Overview
Since the Report + 12.8%
Revenue grew 34.0% year over year, EPS beat the estimate by 7.7%; the stock rose 17.0% in its first reaction.
- RevenueQ2
- $3.58B
- ▲ 34% YoY
- Gross Merchandise Volume
- $115.6B
- ▲ 32% · 5th Straight Quarter Above 30%
Verdict
BUYShopify pushed gross merchandise volume to $115.6 billion, up 32% from a year earlier, and grew revenue, gross profit and free cash flow more than 30% each. Far from AI eating e-commerce software, orders arriving through AI channels tripled. The stock closed earnings day 17% higher.
Close on Report DayAug 5
$147.44▲ 17.0%Report-Day Move
- Market Cap(Today)
- ≈ $214 B
- 1Y Return(At Report)
- + 16%
- P/E(At Today's Price · $1.58 · Trailing 12M)
- 105.3
- PEG(Next-year Consensus)
- 3.67
- Net Margin(Trailing 12M)
- 14.5%
Earnings Summary
In 30 Seconds- Revenue rose 34% year over year to $3.58 billion, beating the market expectation by 4%, while gross merchandise volume grew 32%.
- The company guided to low-thirties revenue growth for the third quarter, against a market expectation of roughly 27%.
- The stock jumped 17% on earnings day as fears that AI would hollow out e-commerce software faded.
The Numbers
Free Cash Flow
$654M
18% Margin
Gross Margin
47.7%
Mix Shift Pressure
Shopify Payments Share
68% of GMV
64% a Year Ago
AI-Driven Orders
Tripled
Year Over Year
Quarterly Revenue ($ Billion)
2.68
Q2 2025 · $2.68 B
2.84
Q3 2025 · $2.84 B · QoQ + 6.1%
3.67
Q4 2025 · $3.67 B · QoQ + 29.1%
3.17
Q1 2026 · $3.17 B · QoQ − 13.7%
3.58
Q2 2026 · $3.58 B · QoQ + 13.0% · YoY + 33.7%
- Q2 2025
- Q3 2025
- Q4 2025
- Q1 2026
- Q2 2026
Q3 2026 Company Guidance
- Revenue Growth (Q3)31% – 33%31%33%
Midpoint 32% · 34% Actual in Q2Midpoint 5 pts Above Estimate ▲
- Gross Profit Growth (Q3)25% – 29%25%29%
Midpoint 27% · 31% Actual in Q2Strong Growth · 27% YoY ▲
- Operating Expenses / Revenue (Q3)33% – 34%33%34%33% – 34%
Midpoint 33.5% · 34% Actual in Q2Flat Trend
- Free Cash Flow Margin (Q3)18% – 22%18%22%
Midpoint 20% · 18% Actual in Q2Trending Higher ▲
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±18% around the midpoint.
Segment and KPI Data
Revenue by Segment
- Merchant Solutions$2.78 BShare 77.6%▲ 37.0% YoY
Includes Shopify Payments and payment services
- Subscription Solutions$802 MShare 22.4%▲ 22.0% YoY
Key Metrics
Monthly Recurring Revenue (MRR)
$221 M
▲ 19.0% YoYPress Release
Operating Income
$488 M
▲ 68.0% YoYPress Release
Transaction and Loan Losses
$141 M
▲ 76.0% YoYPress Release
Shares are computed over the segment total: $3.58 B. Source: Press Release.
Metrics come only from the company's own filings; each one names the document it was taken from.
“GMV growth accelerated on top of last year's already strong Q2 with solid results across all merchant sizes, channels, and geographies. Alongside this momentum, we continue to drive operating leverage, which flowed through to 18% free cash flow margins.”
- Agentic Commerce and AI Orders
- Enterprise Brand Migrations
- International and Offline Growth
Summary and Review
Summary
Shopify posted $3.58 billion of second-quarter revenue on August 5. That is 34% above last year's $2.68 billion and 4% ahead of the $3.45 billion Market Expectation. Gross merchandise volume hit $115.6 billion, up 32%, a fifth straight quarter above 30%. Adjusted EPS was $0.42 against a $0.39 estimate. Four headline measures cleared 30%: revenue, GMV, gross profit, free cash flow. Free cash flow was $654 million, an 18% margin; operating expenses fell to 34% of revenue from 37%.
The stock closed at $144.24, up 17%, after a 24% intraday peak. Volume ran 2.6 times the three-month average. The move was about a fear dissolving, not the numbers. The question for months: if shoppers buy through chatbots, what is left for the storefront? AI-driven traffic and orders tripled; first-time buyers through AI ran at twice other channels' rate. Some 75% of those orders came from outside the top 100 categories. A third-quarter outlook above expectations amplified it.
We read the quarter as strong. Growth is accelerating, profitability keeps pace, and the supposed biggest structural risk looked like an advantage. Two caveats remain. First, gross margin slipped to 47.7% as growth sits in lower-margin merchant solutions, not high-margin subscriptions. Management's third-quarter outlook: low-thirties revenue growth against mid-to-high-twenties gross profit growth. Second, price: the shares trade near 89 times free cash flow, so years of this growth are already embedded. A good quarter, an expensive stock.
Full Review
Payments and merchant services now drive the growth.
Shopify's revenue arrives on two tracks. Subscription solutions, the recurring fees merchants pay to use the platform, reached $802 million and grew 22% year over year. Merchant solutions grew 37% to $2.78 billion and made up roughly 78% of the total. The gap is not accidental: Shopify Payments penetration rose to 68% of GMV from 64% a year earlier. The quarter carried $78 billion of payment volume, and cumulative payment volume since inception has now passed $1 trillion. What that means in practice is that Shopify increasingly behaves less like a software subscription business and more like infrastructure that takes a cut of its merchants' sales. The model accelerates revenue but dilutes margin, because processing payments carries a cost of its own. Monthly recurring revenue reached $221 million, up 19%, showing the subscription base is still widening underneath.
AI turned out to be a new storefront, not a threat.
This is the most-discussed part of the quarter. Traffic reaching Shopify stores through AI, and the orders that traffic generated, both tripled year over year. More importantly, the share of first-time buyers arriving through that channel ran twice the rate of other channels. AI is bringing in new customers rather than merely rerouting existing ones. Some 75% of AI-attributed orders came from outside the top 100 categories. Ask a chatbot for a winter hiking boot and the specialised small brand that comes back is precisely Shopify's customer. The company also helped develop Google's Universal Commerce Protocol and opened product data from millions of merchants to AI agents through its Catalog API. On its own side, the Sidekick AI assistant handled 34 million merchant conversations in the quarter, and daily active merchants using it rose 3.6x. Merchants built 36,000 custom apps with it, triple the 12,000 of the previous quarter.
Profitability keeps pace, the margin gap widens.
Operating income reached $488 million and the operating margin rose to 13.6% from 10.9% a year earlier. Free cash flow was $654 million at an 18% margin, an improvement of roughly 150 basis points year over year. Operating expenses fell to 34% of revenue from 37%, evidence that Shopify can hold spending discipline without throttling growth. The gross line tells a different story. Gross profit rose 31% to $1.71 billion, slightly trailing the 34% revenue increase, and gross margin eased to 47.7%. Management's own third-quarter outlook says that gap will keep widening: revenue growth in the low thirties against gross profit growth in the mid-to-high twenties. This is the natural consequence of payment volume taking a larger share of the revenue mix. One further caution: GAAP net income reads $1.50 billion, but most of that comes from remeasuring equity investments; stripping it out leaves $439 million from the core business.
International and enterprise are carrying the momentum.
Growth is not tied to one geography or one merchant size. International GMV rose 37% year over year, Europe grew 34% in constant currency and North America expanded 28%. Offline GMV grew 32% and business-to-business volume grew 76%, the fastest-growing but smallest-based leg of the platform. On the enterprise side, names that migrated during the quarter include Balmain, Canada Goose, Guess, Holt Renfrew, Avon, e.l.f. Cosmetics, Claire's, Burton, Suitsupply and Arhaus. These migrations matter because replatforming is a multi-year decision large brands rarely repeat, and once made it tends to stick. Retention runs at 92% for shops selling more than $1 million a year and 97% for those above $10 million. By the company's own reckoning Shopify holds more than 14% of the U.S. e-commerce market. Its merchants have captured close to half of every incremental dollar added to U.S. e-commerce since the start of 2025.
The real argument is about price, not the numbers.
There is no obvious operational fault this quarter; the problem is that the stock has already priced in perfection. Shopify trades at roughly 89 times free cash flow and 78 times next year's projected earnings. At those multiples it is not enough to be good; the company has to clear expectations every quarter. The reaction to a single miss tends to be violent. The 17% jump on earnings day is the mirror image of the same dynamic. The market had priced the bad scenario, AI making Shopify irrelevant; when it failed to appear the price corrected upward fast. The right question is not whether the quarter was good — it was — but how many years this pace persists. Next quarter's line to watch: gross profit growth reaching the high twenties and free cash flow margin reaching the low twenties. Our valuation and cash flow guides unpack both ideas.
Looking Ahead
Strengths and Risks
6 Strengths · 6 RisksStrengths
6- Revenue, GMV, gross profit and free cash flow all grew more than 30%GMV of $115.6 billion cleared 30% for a fifth straight quarter.
- Free cash flow reached $654 million at an 18% margin while operating expenses fell to 34% of revenue from 37%, with no slowdown in growth.
- AI-driven traffic and orders tripled year over year, and first-time buyers arriving through that channel ran at twice the rate of other channels.
- Shopify Payments penetration climbed to 68% of GMV from 64% a year earlier, and cumulative payment volume passed $1 trillion.
- Growth is broadly distributedİnternational GMV rose 37%, Europe 34% in constant currency and B2B volume 76%.
- Retention runs at 97% for shops selling above $10 million a year, and enterprise migrations such as Balmain, Canada Goose and Guess keep coming.
Risks
6- Gross margin eased to 47.7% as growth comes from lower-margin merchant solutions rather than high-margin subscriptions.
- Third-quarter guidance calls for low-thirties revenue growth against mid-to-high-twenties gross profit growth, so the gap keeps widening in revenue's favour.
- Subscription revenue grew 22% versus 37% for merchant solutions, leaving the platform's highest-quality revenue line behind the overall pace.
- GAAP net income reads $1.50 billion, but most of it comes from equity investment remeasurementCore operating net income was $439 million.
- The stock trades near 89 times free cash flow, a multiple at which one soft quarter produces a sharp price reaction.
- The AI channel works in Shopify's favour today but remains smallWho owns the customer relationship in an agent-mediated world is a long-term unknown.
What to Watch
6- Third-quarter results are due around November 2026, with the company guiding to low-thirties revenue growth and mid-to-high-twenties gross profit growth.
- Black Friday through Cyber Monday falls on November 27-30, 2026: Shopify's heaviest volume days and the first real stress test for the AI channel.
- Whether operating expenses stay inside the 33-34% of revenue band management guided to will be the key discipline check in the third quarter.
- Management guided third-quarter free cash flow margin to a high-teens to low-twenties range; the upper end would confirm the margin story.
- Enterprise customers that migrated in the second half of 2026, such as Balmain, Canada Goose and Guess, typically show up in GMV several quarters later.
- Wider adoption of Google's Universal Commerce Protocol and the Catalog API exposing products to AI agents will reveal the true scale of agentic commerce.
Upcoming Earnings
To Understand This