group Head - Technology, Media & Communications at William Blair]

But when we think about what is localized and what is available for merchants in international markets, how should we think about where we are in that journey? And is there more opportunities still to unlock internationally despite the success that we've been seeing thus far?

[Harley Finkelstein, President at Shopify]

Hey, Arjun. It's Harley. I'll take that question. To be to me, to be clear, we've been tackling some of these, some of these product, updates for international for quite some time now. Obviously, there's some you know, merchant solutions continue to expand.

[Harley Finkelstein, President at Shopify]

I mentioned that this year alone, we expanded Shopify payments to 60 new countries. Multicurrency is now in 20 countries. Capital is now expanded to Germany, Netherlands. So we've make we're making really good progress here. And obviously, you know, the international results speak for themselves.

[Harley Finkelstein, President at Shopify]

International GMV was up 42% year over year. Obviously, Europe leading the way there. But there still are other areas for us to expand specifically on sort of the product rollout side of things. I I think the results you are seeing from us internationally is is a combination of of the the product getting much better, but also the go to market engine becoming much stronger, much more much more sophisticated, whether it's through partnerships with SIs or it's with our our our own team understanding what product market fit looks like in those countries. So I think the wins that you are seeing are result of the groundwork that we've laid international expansion, both from product and from marketing over the past few years.

[Harley Finkelstein, President at Shopify]

But we still have quite a bit to go there and we think we can continue to grow, internationally. Obviously, we're still gonna you know, we're dominant in in in the English speaking world. And North America, obviously, is is a big, is a huge market for us, US specifically. But international, we we still think is a strong opportunity for us going forward.

[Jeff Hoffmeister, CFO at Shopify]

Yeah, Arjun, maybe the only point I'd add, I think one of the things that Harley and I don't talk enough about is our success in Asia Pacific. I mean, Europe has been going so strongly in terms of the results we're seeing. It continues perform very well. As we alluded to earlier, it also accelerated versus what we saw in Q1. So it's really international for us broadly is just doing really well.

[Carrie Gillard, Head - IR at Shopify]

Thank you for your question. Our next question comes from Gabriela Borges at Goldman Sachs.

[Gabriela Borges, MD - Software Research at Goldman Sachs]

Hi, good morning. Congratulations on the quarter. Harley and Jeff, so much of the prepared remarks talked about the durability of growth and the compounding of your product cycles. As numbers get bigger, we as analysts, we tend to model slowing growth as companies scale, and that's really not happening when I look at your organic growth adjusting for some of the onetime items over the past couple of years. So my question for both of you is how do you think about the long term growth algorithm?

[Gabriela Borges, MD - Software Research at Goldman Sachs]

Do you think you can be in this north of 25%, closer to 30% range for the next couple of years? Give us some color on how you forecast internally. Thanks so much.

[Harley Finkelstein, President at Shopify]

Yeah. Maybe I'll start, and I'll hand it over to Jeff to talk a little bit about some of the forecasting. You know, I I think what you're seeing, Gabriela, is is the results of past investments over the years. Presumably, you've picked up from the tone of both Jeff and my comments that we believe we're consistently performing quarter after quarter both in terms of top line momentum, but also in terms of managing our expenses and how we deliver profitability. But in terms of, you know, our our merchant acquisition, that's accelerating, especially internationally as we mentioned.

[Harley Finkelstein, President at Shopify]

But there's also these new areas these sort of on ramps into Shopify, whether it's large enterprise or it's b to b point of sale. The growth runway we think remains long with you know, there's there's a number of these really durable avenues, including TAM expansion. I mentioned, you know, some new verticals that historically Shopify never even considered going into, like the drilling and, you know, mining drilling companies that are very large and dominant now coming to Shopify. I think when you add that to adding more value to our subscriptions with things like audiences and and and plus and b to b, payment innovation continues to lead. And then in terms of some of the more, you know, some of the products that are still more early in their adoption, things like tax and managed markets.

[Harley Finkelstein, President at Shopify]

We think we are really well positioned to be at the center of of commerce and and and certainly, you know, these multiple levers to drive our growth, we think, are are are going to continue to provide it for growth in in the future. So we think this is the best version of Shopify. We think we're operating on all cylinders here and we still think there's a lot of room for us to keep growing.

[Jeff Hoffmeister, CFO at Shopify]

Yeah, I mean, obviously, Gabriel, I'm not going to guide you to some specific growth numbers over time, but to pile on to some of Harley's comments, it's really the durability of growth from our vantage point is a function of all the different Harley alluded to what we've done over the past couple of years in terms of introducing all new products. You think over the last two to three years in terms of what we've done with tax, what we've done with B2B, how we've really reinvigorated point of sale, the international expansion, all of that is something which is really helping us deliver this growth. This is just in terms of the tailwinds. We've talked a lot in the past about what we're seeing on entrepreneurship more broadly. I think the velocity of change in these markets is actually driving more and more merchants to our platform, given the capabilities of our platform, and we're the ones that are giving merchants the ability to adapt to this environment.

[Jeff Hoffmeister, CFO at Shopify]

I think the overall comments in terms of e commerce growth rates and the penetration of e commerce in various economies, that is obviously continuing to pick up and we think some of the things in agentic commerce will help that. The necessity for omnichannel, kind of what we're seeing on a global basis, there's so many things that merchants need to do. We're expanding the products and we're expanding their capabilities to succeed in this environment. So we feel good about our durability of growth over a multiyear period.

[Carrie Gillard, Head - IR at Shopify]

Thanks, Gabriela. Our next question will come from Terry Tillman at Truist Securities.

[Terry Tillman, Managing Director at Truist Securities]

Yeah, thanks for taking my question. Hopefully you all can hear me Okay. Universal cart, the checkout kit, that sounds really interesting, timely because of large language models, and that is an on ramp for shopping. Will this be generally available in time for the holiday season? And how do you think about that as we go into the back half of the year? Thank you.

[Harley Finkelstein, President at Shopify]

Hey, Terry. Thanks for the question. Look, we've been building infrastructure to make it easy to bring native shopping into every AI conversation for a while now. Obviously, yesterday, hopefully, most of you saw Toby's post about how we think about the future of of of Agenda Commerce and and just frankly conversational, shopping. And so we introduced, three new three new products catalog, which was launched in Q2 that's already out there that really helps agents to search, but also to surface exactly what customers want in seconds.

[Harley Finkelstein, President at Shopify]

And so it uses these very specialized large language models to categorize, to enrich, but also to standardize product data at these massive volumes. The other thing is is Universal Cart, which is actually part of Checkout Kit, but that really allows you to hold items from multiple stores all in one spot so that buyers can easily track all the items they wanna purchase directly in the conversation. And then, of course, checkout, Kate, which you mentioned, that's out there. That was launched last year. We're really excited that Microsoft's Copilot is already using it, but that really lets partners embed the merchant's checkout right in terms of their agent, and it actually works with Shop Pay.

[Harley Finkelstein, President at Shopify]

But what we're trying to do here is kind of three things. From a partnership perspective, what this means for partners is we're trying to ensure that consumers get these incredibly personalized Convalent shopping experiences and make it really easy for these partners to get that easy integration. From the merchant perspective, of course, you know, that means that that their products and and their brand is gonna show up across every AI platform. And so we are act really excited by this. Part of what we think is important, if you're a merchant on Shopify is that by by virtue of being on Shopify, merchants and and and merchants are everywhere where consumers are spending time, wherever commerce is happening.

[Harley Finkelstein, President at Shopify]

And I think the unfair advantage we have in working with all of these AI companies and and and and certainly around Augentic Commerce is that consumers favorite brands are all on Shopify. And when you couple that with an incredible technology stack and incredible product that we've been building, I think, you know, we we become the partner that everyone wants to work with. So it's a really exciting area for us, and most of the products that we're talking about is is they're already out there. And like I mentioned, you know, companies like Microsoft are already working with with some of them, including CheckoutKit.

[Carrie Gillard, Head - IR at Shopify]

Thanks for your question, Terry. Our next question will come from Reggie Smith at JPMorgan.

[Reggie Smith, ED - Equity Research at JP Morgan]

Hey. Good morning. Great quarter.

[Reggie Smith, ED - Equity Research at JP Morgan]

I guess a quick question for me. You guys have obviously done a great job of product innovation and consistently raising the bar. And it seems like, I guess, to this point, you haven't really priced explicitly or or specifically for for different product enhancements. How are you guys thinking about that longer term? Is there an opportunity to to almost a la carte price for different services you've added, over the last, you know, eighteen months or so?

[Reggie Smith, ED - Equity Research at JP Morgan]

And when could that, I think, that shift happen if if if at all?

[Harley Finkelstein, President at Shopify]

Yeah. Hey, Reggie. A couple of things I'll I'll say on that. First of all, we still believe that, you know, the business model that that we've built, it's predicated on our merchants doing really well. The better that our merchants do, the better Shopify does.

[Harley Finkelstein, President at Shopify]

I mean, that's the GMV based revenue model and and business model. And so we really like where that where that's at. In terms of sort of pricing specific products, I mean, you saw the introduction of commerce components by Shopify, which effectively allows merchants to select in a very modular fashion different products. So they may just take checkout or they may just take shop pay. Part of the part of that is obviously making sure that that we have individual products in market, which which have individual pricing.

[Harley Finkelstein, President at Shopify]

But part of that is just to create more on ramps into Shopify. So a very large, I mean, mentioned three very large retailers Burton, Starbucks and Canada Goose coming. Some of these brands wanna come to us and use all of Shopify. But some of them may just wanna start with us with something like checkout or shop pay for example. And by creating more of these on ramps to Shopify, it means more people can come into us and we believe over time we'll take more of our products and services.

[Harley Finkelstein, President at Shopify]

Beyond that, I mean we're not necessarily pricing individual merchant solutions. All of those obviously are priced on their own, but it's part of a much larger business model which is to get as many people to use Shopify as possible, take them to use as many of our services and products as possible. And then as they succeed, we succeed with them. And we think that particular pricing, model works really well for us.

[Carrie Gillard, Head - IR at Shopify]

Thank you for your question. Our next question will come from Ken Wong at Oppenheimer.

[Ken Wong, MD & Senior Analyst at Oppenheimer & Co. Inc.]

Fantastic. Harley, I wanted to touch on your partnership with OpenAI. Very exciting to see you facilitate that commerce experience. Do you see this as a new GMV opportunity or just a shift from existing buying channels over to authentic shopping?

[Harley Finkelstein, President at Shopify]

Yeah. Well, we are, as you can probably tell from my tone, incredibly excited about the possibilities of AI for both discovery and for shopping. I'm not gonna discuss or disclose our product roadmap. Obviously, we're actively working on new opportunities and partnerships because we think that helping our merchants thrive wherever customers are and and is very important. We'll share those updates when we're ready, but but we are built to partner.

[Harley Finkelstein, President at Shopify]

And I I think, you know, it's it's winning alongside others is is kind of part of Shopify's core DNA. And that that extends to our AI approach as well. Think we're one of the best partnership companies when it come in the technology space and something we're very, very proud of. So we have great relationships with all the AI companies, and and and we'll continue to to work with them. In terms of where it's coming from, it's a really good question.

[Harley Finkelstein, President at Shopify]

You know, in the same way I mentioned this in my prepared remarks, but when we were we began to anticipate that social commerce was going to be something that some consumers may may may start using, we immediately integrated with companies like like Instagram and and Snap and and and TikTok. And and, obviously, when we saw that, you know, more embedded video commerce may happen, we we integrated with YouTube. And and and when culture and music became something that that where commerce was happening, same thing with Spotify. So this is another surface area where there is a very serious potential where commerce could be taking place. Whether it takes some of the market share away from search based commerce or not, we wanna be prepared for that.

[Harley Finkelstein, President at Shopify]

We wanna make sure that merchants on Shopify are simply better prepared than merchants who are not, which is why we have all these incredible integrations. One thing that we do think that was really interesting about Agentic Commerce in particular is it's not necessarily based on on who is the largest company. It's based on what consumers are looking for. And the back to my point earlier, the unfair advantage we have is that consumers' favorite brands, the products, the companies they love most, for the vast majority of them, they're already on Shopify. And I think that puts us in a really, really key position in terms of these partnerships with all these companies and and building these incredible products only further substantiates that.

[Carrie Gillard, Head - IR at Shopify]

Thank you for your question. Our next question comes from Richard Tzu at National Bank.

[Richard Tse, Managing Director & Technology Analyst at National Bank Financial]

Yes, thank you. It was interesting to hear you talk about mining and drilling services. I'm guessing that's on the B2B side, but can you maybe help us understand the use case there and how it may be applicable to other sort of potential other customers on its side?

[Harley Finkelstein, President at Shopify]

Yep. Part of the reason why I mentioned it, it's sort of a I like to mention the large ones. I mean, Michael Kors came to Shopify and Miele came to Shopify and Signet Jewelers came. So And I like talking about obviously the brands that merchants that that consumers know and that that all of you know because it shows that the enterprise is really moving to Shopify and migrating to us, in this incredible clip right now. But the reason I want to bring up one that you may have not heard of is because it's just a it's a new vertical.

[Harley Finkelstein, President at Shopify]

I mean, of these industries that historically we did not play in automotive, for example, or education or food and beverage or industrial. We are now, we we are now seeing merchants come to Shop Away from those industries, and we just think it, number one, expands our TAM. It expands the types of merchants that can come to us. But we also believe that these are opportunities for those merchants to modernize their their commerce, you know, their commerce technology, whether it is direct to consumer or in the case of mining drilling services on the b to b side. But it's just one new on ramp into Shopify.

[Harley Finkelstein, President at Shopify]

And we think it's a really exciting area because frankly, when you meet a lot of these industrial brands and these very large companies selling I mean, remember talking to Carrier a couple years ago who sells you know, heating and cooling equipment on Shopify today. It it wasn't as if they were migrating from something good to something amazing. They were migrating from effectively, you know, a technology stack that was not existent that was still, you know, almost archaic in some ways to this incredibly, you know, innovative user user friendly interface and and and commerce stack that allows them to be scalable and allows them to keep innovating. So we just think it's a great new opportunity for us. And, you know, Boart Longyear is not a company that many of you know, but it's a new industry and a new vertical that we can go after and we think we can win there.

[Jeff Hoffmeister, CFO at Shopify]

Yeah, Richard, the only two things I would add obviously, and Harley alluded to the diversification and getting into new industries, that obviously helps add stability to how we think about our merchant base, how we think about our buyers. So that's one point which we really like about the success in B2B. And obviously, it helps strengthen the offering that we go to the largest enterprises, the largest global brands with in terms of all the capabilities that we have. So we're really excited about it.

[Carrie Gillard, Head - IR at Shopify]

Thank you for your question. Our next question will come from Tyler Radke at Citi Investment.

[Tyler Radke, MD, Senior Equity Research Analyst - Software at Citigroup]

Hey, thank you very much for taking the question. Question for Jeff. So performance marketing spend, you talked about that ramping up in the third quarter. I was wondering if you could just double click on kind of what specifically is driving that. Are you seeing kind of improving feedback trends with new logo acquisition opportunity?

[Tyler Radke, MD, Senior Equity Research Analyst - Software at Citigroup]

Or is this more upmarket? And then if you could also just provide an update. Obviously, the initial ramp up in performance marketing spend was a little over a year ago, just sort of how that's played out. Obviously, really strong GMV results, but just anything you could share on payback periods and ROI.

[Jeff Hoffmeister, CFO at Shopify]

Yes. Well, Tyler, maybe in reverse order, as you just alluded to, we're really seeing the strength in the GMV, we're seeing the strength in the merchant base and the revenue growth. So we do believe it's working well. We have, as you correctly pointed out, roughly a year ago, we talked about some of the changes, the updates we made in performance marketing and the continued enhancements that we've made in our own internal models, how we look at the data, how we find signal quickly from all this. And we have continued to improve those models and they're just getting better and better and better, which is one of the things that gives us the belief to continue to lead in the performance marketing.

[Jeff Hoffmeister, CFO at Shopify]

I do though want to make sure, partly because, and I alluded to this in my prepared remarks, when you compare the numbers this year versus last year in terms of growth, one of the things that we were doing this time last year was some of this testing, which you alluded to, which really helped us improve even more our models. And so there's a little bit of year over year comparability, which goes into this. And if you look at the operating expenses more broadly, you kind of look at quarter to quarter versus year over year, it's up some. I don't want to make it sound like we have some massive ramp in marketing. We we are continuing to do more with marketing.

[Jeff Hoffmeister, CFO at Shopify]

We have a lot of great markets. We want to support their specific products. They get success. We spend behind those from a marketing perspective that fuels more success. We really think the marketing engine is working very well.

[Jeff Hoffmeister, CFO at Shopify]

I don't have on one of your questions in terms of their specific size or segment. We talked about this a little bit last quarter too. I don't have some we don't have some segment where we say, hey, we really need to support this segment because it's behind. We're pretty broad based in performance marketing in terms of how we think about, again, geographies, products, things we want to be doing. So we're supporting the growth of these, but I don't have some segment where I feel like we need to do some catch up or we have some strategic agenda that we need to support.

[Jeff Hoffmeister, CFO at Shopify]

So we think our models are working very well, and so we're continuing to lean into those.

[Carrie Gillard, Head - IR at Shopify]

Thank you for your question, Tyler. Our next question comes from Brad Sills at Bank of America.

[Bradley Sills, Managing Director at Bank of America Merrill Lynch]

Wonderful. Thank you so much. Wanted to ask a question about the success you're seeing upmarket in the enterprise. Really impressive just to see some of the logos that you signed this quarter. Has there been any change in go to market, specifically in the channel?

[Bradley Sills, Managing Director at Bank of America Merrill Lynch]

You know, we'd love to get some color as to, you know, what's driving that success from a go to market standpoint? Any changes there? And with the focus on system integrators, has that been a benefit to that business as well? Thank you.

[Harley Finkelstein, President at Shopify]

Yeah. I mean, I don't think there's necessarily one thing that's leading to it. The product is incredible. The value to cost ratio is is incredibly on the side of value. And and more importantly, as we, you know, as we add new new new functionality, for example, some of the stuff we discussed around Agenda Commerce, for example, these are the these are the conversations that all of these very large retailers are having in their own boardrooms, their own management teams about where is commerce going.

[Harley Finkelstein, President at Shopify]

And the fact that they know that if they come to Shopify, they will be future proofed, I think, is is incredible. So certainly, you know, some of the stuff we're we're we're doing with with SIs helps. The product getting much better obviously helps. But, you know, the reason they're coming is is they see the value of of what we're doing. I mean, one of the cool parts of of this, commerce component play for us is that some of these, I guess, as I said earlier, some of these merchants, some these very large brands are coming to us simply because they see and believe in the value of Shop Pay, and they see the conversion lift.

[Harley Finkelstein, President at Shopify]

And they they they wanna have this incredible accelerated checkout experience. And so that opens a conversation with Shopify to figure out whether or not, you know, we can do more with them. And and once they come in the door for a commerce come out or for checkout, we can begin to show them what else we can do for them. But I think part of it is we have the largest ecosystem in commerce. We have this incredible innovation.

[Harley Finkelstein, President at Shopify]

The network keeps getting stronger. And the more you know, again, part of the reason why I love sharing these names that are joining every single, you know, every single quarter is because these are brands that other brands look up to and they wanna know, you know, if if Miele, the, you know, the the the high end, you know, kitchen appliance company is using Shopify, well, maybe we should be thinking about that as well. And so I think this exceptional value they're getting, this powerful platform, this modern technology stack, and this this innovation that they see us coming in, the amount of velocity we are ship the velocity we are shipping product with every single quarter. I mean, we ship more products at at each Shopify edition than some of our competition, you know, shipping over over the course of five years, and we do two of those every single year. So I I think generally, this is all leading to some of the most important, some of the largest brands on the planet, not only considering Shopify, but but coming to Shopify as well.

[Harley Finkelstein, President at Shopify]

And and, it's it's an area of the business I'm I'm incredibly excited about.

[Carrie Gillard, Head - IR at Shopify]

Thank you for your question. And our last question will come from Deepak Mathivanan at Cantor.

[Deepak Mathivanan, Senior Equity Research Analyst at Cantor Fitzgerald]

Great. Thanks, Gary. Harley, just wanted to ask you about the AI assistant. You have a great purview into the traffic patterns of your merchants. Can you give more color on how traffic is shifting towards AI assistance?

[Deepak Mathivanan, Senior Equity Research Analyst at Cantor Fitzgerald]

And what are you thinking are kind of the gating factors right now for commercial use cases to grow more on AI assistance and perhaps become a bigger channel for all your merchants? Thanks so much.

[Harley Finkelstein, President at Shopify]

Thanks for the question. Look, we are getting prepared that that if agenda commerce and more of the you know, more traffic is flowing towards AI to ensure that Shopify and Shopify's merchants are front and center. The reason that you you're hearing about all these new, you know, these new innovative things we're doing, whether it's catalog or a universal card or checkout kit, is because we wanna make sure that we become the best partner for these AI inter these AI AI companies to work with and and these a these agents to work with. So we are preparing ourselves for it in terms of is it taking market share from a different channel yet? Too early to tell.

[Harley Finkelstein, President at Shopify]

But like we did historically with new areas of commerce and e commerce, we are prepared that if something does shift, Shopify merchants are better prepared and Shopify is at the core at the center of all of that. So we'll continue to see. We'll keep updating you on that. But certainly, as you're seeing the pace of innovation and products and and and partnerships that we're rolling out around Agenda Commerce is is second to none. Maybe before we just close-up here, I'll I'll just finish with a couple things.

[Harley Finkelstein, President at Shopify]

I said this earlier, but but hopefully, you know, you've all now picked up the the tone of this call. We believe that Shopify is is steady, strong, and and certainly built on discipline. You know, we show up for our merchants of every size every single day, whether it's BFCM or it's a random Wednesday in in in August. But we think that we can really help merchants of of every size, whether it's the biggest brands or the best entrepreneurs. We're aiming very high.

[Harley Finkelstein, President at Shopify]

We're investing early. We we are never going to settle. But we also are seeing that there's always new frontier, and and and you should expect and you should, if you know, you should expect us to to show up there and and and be the first ones to reach it. We see our channels are growing. Our roster of incredible merchants keeps growing.

[Harley Finkelstein, President at Shopify]

Our global footprint keeps growing. And we still believe there's so much left to do. So, you know, I think you're seeing, the best version of Shopify. We are really excited about where we're where we're going. We're excited about how we're operating steady, strong, and and built on discipline.

[Harley Finkelstein, President at Shopify]

And just wanna say thanks for joining the call. And and now the team and I, and Jeff, we're gonna go back to shipping. So thank you so much.

[Carrie Gillard, Head - IR at Shopify]

With that, this concludes our second quarter twenty twenty five conference call. Thank you for joining us. Goodbye.

Participants

Executives

• Carrie Gillard, Head - IR
• Harley Finkelstein, President
• Jeff Hoffmeister, CFO

Analysts

• Brian Peterson, Managing Director at Raymond James Financial
• Arjun Bhatia, Co-Group Head - Technology, Media & Communications at William Blair
• Gabriela Borges, MD - Software Research at Goldman Sachs
• Terry Tillman, Managing Director at Truist Securities
• Reggie Smith, ED - Equity Research at JP Morgan
• Ken Wong, MD & Senior Analyst at Oppenheimer & Co. Inc.
• Richard Tse, Managing Director & Technology Analyst at National Bank Financial
• Tyler Radke, MD, Senior Equity Research Analyst - Software at Citigroup
• Bradley Sills, Managing Director at Bank of America Merrill Lynch
• Deepak Mathivanan, Senior Equity Research Analyst at Cantor Fitzgerald