Shopify Inc. Q3 FY2025 earnings call

• AI initiatives: AI is central to Shopify's engine. It helps merchants sell everywhere via agentic commerce (product discovery, purchasing experience, post-purchase journey), operate smarter with tools like Sidekick (over 750,000 shops used Sidekick for the first time in Q3, with nearly 100 million conversations), and build better products using internal tools like Scout. - International expansion: International GMV grew 41% in Q3. Europe's market share increased, and there were enhancements in payments products, point of sale, Shopify Capital, and Shop App. - Payments: Shopify Payments had 65% penetration of GMV in Q3, with Shop Pay seeing significant growth (up 67% YOY to $29 billion). There were partnerships and rollouts of Shop Pay in new regions. - Offline and B2B: Offline GMV was up 31%, and B2B GMV was up 98% YOY, with broad growth across cohorts, verticals, and regions.

In Q3, Shopify saw a 32% GMV growth, reaching $92 billion. Revenue grew 32% year-over-year. Shopify Payments achieved 65% penetration of GMV. International GMV grew 41% in Q3, with Europe's market share making gains and revenue from the region accounting for 21% of overall revenue. B2B GMV nearly doubled in Q3, up 98% year-over-year. Merchants across all sizes showed strong growth, with merchants having annual GMV below $25 million generating the majority of GMV.

• Q4 revenue growth is expected to be in the mid to high 20s YOY. - Q4 gross profit dollars are expected to grow in the low to mid-20s. - Q4 operating expenses are anticipated to be 30%-31% of revenue. - Q4 stock-based compensation is expected to be $130 million. - Q4 free cash flow margin is expected to be slightly above Q3, though impacted by higher payments losses in Q4 and timing of tax receivables, but on track for a free cash flow margin similar to 2024.

• Transaction and loan losses: Up 5% of revenue in Q3, primarily from higher losses in Payments business due to merchant onboarding testing, though starting to turn back towards historical levels. - Tariffs impact: While cross-border GMV and merchant price increases have been monitored, there have been slight changes in merchant price increase trends since April tariff announcements in the U.S.

Q: Initial observations from the integration with OpenAI and incremental contribution from AI platforms?

A: Harley mentioned AI-driven traffic to Shopify stores up 7x since January and orders attributed to AI searches up 11x. Partnership with OpenAI is exciting, and AI is laying rails for agentic commerce with merchants on Shopify benefiting.

Q: View on prioritization of instant checkout solutions and Shop Pay's advantage?

A: Harley stated Shopify's advantage is having the best brands on its platform. Shop Pay processed $29 billion in GMV in Q3, up 67% YOY, and is popular among discerning consumers buying from brands on Shopify.

Q: Marketing investments and MRR efficiency?

A: Harley said marketing investments are working, driving merchant adoption, and they'll keep spending where it makes sense with tight guardrails. Jeff added on MRR that Q3 was the first clean sequential comparison with Standard piece seeing growth, and they're pleased with the merchant acquisition engine.

Q: Enterprise business success and take rate?

A: Harley noted large enterprises are migrating to Shopify, with brands like Estee Lauder joining. Jeff added that large GMV brands coming on empower more brands to adopt Shopify's solutions, with a multiyear positive outlook for the business.

Q: Product search in conversational commerce and e-commerce landscape evolution?

A: Harley said Shopify is prepared for any path of agentic commerce, with deep connections to AI agents and Catalog powering product discovery. Consumers are buying from brands they love, and Shopify is where those brands are.

Q: Consumer state by geography and post tariffs?

A: Harley said consumer confidence at checkout is strong, with shoppers buying from brands they love on Shopify. Jeff added tariffs have had relatively constant impact with slight downtick in merchant price increases, and no significant impacts on merchants seen.

Q: Shopify campaigns, ramp-up, and revenue opportunity?

A: Harley said campaigns are solving customer acquisition for merchants, with 9x year-on-year increase in budget commitments from merchants. There are improvements like Gross Sales and AI-powered ranking.

Q: Advertising opportunities and ChatGPT ad rev share?

A: Harley said Shopify monetizes when merchants do better through GMV and Payments. Ads are still in early stages with focus on driving scale and outcomes for merchants, and no specific details on ChatGPT ad rev share were disclosed.