Curated by Dolphin Research: earnings call notes for $Shopify (SHOP.US) FY26Q2. These are management highlights and key data points.

I. Results recap

1. Q3 guidance

a. Revenue: up in the low 30s % YoY, with growth drivers unchanged vs. Q2 (cross-region, merchant size mix, omnichannel), and no material FX impact expected. b. GP dollars: up in the mid-to-high 20s % YoY; the gap vs. revenue growth reflects a structural mix mismatch between Merchant Solutions and Subscription Solutions, alongside sustained strength in Payments.

c. OpEx: operating expenses at 33%–34% of revenue, a marked improvement vs. 37% a year ago. d. FCF margin: high-teens to low-20s %, including a tailwind of less than 1ppt from the MCA accounting change.

2. Key metrics this quarter

a. Aggregate: GMV of $116.0bn, +32% YoY (>30% at constant FX) and accelerating on a high +29% YoY base; revenue of $3.6bn, +34% YoY (+33% cFX). FCF margin slightly above 18%, topping prior outlook. GMV, revenue, GP, OP and FCF all grew 30%+ YoY.

b. Segments: Merchant Solutions revenue +37%, driven by strong GMV and higher Payments penetration; Payments penetration +3ppt YoY to 68% of global GMV. Subscription Solutions revenue +22%; MRR +19%, with Plus MRR at 34% of MRR and also +19%.

c. Three sources of revenue outperformance: broad-based GMV beat, higher-than-expected Payments penetration, and strength in other Merchant Solutions (notably partner revenue share and financial services). d. GMV breakdown: by size, $25mn+ cohort grew fastest but off a smaller base; the $2mn–$25mn cohort contributed the most incremental GMV, largely from existing stores graduating up. By region at cFX, N. America +28%, Europe +34%, Intl +37%. By channel, offline +32%, B2B +76%; GMV growth split was balanced between new merchants and same-store sales.

3. Margins and operating leverage

a. Merchant Solutions GP +39% YoY, with GPM slightly higher YoY as high-margin revenue growth more than offset GPM pressure from higher Payments volume. Payments GPM is typically higher in Intl markets given a larger share of debit transactions and lower interchange.

b. Subscription Solutions GP +19% YoY, GPM just under 80% and flat vs. Q1. Most Sidekick-related AI costs sit here, and holding GPM as Sidekick scales indicates efficiency gains in support and adjacent functions.

c. OpEx at 34% of revenue, improving nearly 400bps YoY; S&M, R&D and G&A as % of revenue all improved YoY, largely via headcount discipline. S&M was under 14% of revenue, improving ~160bps YoY even as merchant acquisition spend increased; R&D absorbed much of internal AI spend with a slight acceleration YoY.

d. Transaction losses at 3.9% of revenue, mainly driven by Capital; loss rates in Payments and credit are at normalized levels. e. FCF margin expanded ~150bps YoY ex-MCA accounting effect, primarily from OP margin expansion, partially offset by ~100bps higher tax.

4. Long-term structural metrics

a. Merchant retention: over the past five years, annual GMV $1mn merchants show 92% retention, while $10mn merchants rose to 97%. Merchants opening a second Shopify store generate on average 2x+ sales per store vs. first-time founders.

b. Cohort compounding: the Q1 2015 cohort’s current-quarter GMV is 5x its initial size, implying a CAGR roughly 3x the broader e-commerce market over the same period. c. Cumulative scale: platform cumulative GMV surpassed $1tn last year; Shopify Payments cumulative GPV also crossed $1tn this quarter.

d. Share: Shopify now holds 14%+ of US e-commerce. Per eMarketer, since early 2025 Shopify merchants captured nearly half of US e-commerce incremental dollars; Intl shows a similar trajectory but earlier in maturity.

II. Earnings call details

2.1 Management remarks

1. Platform principles and competitive position

a. Principles are unchanged: Shopify builds what most merchants need most of the time, and lets partners handle the rest. We build and open the underlying primitives so the best developers and companies can build on top.

b. The model accelerated over the past year: OpenAI, Google, Meta and Microsoft chose to partner with Shopify, opening more front doors to commerce. Thousands of developers use the same primitives to embed commerce into their apps.

c. View: the more fragmented and complex commerce becomes, the more valuable a unified platform is. Whether a human or an agent transacts, whether a human or AI builds a store, Shopify runs underneath.

2. Catalog (AI-native product graph)

a. Positioned as the authoritative source of truth for high-quality products and brands for AI discovery, built on nearly two years of index work to distill 1bn+ products and two decades of commerce know-how for agents. b. Conversion proof: AI search driven by catalog converts at 2x the rate of crawled data, thanks to complete, accurate product information with proper context.

c. Integrated with Shop login, agents can recognize returning buyers and personalize off purchase history, which management claims no other catalog API can match. d. New ‘taste attributes’ are being added (wedding-appropriate formality, breathability, wrinkle resistance, whether shoes suit endurance runs), uniquely enabled by catalog.

3. UCP (Universal Commerce Protocol)

a. Launching in early 2026, with industry players inside and outside the commerce stack converging on the unified protocol; dozens of retailers and platforms have adopted. b. All Shopify merchants are UCP-ready by default: agents and developers can access product data, build carts and even complete checkout under full checkout logic and fulfillment rules, with products auto-flowing into catalog.

c. All developers can now call UCP and catalog APIs across millions of merchants, on the same infra as major AI partners. 4. Early data on agentic commerce

a. In Q2, AI-driven traffic and orders each rose 3x YoY; new-buyer orders from AI channels were nearly 2x other channels, though absolute GMV remains small relative to the base. b. AI complements search rather than replaces it: traditional search sessions grew 1.3x over two years, still about one-third of all store sessions and rising.

c. Long-tail structural lift: 75% of AI-attributed Q2 orders came from outside the top 100 categories, as agents iteratively query catalog and use rich structured data to match specific intent vs. keyword-ranked engines. d. Shopping paths compress: half of AI-referred sessions land directly on PDPs, 2.5x traditional search. e. In May, Shopify launched the first agentic cross-channel attribution module in admin, letting merchants manage AI channels, track performance and receive actionable recommendations in one place.

5. Sidekick and agentic store-building

a. DAU merchants +3.6x YoY in Q2, daily sessions +4.8x; nearly 34mn conversations handled. Sidekick was used to create 36k custom apps vs. 12k in Q1.

b. Personalized onboarding increased the share of new merchants achieving 5 orders within 15 days by 8%. c. Through extensions, Sidekick can access data from third-party apps like Klaviyo and execute actions without leaving Sidekick.

d. Use cases shift as merchants scale: in the first 30 days, ~50% of conversations center on setup, design and themes; by year five that falls to ~8%, with analytics and reporting rising above 40%, making Sidekick the intelligence layer on first-party data. e. Connectors are live via the AI toolkit for agents such as Claude, ChatGPT, Perplexity, Manus and Vercel, and integrated with vibe coding platforms like Lovable plus AI chat agents and CLI/IDE.

6. Checkout, identity and Shop

a. What appears as ‘one click’ actually executes complex, customized flows across tax, discounts, bundles, inventory, validation and payments. As commerce spreads to more touchpoints and agents transact, the ability to handle this complexity becomes more valuable.

b. Trust and identity matter more: agents acting on behalf of buyers need to know who they are, how they pay and what rules apply. Shop has built a buyer network at hundreds of millions scale with identity, preferences and payments operating as one system.

c. Native Shop App GMV grew 70%+ in Q2; CartSync contributed 30%+ of Shop App GMV. d. Cumulative GMV accelerated through $400bn on Shop Pay in Jun.

7. Intl, offline, B2B and enterprise brands

a. Intl GMV +37%; launched the first local payment method in Mexico; expanded Managed Markets beyond the US for the first time, now live for Canada and the UK. b. Offline POS GMV +32%, delivering the fastest POS experience ever and enabling cross-store fulfillment and inventory transfers; expanded the Arhaus partnership into offline.

c. B2B: opened native B2B capabilities beyond Plus, letting more merchants manage wholesale and DTC in one admin. d. Enterprise brands choosing Shopify this quarter include Guess, Fred Segal, Aritzia and Avon; launches also include a cosmetics brand (name missing in transcript), Claire's, Burton and Suit Supply.

e. Arhaus as a unified commerce blueprint: from online, then offline, B2B and Shopify Payments, serving distinct customer segments and channels with different pricing models on one back end.

2.2 Q&A

Q: AI is clearly creating substantial merchant value. Will you capture more of that back to Shopify, or keep prioritizing open access and onboarding more merchants?

A: Monetization is straightforward: we unlock more places for merchants to sell and monetize those sales the way we always have. Agentic transactions and online store transactions share the same unit economics, with no added fees and no separate pricing, so more agentic GMV simply means more revenue for Shopify. This model has run for nearly two decades.

To add, we are seeing incremental flows through agentic, not cannibalization. Last call we were asked if this just takes from search, but search is performing very well while agentic is now scaling. Importantly, 75% of AI-attributed Q2 purchases came from outside the top 100 categories, surfacing real Shopify products that match specific needs, which structurally benefits small, specialist independents, our core base, so they will be disproportionately advantaged as this new touchpoint scales and we grow with them.

Q: How are you shortening time-to-launch and sales cycles for large customers? What is on the roadmap to move target GMV bands from $100mn+ to $200mn+?

A: A near real-time example: this morning Balmain, one of Europe’s most iconic luxury retailers, emailed me that they migrated to Shopify in just weeks and Balmain.com is fully live. Fundamentally, merchants on Shopify have an advantage across sizes. Large enterprises are choosing Shopify at a higher cadence because of massive, often hidden complexity where our speed to launch, unified platform, pace of innovation and leadership in agentic commerce outclass custom stacks and legacy platforms.

They want a future-proof commerce partner and do not want to replatform again. Historically, enterprise commerce meant replatforming every few years; with Shopify, we joke it is their last migration. We are also bringing in storied brands like Barnes & Noble, Claire's, Suit Supply, Guess and Avon, and the best part of enterprise is that once they come, they stay.

Brands like Alo, Vuori and FIGS that started or moved early to Shopify have stayed. Arhaus is a key example of successful cross-sell, entering via one channel and expanding to POS, B2B and agentic. We are building teams and sales motions around getting them live faster, from SKU and inventory migration to modernizing their stacks, and once they land, they stay.

Q: How much of your TAM is serviceable? Is there a per-merchant GMV ceiling? Are there business models, like marketplaces, that are a structural mismatch with Shopify?

A: Part of Shopify’s secret sauce is that we want anyone starting at a kitchen table to use Shopify. Not everyone will succeed, but those who do tend to stay indefinitely and adopt more solutions over time, moving us from important to mission-critical.

We are also winning more mature retailers like GM, Amer Sports (Wilson, Salomon, Peak Performance) and Burton. There is no inherent upper bound, though some models are not a fit today, and in those cases Shop Pay as a component is powerful, including for marketplaces, to deliver conversion and accelerated checkout, and then we cross-sell over time.

So the ceiling is not about GMV. We have merchants doing several billions with very small teams, so there is no GMV cap, and we handle complexity via headless and components as needed. Intl is similar: we have well under 1% of global retail, leaving vast runway even in core markets, and while Intl GMV grew 37% this quarter, awareness is still lower than in core markets.

Q: To what extent has Shopify catalog become a primary driver of demand gen and merchant acquisition?

A: Catalog is real. Versus generic search, catalog-driven AI search converts at 2x, and AI search overall converts nearly 80% better than traditional organic search. It is the most important, high-fidelity inventory of what consumers want.

We are adding taste-level attributes like wedding-appropriate formality, breathability, wrinkle resistance and endurance-suitable running shoes, which only catalog can provide. Traffic and orders are both up 3x YoY, and AI channels drive ~2x new-buyer orders vs. other channels; agentic is already broadening discovery even if absolute GMV is still small.

On the merchant side, every large retailer’s leadership team is being pushed to define an AI strategy. Coming to Shopify lets us take that off their plate and position them to win, so while we often talk about catalog from a consumer lens, it is also a merchant acquisition driver.

Q: During COVID we saw a surge of ‘own your destiny’ entrepreneurship. Is today’s AI builder economy a similar moment, and how do they compare?

A: COVID did spark entrepreneurship for income resilience, and tools like Sidekick are now showing strong progress. Sidekick plays different roles across the merchant lifecycle, helping win early orders, make smarter growth decisions and take work off their plate, and only Shopify can build Sidekick at this level given our context.

One data point: onboarding with Sidekick lifted the share of new merchants hitting 5 orders in 15 days by ~8%. Earlier orders correlate with higher retention and success, and Sidekick plus our broader toolset makes entrepreneurship more accessible than before.

Q: Can Sidekick usage be tied to outcomes like retention, GMV growth and attach? Long term, is monetization mostly indirect, or could premium AI be a direct pricing lever?

A: We reserve the right to wake up smarter every day, but for now our model is merchant-success led, and Sidekick is designed to drive that. Sidekick is unique because it understands a merchant’s products, customers, transactions and storefront, with full history, enabling advice grounded in operating reality and direct execution.

This advantage compounds as Sidekick connects to more Shopify-native work because only we have merchant data and transaction history. DAU merchants are up ~3x YoY (3.6x in prepared remarks), daily sessions +4.8x, with ~34mn Q2 conversations and 36k custom apps built vs. 12k in Q1, showing both broader adoption and expanding use cases per merchant.

For new merchants, the first job is the first order and then the next, so hitting 5 orders in 15 days is critical momentum. As businesses scale, setup moves from ~50% of conversations in the first 30 days to ~8% by year five, while analytics and reporting exceed 40%, and heavy users are pushing into advanced design, content, SEO and even product creation.

When I meet our largest merchants, those using it can demo instantly; for those not yet using it, a quick on-the-spot query, like identifying top customer cities, is eye-opening and habit-forming. It is a transformative experience for first-time users, and they continue using it.

Q: With recent model advances like Fable and GPT-5.6, where are you seeing clear product or operational gains?

A: AI is embedded in how Shopify operates, across decisions, experiments and every merchant interaction, and over the past year we have reorganized teams and work around AI capabilities. We use the best-fit model per task, reserving frontier intelligence for where it matters and cheaper models where it does not, routed through an internal agent layer for visibility, control and safety.

Once a task is repeatable, we migrate to more efficient models. Notably, we now run distilled models, training smaller models for specific use cases via a frontier teacher, yielding faster, cheaper and sometimes better results on narrow tasks, and our differentiated how, not just what, owes a lot to Toby’s early conviction that made Shopify one of the most AI-pilled companies globally.

Q: Is ~20% FCF margin the new normal, and how should we think about leverage?

A: Our view on FCF and available leverage is unchanged. On margins, we continue to expect any GPM pressure to be more than offset at OpEx, and in Q2, ex-MCA accounting, we were ~150bps higher YoY.

I would not call it a new normal, and would point you to our Q3 guide. We are extracting more leverage across the system.

Q: Where is your headless strategy working best, and how does deeper embedding into third-party toolchains like Vercel affect the long-term model?

A: Shopify provides a composable architecture others cannot, and many, especially enterprises, simply want out-of-the-box Shopify. The days of a cosmetics retailer staffing 100 engineers to chase tech are over, as brands want to focus on what they do best.

We let merchants choose the build path. Some want headless with Hydrogen for highly complex experiences, others do not, and we offer many on-ramps, with Shop Pay components often the easiest way to start and demonstrate our strengths before expanding into broader capabilities.

The same applies to agents and tools. We support whichever agentic apps merchants want to use, because inventory, transactions, customer data, analytics, tax and logistics sit in Shopify as the retail OS, with extensions that bring these apps straight into Shopify and route back to a centralized admin. That is why we aim to partner with nearly every company helping merchants start or scale faster.

Q: As agentic traction builds, which touchpoints are showing visible inflections in transactions or usage?

A: It is still early and small relative to $116.0bn GMV, but trends are compelling both in growth and in who benefits. Traffic 3x, orders 3x, AI channels deliver ~2x new buyers vs. other channels, and catalog-driven conversion is 2x general AI search, with 75% of AI-attributed Q2 purchases outside the top 100 categories.

A personal example: searching for a ‘screenless phone’ for my 10-year-old, an agent led me straight to an excellent Shopify merchant I would not have discovered via traditional search. This structurally advantages small, specialist independents, a large share of our base.

Q: What role will Shop App play in the agentic era? It seems there is still significant runway.

A: Shop is becoming a highly compelling, fast-growing front door to commerce and a daily destination for high-intent discovery. Native GMV is up 70% YoY, with CartSync contributing 30%+ of Shop App GMV, letting shoppers switch between a merchant’s store and Shop while carts and inventory state persist.

This is becoming a very rich experience. We have a lot more to do as catalog and agentic apps are embedded, and I would call agentic and Shop App our two main pillars for the future.

To close, AI will likely accelerate entrepreneurship more than most other work, a view Toby shared a year ago that we are already seeing. Catalog is lifting conversion, and Sidekick is helping merchants get to first orders faster, but Shopify’s value is the compounding of everything built over 20 years: each new product drives merchant success and more transactions, each transaction signals to make products smarter, smarter products drive adoption, and as merchants scale, Shopify becomes even more valuable. The internal momentum at our Toronto Summit two weeks ago was the strongest I have felt in a long time, and we are still just getting started.

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