Shopify Inc. Q2 FY2026 earnings call

Core Operating Model

• Shopify's core principle is to build what most merchants need most of the time, and leverage an open ecosystem of partners for all other use cases. This model has driven five straight quarters of 30%+ GMV growth, and is uniquely suited for the emerging agentic AI era of commerce.
• Cohort dynamics drive durable growth: newer cohorts outperform older cohorts, and older cohorts continue growing. The Q1 2015 merchant cohort now has quarterly GMV 5x its initial size, with a CAGR 3x that of the overall global commerce market. Even when first businesses close, serial entrepreneurs typically stay with Shopify for their next venture, and second shops average more than twice the sales per shop of first-time founders' shops.

AI and Agentic Commerce Infrastructure

• Launched the Everywhere Edition product line to enable commerce everywhere, built for agentic AI:
  • Shopify Catalog: A structured product discovery index with over 1 billion products, designed for AI agents. AI searches using Catalog convert at 2x the rate of searches using scraped data, because product information is complete, accurate, and context-rich. 75% of AI-attributed orders in Q2 came from outside Shopify's top 100 categories, disproportionately benefiting the long tail of small, specialized merchants that make up Shopify's core base.
  • Universal Commerce Protocol (UCP): An open unified protocol for cross-platform agentic commerce, already adopted by dozens of retailers and platforms. All Shopify merchants are UCP-ready, enabling agents and builders to access product data, create carts, and process checkout while preserving merchant checkout and fulfillment logic.
  • Agentic admin tools: A new agentic section in the Shopify admin provides the first cross-channel attribution for agentic selling, letting merchants manage AI channels, track performance, and get optimization recommendations in one interface.
• Sidekick AI assistant for merchants: Q2 daily active merchants using Sidekick grew 3.6x year-over-year, daily sessions grew 4.8x, and the tool handled 34 million conversations. Sidekick helped new merchants reach 5 orders within 15 days 8% faster than the baseline. Usage varies by merchant stage: 50% of conversations for new merchants focus on store setup, while 40% of conversations for 5-year established merchants focus on analytics and reporting. Sidekick now integrates with third-party apps, letting merchants take action without leaving the interface.
• AI/agentic growth trends: AI-driven traffic and orders to Shopify stores tripled year-over-year in Q2, and new buyer orders from AI channels are nearly twice the rate of other channels. AI is a complement to, not a substitute for, traditional search, which still holds roughly one-third of all storefront sessions and remains one of the largest sources of buyer traffic.

Cross-Business Expansion Highlights

• International: International GMV grew 37% year-over-year. Shopify launched local payment methods in Mexico and the UAE, bringing the total number of countries with Shopify Payments available to 40. Managed Markets capabilities expanded beyond US merchants to Canada and the UK.
• Offline unified commerce: Shopify POS delivered faster performance and deeper unified capabilities, including cross-location order fulfillment, inventory movement, and combined checkout for returns, exchanges and new purchases. Added major enterprise clients including Holt Renfrew, multiple Canada Goose locations, and expanded the relationship with furniture retailer Our House to include its offline business.
• B2B: Expanded native B2B capabilities beyond Shopify Plus to all eligible merchants, letting merchants manage wholesale and DTC from a single admin, reducing the need for separate tools and custom workflows.
• Large enterprise merchant growth: Multiple major global brands including Guess, Fred Siegel, Aritzia, Avon, Elf Cosmetics, Burton, and Suit Supply joined or went live on the platform in Q2. Most large merchants start with one channel (typically online) as an on-ramp, then expand to offline, B2B, and payments over time, deepening platform embedding and driving profitable growth.

Financial and Operational Discipline

• Operating expenses were 34% of revenue in Q2, a nearly 400 basis point improvement year-over-year, driven by headcount discipline and operating leverage. All expense categories (sales and marketing, R&D, G&A) improved as a percentage of revenue year-over-year, providing financial flexibility to continue investing in AI capabilities.
• AI cost management strategy: Use the best model for each use case (frontier models for high-value tasks, smaller cheaper models for routine tasks) and distill frontier model capabilities into smaller specialized models for repeat tasks to reduce cost and improve speed. Sidekick scaling did not erode subscription gross margins due to these cost efficiencies.

Overall company: Q2 2026 total GMV was $116 billion, up 32% year-over-year (over 30% constant currency). Total revenue was $3.6 billion, up 34% year-over-year (33% constant currency). Free cash flow margin was 18%, with 18% year-over-year expansion (excluding an accounting change tailwind).

By merchant size segment: The $25 million+ annual GMV band is the fastest growing, off a smaller base. The $2 to $25 million cohort contributes the most incremental GMV, with most growth from existing merchants graduating into this band. Retention for merchants reaching $1 million annual GMV is 92%, rising to 97% for $10 million+ annual GMV.

By geographic segment: North America GMV grew 28% year-over-year; Europe GMV grew 34% constant currency. Contribution to growth from new merchants and same-store sales remains balanced, consistent with multi-quarter trends. Shopify is still underpenetrated globally, capturing less than 1% of total global retail sales.

By product/channel segment:

• Subscription Solutions: Revenue grew 22% year-over-year, driven by strong net new merchant additions to standard plans, plus equivalent dollar growth from Plus subscriptions and variable platform fees. Q2 MRR grew 19% year-over-year, with Plus MRR accounting for 34% of total MRR (also growing 19% year-over-year). Gross profit grew 19%, with gross margins holding just under 80%. Contribution to total revenue: ~22% implied based on 34% total revenue growth and 22% subscription growth.
• Merchant Solutions: Revenue grew 37% year-over-year, driven by strong GMV growth and 300 basis point year-over-year increase in Shopify Payments penetration, which reached 68% of global GMV. Gross profit grew 39%, with gross margins up slightly year-over-year. Contribution to total revenue: ~78% implied.
• Offline/Point of Sale: GMV grew 32% year-over-year, with strong momentum among large complex retailers (the fastest growing merchant segment).
• B2B: GMV grew 76% year-over-year, following expansion of native B2B capabilities to more merchants.
• ShopApp/ShopPay: ShopApp native GMV grew over 70% year-over-year; Cart Sync represented 30% of ShopApp GMV. ShopPay GMV grew 53% year-over-year, and surpassed $400 billion in lifetime accelerated GMV.

• Q3 2026 revenue is expected to grow in the low 30% range year-over-year, with growth broad-based across geographies, merchant sizes, and channels, and no material expected FX impact.
• Q3 2026 gross profit is expected to grow in the mid-to-high 20% range year-over-year, with the gap between revenue and gross profit growth driven by the ongoing mix shift between faster-growing Merchant Solutions and slower-growing Subscription Solutions, and continued strength in payments growth.
• Q3 2026 operating expenses are expected to be 33% to 34% of revenue, reflecting continued operating leverage and a meaningful improvement from 37% of revenue in Q3 2025.
• Q3 2026 free cash flow margin is expected to be in the high teens to low 20% range, inclusive of less than a 1 percentage point tailwind from the merchant cash advance accounting change.
• Management confirms long-term structural tailwinds: Shopify merchants have captured nearly half of all incremental US e-commerce dollars since the start of 2025, even though Shopify holds just over 14% of the total US e-commerce market, and early international results follow the same trajectory. Growth of agentic commerce, which disproportionately benefits Shopify's core long-tail merchant base, adds additional upside to base case growth.

No material new risks or operational failures were discussed during the call. Management noted that loss rates for payments, capital, and credit products are at normalized levels, and the company continues to improve forecasting and measurement to keep loss rates low as these products scale. No other operational or financial risks were highlighted.

Q: AI is creating clear value for merchants — will Shopify harvest this value with new pricing, or continue focusing on growing the merchant base first? / A: Shopify monetizes agentic commerce the same way it monetizes all other sales, with the same existing economics and no new or separate fees. More agentic GMV simply means more revenue for Shopify through the existing model. 75% of AI-attributed purchases go to small, specialized long-tail merchants that are Shopify's core base, so as these merchants grow disproportionately from AI, Shopify grows with them under the existing model. This model has worked well for Shopify for almost 20 years. (207 characters)

Q: How has Shopify improved speed to onboard large enterprise merchants, and what is the product roadmap to support increasingly large GMV merchants? / A: Large brands are migrating to Shopify at an accelerating rate because they want a future-proof platform that is already positioned for agentic commerce, unlike custom or legacy stacks. Many large merchants now complete full migration in just a matter of weeks, compared to much longer timelines for traditional enterprise platforms. The common on-ramp is starting with a single channel (typically online), then expanding to offline, B2B, and other solutions over time. Once merchants join Shopify, they almost always stay, with very high retention rates for large brands. (380 characters)

Q: Is there an upper bound to how large a GMV per merchant Shopify can serve, and what types of business models are not a good fit for Shopify? What is the total size of the serviceable TAM? / A: There is no upper bound to GMV per merchant Shopify can serve; Shopify already hosts merchants doing billions of dollars in GMV with small teams, and has become very good at handling high complexity. The model lets merchants start with just a single Shopify component (like ShopPay for marketplaces) then add more solutions over time. Shopify is still heavily underpenetrated globally, capturing less than 1% of total global retail sales, so there is massive room for growth across all geographies and merchant segments. (342 characters)

Q: Sidekick adoption is growing very fast — can you share impacts on merchant retention and GMV growth, and could premium AI capabilities become a direct monetization opportunity? / A: More merchants use Sidekick every quarter, and usage expands as merchants grow: new merchants use it for onboarding and store setup, while established merchants use it for analytics and business intelligence. It already improves early merchant outcomes, driving an 8% increase in new merchants hitting 5 orders within 15 days, which improves long-term retention and success. Currently, monetization is indirect: better merchant outcomes lead to more GMV and more revenue for Shopify through the existing model, though management has not ruled out direct monetization for premium capabilities in the future. (365 characters)

Q: How does Shopify's headless commerce strategy work, and what are the long-term implications of integrating with more third-party development tools? / A: Shopify offers a composable architecture that lets merchants build however they want, including full out-of-the-box setups or headless configurations using third-party tools like Vercel. No matter what front-end tools merchants use, Shopify remains the core back-end commerce operating system that manages inventory, transactions, customer data, taxes, shipping and all the underlying complexity of commerce. Partnering with third-party development tools lets Shopify meet merchants where they are, and all transactions ultimately flow back to Shopify, deepening platform embedding. (341 characters)