Shopify Stock

Good afternoon, and welcome to the Shopify session at Goldman Sachs Technology and Communacopia. I'm Gabriela Borges. When I was debating with Shane from Shopify, how we could amp this presentation up a little bit, we thought it would be really fun to have Archie Abrams, Head of Growth, join us from Shopify and of course, Jeff Hoffmeister, CFO.

We really thought this would set us up for a little bit of leveling up in the Shopify discussion beyond all of the good stuff that Jeff quickly shares with us. And look, it's such a great time for us because the investor questions that we've been getting have gotten much more technical and specific on Shopify's modes over the last 6 months.

I want to start this conversation with a little bit of a reflection on the culture that Tobii has built at Shopify. There was a podcast that came out, I think it was a couple of weeks ago now, where Sam Altman, he opened up talking about Tobii and how he's just such a great example of a founder CEO who actually gets -- rolls up his sleeves and gets into the technology.

And I know from speaking to you guys for a number of years now that the first principle of thinking at Shopify is pretty unique. So tell us a little bit maybe via an example from your day-to-day where this plays out in practice and Shopify essentially thinks first principles about adopting AI. Yes. Archie, do you want to start with?

Yes. Thanks, Gabriel, for having us and excited to be here. Working with Toby is amazing because he is so hands-on keyboard, right? He is in the technology himself doing it. And so just the other night, we were going back and forth very late into the evening on how different AI models are discovering Shopify merchants and Shopify itself. and really trying to kind of reverse engineer a lot of that discovery and what makes a merchant appear, what makes Shopify itself appear and rethinking and using that as an opportunity to really rethink the information we're giving to merchants and how we're even structuring ourselves. So that depth and that level of understanding, I think is really unique in how we build and what we're doing.

Jeff, an example from your day-to-day?

Well, I think one of the things, and Archie alluded to it, the one point I'd expand on is because Toby is so deep in the technology, he's exceptional at making sure we constantly are questioning how we've built a product. And maybe it was built on an architecture that even though it's only 2 or 3 years old, could be rebuilt in a way, and we see this a lot where he's like, hey, this is phenomenal. But if we want to take this to the next level, we need to do this. So let's use this latest and greatest technology in order to enhance the product so that make sure in the next 2 or 3 years. it's even further along. Or the other thing which I see a lot is we'll be doing product reviews and a bunch of engineers will come in and say, "Hey, we did a bunch of work.

We got it down to 10 milliseconds or we did this or we did that? And they'll be like, well, you need to be 2. " -- and like, no, no, we just spent like 2 months trying to get this down to 10 million. He's like, no, it's to be 2. Like the consumer experience demands this. And so he's very good about taking that product knowledge, thinking about how we apply it and make sure we're delivering merchants what they need, not what it is that we're kind of obsessed about building, but what they're actually going to utilize.

Jeff, there was a time, I think it was around COVID actually, when Shopify still used to give us merchant acquisition numbers every quarter. And I remember investors used to ask us, look, at some point, this merchant acquisition gravy train is going to slow down because the depth of TAM just isn't there. So Archie, I know your role focus is a lot on merchant acquisition strategy. Talk to us a little bit about what the strategy is. And Shopify is sustaining these growth rates. It doesn't seem like merchant acquisition is slowing down. How are you able to generate this sort of infinite TAM?

Yes, it's a great question. I think that the key to our strategy is to kind of remain timeless over time, which is that we believe that the next large Shopify merchant is just getting started today. And so our job is always to meet entrepreneurs early in their journey wherever they are and lower the barriers for many people to start. We know that many of those businesses, they might not actually succeed, and that's totally fine. The the businesses that do become brands like FIS, A Yoga and the like.

And of course, we grow right alongside them. And one thing that's really interesting about the merchant acquisition piece is one of our goals is always to build trust with entrepreneurs. And as I mentioned, a lot of those businesses, they might churn, they might not be successful in their first attempt. But actually, over 40% of businesses on Shopify started by merchants with their second or third or fourth business coming back to start over. If you look at one example of that, Ben Francis, the founder of Gymshark, actually started multiple businesses before he hit it big with the apparel brand, Gymshark.

And so that goes to us really lowering that barrier to making it really easy to start in our integrations with all of the Agentic platforms. So we're there, building trust along the way and then helping more merchants come on, be successful and over and over until they hit that successful business.

There was a couple of secular shifts that happened probably around the time that Shopify was founded, where the start-up costs to start and become a merchant went down. And I'm thinking of dynamics like drop shipping and thinking of Facebook ads. What does that look like in 2026 with AI? Does the barrier to the average American starting a business are actually global. Has it gone down and in what ways?

Absolutely. So I think that one thing I look at is right now, if you look at -- we focus a little bit on the U.S., but obviously, our growth is very global. The 12% increase year-over-year in terms of new business starts in the U.S. But if you look at absolute numbers, still only 1% of the U.S. population that is starting a business. And I think our fundamental belief is that there are many, many more people who want to reach for independence, particularly with AI.

And what AI allows one to do is if you think about starting a Shopify business, right, you had to be good at a multitude of skills. We're really good at designing apparel, but can also be really good at marketing, also be good at website design, also be good at running your operations, also be good at analytics. With AI, you might only need one superpower being an incredible product designer but then leverage the Sidekick or other AI tools to become an expert in marketing, leverage Shopify's autopilot, so we can help you run your marketing for you, use Sidekick to run your reports and run your operations.

So all of a sudden, the barriers for many people want to reach for independents, they really only need one superpower Sidekick and other AI tools can help them with the other skills that are not as coming naturally. And I think that's really the opportunity with AI and what we're seeing.

Yes. I think if some of you haven't as investors just tried to build the store and use Sidekick, I think it would be really enlightening just for you to get a sense for the experience, the information, the content, all the information in there to just basically say, I have an idea or even help me generate an idea. And with this idea, get a website up and running.

So even if it's something where you're just testing it out and trying to figure out I want to just get a feel for how the technology works and really put it in action, I'd encourage you to do it because to Archie's point, it's pretty incredible what it enables.

Let me ask you a little bit about how agented commerce is starting to impact the market. Let's start a little bit more macro. During COVID, people would track the e-commerce trend line and it accelerated. I think it was 3 years' worth of acceleration in 9 months. My question to you is, do you think the e-commerce penetration trend line is changing again?

I'll start. I'm sure AG will have plenty to add. Yes. But I also think it's early days. I think with all the product announcements, it's very easy to get focused on, hey, we think Agented commerce is such a huge percentage of commerce. We're really only depending on how each of a company, a vendor or a software provider defines it. We're kind of 6 to 9 months into seeing real traffic where someone goes to one of the LLMs, does some discovery and then ends up on a merchant's website and then transacts. So with that caveat that we're still in the early days of this, we are seeing an inflection.

And as you know, when you kind of normalize across geographies, roughly 20% of commerce globally is done online. And I should know the exact rate of change. But in any given year, it feels like -- and Gabriel, you have a view on this, too. In the last few years, it's kind of a point or so of global e-commerce each year shifts from offline to online. We fully expect Agented commerce to inflect that. And that obviously will play into our strengths into kind of what historically has been our traditional source of where we started with merchants and help them grow. I think the other thing that we're going to see in addition to the adjustment, the inflection of the growth rate is we're going to see more and more discovery happen earlier in the process, which is going to help merchants.

And there's a couple of stats, one of which we alluded to in the last earnings call. But when you start with an LLM and you do your searching there, you're 2.5x more likely to end up right on the product page rather than starting somewhere in a general spot on the merchant's website. You're going straight to the product you want. And then that leads to an uplift in conversion. We've seen roughly an 80% uplift in conversion. And so you're doing a lot more discovery, searching, figuring out exactly what you want before you even get to the merchant's website, but it also helps them the merchant transact and convert much faster, which is something that we've seen to be very, very effective.

And we're also -- just in terms of how we're interacting with the merchants and all the LLMs for us, we're the only one that has the admin that allows you to work with all the different AI and LLM platforms directly from one admin, one pane of glass and let you decide, hey, I want to sell in this channel or that channel or turn this one on, turn this one off in any one given point in time. So it works really, really well. But importantly, the economics to us do not change. So whether you start on this LLM or that LLM, you're still a channel for the merchant and you're still getting to the merchant's website.

So once you're on the merchant websites, you're still going through Shop Pay, you're still going through the process and kind of everything you're doing in terms of obviously exchanging money and getting your goods services, whatever sent to you. And it's -- there's been a lot of announcements around Meta and Me, which obviously is a huge partner of ours, exact same way in terms of everything we've done in terms of how we work with OpenAI and everyone else.

Your point on economics is an interesting one because I would imagine that whether it's Meta or perhaps one of the frontier models on the LLM engines, they would also want to share in the economics. So how does that work? How are you able to preserve your economics and then also make it worthwhile for them to be in this path of discovery?

Well, for the LLMs, they're obviously -- they're trying to do a couple of things. And there's -- the business models, the size of the businesses differ a lot, right? So it's a little hard to make some generalizations across all of them. But for the most part, they're engaging with the consumer in a way largely attached to what they're trying to do on an advertising side to funnel that consumer to a merchant and help them conduct a transaction.

But if you're a merchant, the vast majority of the time, you still want the transaction to happen on your website. It may even be within one of the LLMs that makes a reflection or a mirror or it seems like you're actually still within the LLM, but you're really operating with the infrastructure of the merchant in a lot of cases. Because if you're a merchant, you spend a lot of like countless hours, dollars, management bandwidth trying to make sure the pictures are the way you want. The brand is the way you want. The product descriptions that you want. This is kind of the top level and you click down to the second level and you click down to the third.

All that information a merchant has spent a ton of time working on. So the LLMs are doing everything they can to engage with the consumers. And I give -- I mean, one of the things, as you know, Gabriel, as we've talked about it, one of the changes that's happened is most of the LLM searches are generally -- when you type in the query, it's generally like 2 dozen words or so. The old traditional search, you probably were typing in kind of 5 or 8 words. So to all the LLMs credit, you're getting more -- they're generating more sophisticated questions, which allows them to get more sophisticated answers and they're trying to compete in addition to what they may be doing on advertising and other pieces, they're trying to compete on the quality of the referral.

If you type in something very specific in terms of a product you may want, they want to get you to the right spot. And that's -- I mean, I'm sure we'll talk about catalog at some point, but that's the beauty of catalog in terms of how we interface with the LLMs. But they're trying to build their brand with the consumer.

We get this question, and I think you've already alluded to the any here, but just to crystallize it, every time a new agentic technology comes out that seems to have some way of replicating or disintermediating Shopify in the stack of merchant discovery through to conversion, we'll get questions about it.

And I think that's probably a way to answer all of those questions in the same way, which gets to the heart of Shopify's moat. So how do you -- when investors ask you about ABC product that seems like it might abstract part of Shopify, how do you respond to that in a more comprehensive way?

Yes. I -- maybe, Archie, I'm going to let you start on this, too. But part of it is just kind of the -- to your point, the comprehensive element of things we do, which this is one of your near and dear points. I'll let you start, and then I'll pile on.

I mean -- and to Bill, I think the complexity and the fragmentation is actually -- is amazing for Shopify and the value proposition we offer to merchants because if you're a merchant, right now, think about you're starting a business, you need to have a website, you need to sell in the agentic channels. You may also want to do physical retail.

And so you want one place that can bring all of that together in a simple way. And that is what Shopify does. So from a merchant perspective, actually, as the fragmentation gets even more over time, all roads lead back to Shopify. You want one place to manage your inventory, you want one checkout, you want all of those pieces to flow back. And that I think is the ultimate moat for what we do in the merchant value.

Yes. I mean, always keep in mind that Shopify is a place that does depending on how you define the products, 12, 18, 20 things for the merchant. There will people -- there are companies angles that will do a piece of that. But to Archie's comment, like we're helping them with the inventory. We're doing -- kind of getting them connected to shipping or calculating the taxes. We're doing the payments. We're doing the consumer context in terms of everything in the -- like we're doing -- we're running their website.

We're doing -- we're using Stick to help them figure out which new product to do next or how to price or what to do in terms of this initiative, like all that stuff and at times, people are like, well, I want to do a little bit more of this piece or a little bit more of that piece, but no one's doing anything like we are in terms of the totality of all of it.

Let's talk about catalog. It's one of those innovation that is so simple and obvious and yet so sophisticated because the catalog, as I understand it, doesn't just describe, hey, it's a dark great dress. There is a level of how you can coat that up that makes it incredibly useful to LLM discovery. Talk to us about how catalog does that.

Yes. So I mean, I think one of the things that we've invested a lot in is our real deep understanding of every single product that is in the Shopify merchant has and creating a taxonomy that is incredibly robust around not only it's the most basic facets, but also things like understanding the imagery and really understanding kind of the tone, what type of buyer this is going to appeal to.

And then in the process of that, cleaning things up so that if there are multiple products listed from different merchants, we have that unique understanding of a per product understanding versus kind of a scattering of these products are actually the same, but they appear in different listings. And so all of that plus the live inventory data, the live pricing data, those things are extremely unique when you're an LLM who's reaching for and helping a consumer actually find the right product versus using web search or something like that, which will have all sorts of issues, not real-time, bad pricing data, no live inventory. And so all of those things are really compelling for the catalog for both consumers and then also for merchants themselves.

The statistic that I really like from your earnings call was the one about conversion rates for the long tail.

Yes, yes.

How do you think competition is changing in so much of Shopify's value pitch has been -- value proposition has been empowering the Rebels and helping the small guys compete with the power of an Amazon. How do you think share is shifting between the long tail of merchants versus the giants in the room, typically the marketplaces?

Yes. I'll go back to one of the comments I made in terms of the LLMs being really thoughtful in terms of you're asking more sophisticated nuanced questions and you're getting more sophisticated nuanced answers back. And we're seeing that initially play out in a couple of spots, and we alluded this to your point, Gabriel, a little bit on the earnings call. There's 2 immediate spots, and there's a third one, which is rapidly developing. The 2 immediate spots are some of the -- I don't know if I'd want to say nichey products.

We had Harley quoted a statistic regarding what percentage of the AI-driven traffic was outside of our top 100 categories. Now obviously, we can define the top 100 categories in a bunch of different ways. But the point is that the significant majority of the AI-driven, the AI started searches, I should say LLM started searches are in some of these products which are maybe less known. It's not the huge brands. It is maybe, for example, some product, some entrepreneur that started 5 or 6 years ago, the brand took off really well, had some phenomenal growth rates and then just plateaued a little bit, had kind of found an initial niche.

And then with LLM, you're getting more specific questions. And you're kind of seeing a lot of these brands that have done well, slowed a little bit and a lot of them are taking off again, which has been amazing to see. The other category, the second category where we've seen a lot of initial impact from LLM are things which are very heavy in terms of product specifications. -- electronics or maybe there's a piece of furniture needs to be a certain size or certain height or something that needs to be a certain weight or something like that where obviously, the LLM is going to allow you to put in some very specific requirements that you want and then get more feedback from that and get a better result.

The third thing which we're really doing, and we've talked about this a little bit when Archie was talking about catalog. We're really trying to take some of the things that maybe did not have a lot of product heavy searches. And now because of LM, you can take some of the things that merchants have in inventory listing and with catalog, present them in a way which is enhanced in terms of the product description. And so maybe you're looking at, all right, so I want to look and buy this suit. And is this suit a certain level of weight of fabric? Is it breathable? Is it appropriate for this type of event? Is it suitable for this and adding some things which historically you never would have considered within a description or a characterization of a product and now put that in there in a way where the LLMs now for the first time, allow you, if you can ask the question, which, of course, you can because you get in the habit of asking that question, catalog will serve up a product which is even better suited to what you maybe would have planned.

And so maybe historically, you would have bought from brand X. But now the LLM will say, well, based on other things you bought in your style and types of things that I see you buying, actually, maybe there's a small manufacturer in Portugal or wherever that that's the manufacturer you should be buying from. And so as we can help merchants do better descriptions of their products, fold that into the catalog, it's really helping a lot of merchants be discovered in that way. It's just -- it's feeding more information and content into the system and letting that content then be accessed by the consumer.

The inverse of this question is how merchants discover Shopify, which Archie, I think is at the heart of where you spend time. Jeff, I remember there was a fair amount of change at Shopify when Google search engine went down as a percentage of your mix top of funnel in 2023 time frame. And the number of marketing channels that you were able to use to land new merchants dramatically expanded as best we could tell from the outside. So Archie, tell us a little bit about how that strategy has changed, maybe bring us up to speed over the last year.

Yes. I think the great thing about kind of our merchant acquisition has always been a very diversified set of channels that we use to acquire merchants. And as I mentioned earlier, a lot of it has always gone back to how can we be helpful to merchants at the very top of their journey to becoming an entrepreneur. So historically, that may have been tools that we had like a logo maker or a business name generator.

And what we've done is we've taken a lot of those tools and actually made skills that are accessible by agents and connectors that enable folks in Luveowl, and ChatGPT and Claud and Manus and Repla and Grok to basically be able to discover Shopify right there as well as really that going back to what Toby and I were going back and forth about that late night, how do we understand what type of content is being served up and how do we continue to optimize our content and how people are talking about Shopify to make sure that we are showing up right at the start when somebody is searching for the best platform to start their business.

And so what we see is we see just an enormous amount of visibility in the AI channels. And then a lot of that comes back in direct to Shopify or via some other channel as well. And so that's been kind of the core of getting into agents being helpful at the start of the journey and playing that out.

I think it was Harley who was talking about how the initial meetings with larger enterprises also feel different because you can very quickly show them essentially what they're missing out on. Talk about that conversation further up to the larger enterprises, the Estée Lauders of the world.

Yes. I think a big piece of that is folks realizing some of the network power that we have. And specifically around payments and Shop Pay, kind of that accelerated checkout really opens up a lot of conversations. But more than that, I think I go back to a product that Estée Lauder or any of the large brands have is that folks are always, let's say, running A/B tests to understand how they can convert or better price their products, et cetera. And not only do have we built products that make that easier to run those types of experiments, but we also leverage a lot of the network intelligence that we have.

So there's a product called Simgim. What does Simgim do? -- allows you to create a bunch of variants. It could be landing pages, pricing for your product, product imagery, ads. And then we actually have agents come in and basically simulate which one of those variants is more likely to do well and then actually run the experiment and then actually launch the winning variant. So when you're an Estée Lauder or you're a large brand, you're getting both the benefits of all the complexity, but also that we handle, but also that intelligence that we're able to offer that is very unique compared to anyone else.

One of the themes that we've been exploring is this idea that switching cost goes down. And I think as it's relevant to your business, it's the switching costs between some of the legacy platforms and migrating over to Shopify. Have you all observed that? Maybe give us a stat here, perhaps the migration typically was a 1-year undertaking. Have you noticed a change in pace of migration?

Yes. I think we're seeing that with our help, some of the largest brands are able to get launched in weeks or even shorter because of what we're able to do both by just having the platform the way it is and it's easy to integrate, but then also whether that's agencies that we work with and really equipping them and the integrators to be able to leverage all of the Agentic workflows to be able to help move those brands over. We've seen a real ability to get folks launched increased pretty substantially over the last year or so.

Yes. I'd say the other thing, too, just in terms of migration overall, Archie, you mentioned Cyngn. But I think just in terms of having an gentic road map, a thoughtful road map of here's Sidekick, here's cattle. I mean we started building both of those 3 years ago. So here's products that are going to help you as you really think even if you, as a CTO of a large organization, say, I have maybe a slightly different view or bearish view in terms of how quickly Agentic commerce is going to take off or what percentage of this or that is going to be. It is still hard for you as a CTO of a very large global brand retailer to say, I'm going to adopt a platform that doesn't really have a lot of AI capabilities.

And we are really the only ones that are presenting kind of not just an agentic plan, but a bunch of products in place with a bunch more coming just in terms of how we think about these capabilities and really making the decision where it's hard for them not to do. And I think effectively, what we've done over the last couple of years is for the first time, given large brands the opportunity where you have a third-party software, which is going to outperform and which is going to help you be more successful than something that maybe you spent depending on how big you are and how long you've been around years, maybe a couple of decades in terms of building the infrastructure, building the team and customizing all that stuff.

And all that's wonderful. But with the capabilities of catalog and the capabilities of everything we're doing, you're just at a spot where you're almost at a competitive disadvantage if you're not adopting some of the things that we can do to help you propel your business.

Let me sneak in a couple of macro questions. Archie, I think this one is for you. How worried should we be or how worried should Shopify merchants be about SEO hitting an air pocket?

I think that for our merchants, I think what we see is traditional search continues to grow and continues to be strong. But the nature of that SEO tends to be different. It tends to be lower in the funnel, more navigational. So things like in the past, you might have had queries like black pants. And now you have Vori pants instead. And so the top of funnel discovery is happening on social platforms, obviously, still as well as in Adentic, where folks are actually researching the best pants to buy, as Jeff said, really able to get that customized thing.

But then when they actually want to go discover the brands, they typically use those navigational queries to actually have that rich experience of being on the merchant's website. And all of this, I think, will help independent brands because those queries around black pants -- those are very hard and very, very competitive queries, whereas in Agentic, those independent brands are more discovered. And on social is where with our merchants and their ability to create amazing kind of content and the like are able to really succeed. So I look at the change in SEO is very beneficial to a lot of our merchants and as the new discovery channels grow.

And Jeff, the other macro question for you is health of the consumer. I use your data point all the time on the average Shopify merchant makes on average more than $100,000. So with that backdrop, any comments you're willing to share on health of the consumer?

Yes. We try and put a lot of reliance on our own proprietary data. But I would also say that we're not seeing anything that vastly differs from what you see in the morning, whether you're kind of reading this blog or watching CNBC or kind of wherever you're getting from the Goldman Trading desk in terms of you're getting your views on the economy in terms of how things are doing.

You see it in the numbers we posted for several quarters right now. The business continues to perform very well. And I'm always talking about kind of strength across geographies and merchant sizes and industries and verticals and all that. So like it remains strong in our mind. So there's -- especially the last couple of days, of course, we kind of seems like we kind of ebb and flow in terms of what's going on with oil prices and kind of consumer spend and all that.

But -- and of course, Gabriela, I got to stick to what I said at the last earnings call. But that being said, like it remains consistent in terms of the strength that we're seeing. So you all will have your own views on consumer spend. It seems strong right now.

I think it's worth spending a little bit more time on Sidekick because of the amount of proprietary data that Shopify is able to leverage in Site. Tell us a little bit more about the AI engine that's running behind that? How much is third party, how much is Shopify proprietary? What are the types of data that you can really put to work in something like Sykick?

Yes. I mean I think that it goes back to one of the investments Toby made right at the age of kind of the start of AI a few years ago, which is really building kind of a vending in the admin that was incredibly powerful. So tracking absolutely every interaction that a merchant has and a buyer has on merchant sites and other services, which really laid the foundation for us to be able to do all sorts of next best action predictions.

And I think where you see Sidekick going is leveraging that deep understanding of an entrepreneurial journey all the way from starting to scaling and making Scikick not only good at when a merchant is doing a task like designing a website and doing analytics, but starting to become more proactive with things like Sykick Pulse, which is your proactive recommendations of, hey, you might be not understanding that you could create a collection and offer a discount and that will increase your GMV.

So it all starts with really that very early investment and that kind of very prescient investment Toby made and we made and really understanding all of the actions. And when we have that, and we understand that both the merchants and how buyers are interacting across all of our storefronts, agentic channels in person, it allows for something very, very powerful, not only as a tool, but also as a proactive assistant to help merchants run their business. And it is very unique.

And Jeff, just reminds me of when I used to ask you about audiences monetization every other quarter. There are these products within Shopify that are monetized indirectly. I think Audiences is a great example of Sidekick to some effect. Tell us more about the monetization strategy and the second derivative impact that these types of products have on GMV and take rate.

Well, I'll start with Sidekick. I mean the second half of your question. For us, because -- and we've given some statistics and that we will continue to give more in terms of the impact that we see Sidekick is having on merchants and their success. And really, what we've seen over the last -- as I mentioned before, we started working on this over 3 years ago. It's been out for over 2 years. It's really about 9 months or so ago, where we really started to see diversity and explosion in the usage of Sidekick.

And it went from being something which we were seeing largely in terms of kind of midsized merchants were asking for the most part, go-to-market questions was really kind of the initial foothold that Sidekick has, and it's really exploded in terms of merchants of all sizes and all geographies are asking all types of questions. And so you can imagine that the questions being posed to Sidekick by a 10-person entrepreneur team versus one of the Lands' End or some of the biggest companies out there in terms of how they're thinking about things. There are different types of questions.

But what we're finding is that it's really helping people think about how they can accelerate their business. And so obviously, what that translates, the merchant is the Canada Goose is selling more things. And obviously, that's generally going to translate back into payments revenue or FX revenue or tax revenue and all these things. So Sidekick is there because it goes back, and you've mentioned this before in terms of the first principles of Shopify and kind of how we're very mission-focused on a lot of things and helping the merchant be successful, us trying to be a tailwind to the merchant in terms of what they're trying to do. That is what Sidekick does. The benefit -- one of the benefits coming out of that, of course, is they're more successful than our -- the success of our business is tied to their success. So -- and you see that in...

The question we sometimes get when products like Sidekick are really successful is how do you think about the token impact on gross margin?

Yes. Well, it goes a little bit back to kind of what I just alluded to, that is if Sidekick -- and we've given some statistics, we'll give more. If Sidekick continues to drive success, then that translates into gross profit dollars. And so there will be -- it may show up in different spots. And as you know, it's shown up in payments, if it's shown up in tax, if it's shown up in FX, cross-border, some of that will be shown up in our -- for those of you that know our financial statements really well, some of that shows up in the Merchant Solutions side of the business rather than the subscription solutions side of the business, but it still goes down to gross profit dollars.

And as you know, as we talked about on the last earnings call, for our gross margins on subscription solutions, it's been a balance is some of the LLM costs continue to rise with Sidekick usage. And to be clear, we want to encourage and we are actively encouraging Sykick usage. We want merchants to use it. We want them to use it as much as they can. The challenge for us, of course, is make sure some of those additional LLM costs and all the things that we've talked about in terms of how we manage those costs, how we also in areas of support and other things, extract costs there and just kind of on the net make sure that we're driving gross profit growth through kind of balancing those costs and driving kind of more successful.

To build, we're seeing a lot of really great work from the distillation efforts, with some of the new open source models. We're getting a lot of leverage with very little or no quality trade-off, but able to leverage them very effectively to keep those costs at very good rates.

And we're doing a lot of -- sorry, we're doing a lot of cashing to questions. You can imagine a lot of times merchants will be asking Syk similar questions. And so we can be anticipatory in terms of the question they're asking. And it's not -- we don't have to use the latest frontier models and everything because the value -- one of the key values of Shopify is 20 years of transaction data, consumer transaction data, not just kind of I sent you to a website, but you went to this website, you put this in the cart, you took this out of the cart, you added 2 things that you transacted, you ship, you did all this stuff. All that information is itself the source and then we can run models off of it. But I don't need to have the latest and greatest model to do that.

We come that a lot in 35 minutes and how the world is changing. If there are 1 or 2 themes that you want to leave this audience with that may be underappreciated in how the world is changing, I would love to end there actually?

Yes. I think that one of the things that I'm really excited about is the -- I think there's 2 really great trends for Shopify. One is entrepreneurship becomes much more accessible, which will mean a lot more interesting, unique brands and products in the world. That, combined with the ability to actually find those products and kind of expanding the shelf space, the range of products that can even be discovered, I think will only increase with LLMs and with Agentic. So I think those 2 things of more entrepreneurs creating more interesting products, more brands able to find those 1,000 true fans will become much more possible, which will lead to both more merchants, more growth there, but also just more buyers choosing and shopping across independent brands over the next period of time.

And the only other thing I'd say on Agentic commerce, as we look at what is possible in the years to come, we are very excited about the fact. And there's kind of news about all the different LLMs and we alluded to it is whether you get to the merchant's website, which Shopify is running, whether you get to that website by coming through news or coming through OpenAI or going straight to the merchant's website or you did a Google search or whatever it is, all those are channels that lead back to the merchant and the broad suite of things that we do to help that merchant be successful. So these are just -- since commerce began, it's essentially a question of how do I get more buyers to show up for me. And however they get to me, I welcome them and then we help them transact, and that's something that we're working really hard to do.

It's really good stuff. Please join me in thanking Jeff and Archie for the time. Thank you for being here.

Good morning, and thank you for joining Shopify's Second Quarter 2026 Conference Call. I'm Shane Kleinstein, 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. Today's call will include certain forward-looking statements 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.

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 the U.S. and Canadian regulators. We'll also speak to adjusted financial measures and other non-GAAP measures, which are not a substitute for GAAP financial measures. 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. dollars unless otherwise indicated.

With that, I'll turn the call over to Harley.

Good morning, and thanks, everyone, for joining us today. We've got another exceptional quarter to talk about here at Shopify. Here's what that looks like in the numbers.

G&D was up 32% to $116 billion with broad growth across our merchandises, geographies and sales channels. Our revenue was up 34% to $3.6 billion and our free cash flow margin was 18%. That's a growth rate of 30% or more across every metric. And this marks our fifth straight quarter of GMV growth above 30%. Now all the numbers our GMV is the one worth repeating. Our merchants processed $116 billion this quarter. This is commerce at an extraordinary scale flow through the platform, and it also tells us that our merchants are thriving.

Okay. Now for the story behind those numbers. Since day 1, our operating principle has been simple and consistent. Shopify creates what most merchants need most of the time. And for everything else, we empower our incredible ecosystem of partners. Now I know you've all heard that before, but here's why it matters now. The principle that got us here also explains why we're able to deliver durable growth quarter-after-quarter. And it perfectly captures how we are building to win in this new era of commerce.

Let me explain. First, our addressable market of most merchants is now a very large pool. Because we made it easier to start, there are now simply more merchants to serve, and the breadth of our capabilities has expanded so that merchants of all sizes now run on Shopify.

Second, the range of those, most of the time merchant needs is expanding quickly. They need access to new and emerging surface areas. They need best-in-class tools that will allow them to keep pace with the rate of change in commerce and they need it all in 1 place. Added complexity only reinforces the demand for a simple unified platform that they can rely on, and that is Shopify. And here's the third critical piece.

Our open ecosystem model is uniquely well suited to this agenetic era. We have always focused on most merchant needs while making the platform extensible for everything else. We build the primitives, we open them up, and we let the best developers and the best companies in the world build on top of us. In the last year, we kicked that model into a whole new gear. Some of the largest technology companies in the world like OpenAI, Google, Meta and Microsoft have chosen to partner with us to open more front doors for commerce.

Every new surface area they build is another place our merchants can sell all because they're on Shopify. And on top of this, the thousands of developers all over the world are embedding commerce into their own applications using the same primitives we built. Thousands of new front doors all built on one unified foundation, the Shopify platform.

Now as commerce continues to fragment, Shopify becomes an even more critical partner because we provide consistent and reliable infrastructure that makes every shopping experience feel seamless. Now whether commerce is handled by humans or agents, whether stores are built by people or AI, Shopify runs underneath it all.

For 20 years, we've built a commerce operating system that takes merchants from first sale to full scale by using our partner ecosystem as an extension of our platform. That is our muscle memory. And this model will continue to service even better in this new agentic era of commerce.

So let's talk more about Shopify's infrastructure, specifically what we've been building and why it matters so much. We have a very strong conviction that commerce experiences will soon be built in to everywhere people are spending their time. That is why our latest product drop was called the Everywhere Edition.

We are building now to our merchants are ready for the future. So let's talk about that infrastructure that unlocks commerce everywhere. First, our catalog, which you can think of as the authoritative source of truth for AI product discovery of the world's best products and best brands. For nearly 2 years, we've been investing in the search index ensuring over 1 billion products and 20 years of commerce experience is distilled for agents.

It structures merchants product data, so every and any AI partner can access it directly, giving agents the ability to discover, understand and recommend our merchants' products. And let me say this, catalog will be one of Shopify's most important assets for years to come.

And here's why. We're seeing that AI searches powered by catalog converted twice the rate of those using scraped data. That is because with catalog, merchants products show up complete, accurate and with the right context when someone is ready to buy. Put simply, catalog is the discovery engine for the future and Shopify built it and owns it.

Next, let's talk about the Universal Commerce Protocol or UCP. We introduced UCP at the start of 2026 and already industry players across the commerce stack and beyond are converging on this unified protocol with dozens of retailers and platforms adopting it to date. And because we co-built the protocol, partners look to us to make sure it evolves in ways that represent the full diversity of commerce.

So first, we built the infrastructure to unlock commerce everywhere. And then we opened it up for everyone. Every Shopify merchant is UCP ready. Agents and builders can access the product data, create carts and even check out using the protocol. Everything flows through Shopify. So their checkout logic and fulfilling rules are perfectly preserved. Their products are also automatically listed in catalog. And every builder can now access UCP and the catalog API across millions of merchants so they can build commerce experiences with the same infrastructure as our major AI partners.

Plus, we built our catalog the way only Shopify could integrated with shop sign-in so agents can recognize returning buyers and surface personalized recommendations based on their purchase history. No other catalog API can do this. And we're not just putting merchants in AI channels, we're also showing them how to win in them. In May of this year, we rolled out our new Agentic section in the admin, the first cross-channel attribution for Agentic selling.

Merchants can manage AI channels, they can track performance, and they can get specific recommendations on what to improve, all from a single interface. Now while the volume from Agentic commerce is still small relative to our massive GMV, the growth trends are impressive, both AI-driven traffic and also orders to Shopify stores tripled year-over-year in the second quarter.

New buyer orders are coming in at nearly twice the rate of other channels. And this is not just AI taking share of search. In fact, search remains one of our largest sources of buyer traffic to our merchants, and it's still growing. Traditional search sessions are up 1.3x over the past 2 years, holding roughly 1/3 of all storefront sessions. That is AI as a complement to search rather than a substitute for it.

Okay. Now let's talk about Agentic building. AI is not just opening up new surface areas for discovery. It is also democratizing code and software development, lower the barriers to starting a business even further. The way entrepreneurs are pursuing new ideas, the way developers are building software, the way merchants are running their businesses, they're all being rewritten. So naturally, the tools we're arming our merchants with are also evolving at an incredible pace. And Sidekick is the prime example of this. In the second quarter, daily active merchants using Sidekick were up 3.6x year-on-year and daily sessions were up 4.8x. It handled nearly 34 million conversations, and it was used to create more than 36,000 custom apps, up from 12,000 in Q1. More merchants are using Sidekick, and they're using it far more often. That's because it's driving real value, getting new merchants to their first sale faster and helping establish merchants run smarter.

Sidekick's personalized guidance for new merchants during onboarding led to an 8% increase in merchants reaching 5 orders within 15 days, and it's getting more intelligent all the time. It can now access data and take action through extensions to third-party apps like Klaviyo without the merchant ever leaving Sidekick. Now adoption is widespread across merchants of all sizes. But what's really interesting is how the value evolves as merchants grow. In a merchant's first 30 days, roughly half of their conversations with Sidekick are about store setup, design and theme configuration.

Now for merchants 5 years in, that drops to about 8%, while analytics and reporting claims passed 40% as they use Sidekick as their intelligence layer to interrogate their own data and make better decisions. Same product, different job. At the same time, we built connectors to agents, including Claude, ChatGPT, Perplexity, Manus, Replit, and Vercel with our AI tool kit. So our merchants can build on Shopify however they choose.

And these are just a couple of examples. Our integrations across [indiscernible] coding platforms like lovable, AI chat agents and CLI IDEs show Shopify's commitment to meeting builders where they are, however they choose to get there. These tools are a real competitive advantage, and they're exclusively and seamlessly available to Shopify merchants.

Interface layers are changing in the agent first world, but Shopify is still the core commerce infrastructure underneath it all, one where every step of commerce from buying to building from starting to scaling moves faster and is within reach for more people.

Beyond what we at Shopify are doing to move the needle for our merchants, there are early structural changes we are seeing in the market that also strengthen our position even further.

First, let's look at the type of merchants benefiting from these AI ships. Early indications show that AI search has been particularly helpful to some of the smaller brands that form the long tail of commerce. These are brands that also happen to make up the majority of Shopify's merchant base, smaller businesses with specialized products built for a particular customer. We saw that AI search was starting to disproportionately benefit the long tail in 2025.

And that trend has continued, with 75% of AI attributed orders in the second quarter coming from outside our top 100 categories in Q2. And the explanation is simple. While search engines rank by popularity against a handful of keywords, AI agents make multiple calls into Shopify's catalog working with richer structured data to match products with the buyer's specific intent rather than just keywords.

So when a buyer asks an AI assistant for the best car seat that fits 3 across the Sedan. Traditional search focuses on the keyword car seat. An agent, however, understands the actual need, the dimensions, the vehicle type and the fact that they need 3. It searches across all of those constraints at once on the product that actually works not just the one that ranks highest.

And in this world, relevancy rains. So specific products made it for a specific buyer do particularly well. Same for things like reef safe sunscreen that doesn't leave a white cast or even the best dog harness for a French bulldog. These are real Shopify products that have benefited from the specificity of AI search in the last quarter. And this specificity is leading to better conversion for merchants.

Buyer shopping journeys are being compressed as half of all AI referred sessions are landing directly on a product description page that is 2.5x more than what we see with traditional search. All of this is a serious tailwind for our merchants to and in turn for us at Shopify.

Second, as AI makes commerce more fragmented, the value of a best-in-class checkout that can sit underneath any commerce experiences grows exponentially. Our checkout is intentionally designed to look simple, one click, done. But in reality, it is anything but simple. From taxes to discounts, priors to bundles, fulfillment inventory validation logic payments, I could go on. There is a world of complexity that neither the merchant nor the buyer ever has to think about.

But if it breaks, everything breaks with it. And every seemingly simple transaction inside of Shopify Checkout is made up of countless customized logic flows. The ability to handle that complexity is what Shopify is world-class at. And the stakes only get higher as commerce expands to more service areas and as agents start having a role in the transaction. So the Agentic landscape favors Shopify's core merchant base, and it makes our checkout even more valuable. It also significantly increases the importance of trust and identity.

And agent acting on a buyer's behalf needs to know who they are, how they want to pay and what rules they've set. And through SHOP, we've built a buyer network of hundreds of millions of people with identity, preferences and payments working as one system. Shop apps native GMV grew over 70% in Q2. And one of my favorite features Cartzinc, represented over 30 of Shop App GMV in this quarter. That is the value of known buyers. And Shop Pay is where that trust and identity show up in conversion.

In June, Shop Pay surpassed $400 billion in lifetime accelerated GMV. And as new surfaces grow, Shop Pay remains the trusted payment layer that travels with the buyer. So when using a, here's what you see, a new powerful surface area for discovery that disproportionately benefits our core merchant base, a fragmented environment that needs a reliable check of sitting underneath it all to power it. a world where humans must be able to trust that an agent acting on their behalf knows them and follows the rules they have set and a greater need all the time for a unified operating system that makes commerce everywhere, not just possible but easy. And this is what Shopify was built for.

Now before I hand it over to Jeff, let me give a couple of quick highlights from across the business that fueled our growth in Q2. First, international. International GMV grew 37% in the quarter, and we launched Shopify's first local payment method offering in Mexico, and we expanded managed markets beyond the U.S. merchants for the first time, making it available to merchants in Canada and the U.K.

Now let's talk about offline. Shopify point-of-sale GMV grew 32% year-over-year in Q2 and we continue to widen the gap on what set Shopify part, delivering our fastest-ever point-of-sale experience and deeper unified commerce capabilities. Merchants can now fulfill orders across locations, move inventories more efficiently between stores, complete returns, exchanges and new purchases within a single checkout.

We're seeing particularly strong momentum with large complex retailers who are our fastest-growing segment. And this quarter, we welcomed the iconic Canadian retailer hold rent through. We powered the rollout of multiple Canada Goose locations and we expanded our relationship with the furniture retailer, our house, to include their off-line business.

In B2B, we expanded native B2B capabilities beyond Plus for the first time, giving more merchants the ability to manage wholesale and DTC from the same Shopify Admin. That means fewer separate tools, fewer custom workflows and more of their business running through one unified system.

Finally, let's talk about our growth with larger brands. Some of the biggest and some of the most important names in commerce and retail continue to move to Shopify to modernize their next chapter. This quarter alone, brands like Guess, Fred Segal, an Aritzia Company and Avon, all chose Shopify. And e.l.f. Cosmetics, Claire's, Burton and suit supply are all now live on our platform.

As I mentioned earlier, we expanded our work with Arhaus, and this is a perfect example of the power of our unified commerce offering. Arhaus started with us online, and now they're expanding into offline B2B and Shopify Payments. Different customer groups, different channels, different pricing models and one back end to run it all. Now here's what else really matters. Once merchants come to Shopify, they stay. Our merchant retention is something we are very, very proud of.

Put simply, Shopify is a platform for brands at any stage of their life cycle. And each channel they add makes the others more powerful, embedding merchants deeper in our platform and driving more profitable growth for our company.

So let me bring this back to where I started today. Shopify built what most merchants need most of the time. For everything else, we leverage our ecosystem of partners to build with us. 20 years ago, most merchants meant a much smaller group with a much smaller set of needs. But today, we power every size in every shape of Commerce business. And as the merchant base has expanded, our focus has remained the same, absorb that complexity on behalf of merchants, so they can continue to focus on what matters most to them. Their products and their customers. Every time commerce gets more complex, the value of the Shopify platform increases.

Today, an entrepreneur can have an idea in the morning and their first sale by the end of the day, which Shopify's AI tools helping them build their storefront with catalog servicing their products to buyers and Sidekick already guiding them to the next step. This is an entirely different velocity of entrepreneurship and it's only going to continue to accelerate.

It doesn't matter whether commerce is built back person or an agent. It doesn't matter whether a transaction starts on a store, in an app, a chat or an interface that hasn't even been invented yet. The underlying needs of merchants do not change. Products need to be discovered, inventory needs to be accurate. Checkout needs to work seamlessly and payments need to move. And the infrastructure underneath it all needs to be fast, reliable and infinitely scalable. And that's what we do at Shopify.

And with that, I'll turn the call over to Jeff.

Thanks, Harley. It was an incredible quarter. Q2 represented a continuation of what we've seen for several quarters now, broad-based growth across the business. Strength in GMV flowed through all of our financial results. We achieved greater than 30% growth in each of GMV, revenue, gross profit, operating income and free cash flow. Q2 marks the fifth consecutive quarter with constant currency GMV growth of 29% to 30%, a tight band. And importantly, even as our scale has grown and the year-over-year comps have gotten tougher, we have consistently delivered these growth rates.

The durability of our growth is driven by one of the most powerful dynamics of our model, our cohorts. New York cohorts continue to outperform, while older ones keep growing. That strength compounds over time as our older era multiples of their first year GMV. For example, our Q1 2015 cohort now has a quarterly GMV that's 5x its initial size, implying a compound annual growth rate 3x that of the overall commerce markets growth rate over the same period.

This is the mission of Shopify. We make it easy for anyone with an idea and the courage to start the business. It's why we cast a wide net and bringing merchants to the platform. This approach is a feature, not a bug. Through that wide aperture, we find, nurture and build for merchants, many of whom go to do millions and then hundreds of millions in GMV. And the ones that scale stay.

Over the last 5 years, merchants who reach $1 million in annual GMV had a 92% retention. That jumps at 97% and a $10 million annual GMV. A lot of entrepreneurs are serial entrepreneurs. So even if their first business doesn't make it, Shopify still supports the next one. Merchants who build a second shop on Shopify on average, earn more than twice the sales per shop compared to first-time founders. That is how our cohort strategy at work. We give every entrepreneur a shot, arm them with tools to build and watch the winners compound their success.

But it's not as simple as just offering tools. We offer a breadth of products in an integrated platform to simplify the complex backdrop of commerce. And every piece of that solution makes the others more powerful. GMV drives payments revenue but also informs our capital offers. Checkout fuels buyer identity, and that identity benefits advertising precision. And every transaction sharpens the data underneath all of it.

Last year, we surpassed $1 trillion in cumulative GMV facilitated by our platform. Then this past quarter, we also passed that threshold for gross payments volume through Shopify Payments. That is a data foundation underneath everything I just described. It's less about any single capability, but rather how they lead together and inform and enhance each other. This is a magic of combining the bravery and vision of entrepreneurs with the power and capabilities of the Shopify platform. And when merchants win, so do we.

Now let's take a closer look at our second quarter results. Q2 GMV was $116 billion, representing year-over-year growth of 32%. On a constant currency basis, GMV grew over 30%, accelerating on top of a very strong 29% prior year comp, diving deeper into GMV from a few different angles, first by merchandise. Consistent with trends for several quarters, we've had broad-based growth across merchandises. The $25 million in Greater band is the fastest growing, albeit off of a smaller base.

The 2 million to 25 million cohort continues to contribute the most incremental GMV and we are still growing the space with the majority of the growth coming from existing shops graduating up into this band.

Moving to regions North America GMV grew 28% and Europe grew 34% on a constant currency basis. The contribution to GMV growth from new merchants and same-store sales remain relatively balanced and in line with multi-quarter trends.

Finally, turning to channels. Off-line GMV was up 32%, B2B GMV grew 76%, all a continuation of prior quarter strong trends.

Now looking at revenue. Q2 revenue grew 34% or 33% on a constant currency basis, clearly surpassing expectations. Merchant Solutions revenue grew 37%, driven primarily by the strength in GMV and increased payments penetration, which grew 3 points year-over-year, reaching 68% of our global GMP. We see clear runway on payments penetration, both domestically and abroad. This past quarter, we launched Shopify Payments in the UAE, bringing to 4 the number of countries where we have payments available.

Penetration in Europe increased by more than 350 basis points year-over-year, even as many of the countries we serve launched only last year. We also continue to add more and more local and regional payment methods, including, for example, our additions this past quarter in Mexico.

As of Q2, we also now dynamically surface the most relevant payment methods for buyers. Doing this helps eliminate reasons for buyers to ever abandon their checkout, creating better conversion.

Shop Pay GMV grew 53% year-over-year. In Q2, we made more local payment methods available to consumers within Shop Pay. This continues our 2-part strategy of adding more local payment methods to Shopify Payments and then making more of those available within Shop Pay. More choice and payment method availability means fewer drop-offs to guest checkout, and helps drive Shop Pay usage. Shop Pay also allows buyers to choose to finance their purchases and Shop Pay installments continues to gain share. Each of these make Shop Pay a better consumer experience and a more complete wallet with additional ways to pay, helping drive consumer adoption.

Subscription Solutions revenue grew 22%, the largest contributor to the growth was monthly subscriptions for our standard plans as we saw a strong quarter of merchant net adds in standard. We also saw relatively equivalent sized dollar growth in Plus subscriptions and variable platform fees, which were driven by the higher GMV.

Q2 MRR grew 19% year-over-year, with continued growth across each of standard plus and point-of-sale plans. Plus MRR represented 34% of MRR, also growing 19% year-over-year. Bringing these all together, our revenue beat in the second quarter stemmed from three key areas where we outperformed, broad-based GMV outperformance, higher-than-expected payments penetration and strength in other merchant solutions, primarily from our partner rev shares and financial services.

Now turning to our profitability. Merchant Solutions gross profit grew 39%, with gross margin up slightly from last year. Margin pressure from increased payments volume was more than offset by growth in higher-margin revenue streams. Also to my earlier comments regarding local payment methods, our payments gross margins are generally higher in international markets due to the greater prevalence of debit transactions and lower interchange fees.

Subscription Solutions gross profit grew 19% with gross margins just under 80%, in line with our Subscription Solutions gross margins in Q1. As a reminder, the vast majority of AI costs related to merchant use of Sidekick appear in Subscription Solutions gross profit. We were able to hold gross margins at a relatively consistent level quarter-over-quarter while Sidekick usage scaled, which reflects some cost efficiencies and support as well as our ability to continue providing merchants unique AI solutions like Sidekick, while diligently managing cost.

We are big believers in Sidekick and the value that it can deliver to merchants. We believe these types of investments in our platform will translate into more merchants joining the platform, and those merchants have an even greater success. That translates to more gross profit for us, but more importantly, it is helping our merchants accelerate their businesses.

Now looking at operating expenses, which were 34% of revenue, a nearly 4-point improvement from Q2 last year. This reflects continued leverage as we grew gross profit dollars faster than our expenses, primarily by maintaining our discipline in headcount, sales and marketing, R&D and G&A as a percentage of revenue each improved year-over-year.

This operating leverage provides the financial flexibility to continue to invest in our platform, including in our internal AI capabilities. We've moved from a place of just reflective use of AI to a place of AI leverage. Our AI philosophy is straightforward. Maximum leverage paired with thoughtful cost management. We use the best model for the job, frontier intelligence where it matters, less expensive models where it doesn't. We believe widespread adoption of AI tooling already is and will continue to yield benefits in the quality of our output.

Looking more closely at our OpEx. Sales and marketing in Q2 was less than 14% of revenue, approximately a 160 basis point improvement year-over-year, even as we funded additional dollars into our merchant acquisition efforts.

On R&D, the majority of our internal AI spend is allocated here. So you've seen a modest uptick in year-over-year growth. Overall, we've driven substantial leverage in R&D as a percentage of total revenue, and we'll continue to be disciplined in managing the spend.

Transaction loans and losses came in at 3.9% of revenue. It will scale with volumes in our payments, capital and credit products. Capital was a larger driver this quarter, while loss rates and payments and credit are both at normalized levels. Each of these products continues to grow well, and we are constantly improving our measurement and forecasting to keep loss rates low as adoption grows.

And finally, our Q2 free cash flow margin was just over 18%. And exceeding our outlook. This represents roughly 1.5 points of year-over-year margin expansion after excluding the benefit of the accounting change in merchant cash advances that we mentioned last quarter.

This free cash flow margin expansion was primarily the flow-through of our operating margin expansion, partially offset by about 1 point of increased taxes compared to last year. With that, let's move to our Q3 outlook. We expect Q3 revenue growth in the low 30s year-over-year. The expected sources of growth are consistent with the drivers that we saw in Q2, broad-based across geographies, merchandises and channels. We do not expect any significant FX impact.

We expect our gross profit dollars to grow in the mid- to high 20s. The differential in the revenue versus gross profit growth rates is driven by the same factors as the second quarter. The continued mix shift between the growth rates of merchant solutions and subscription solutions and the continued strength of payments.

We expect operating expenses in Q3 to be 33% to 34% of revenue, reflecting continued leverage and meaningful improvement compared to the 37% we delivered in Q3 of last year. We expect our Q3 free cash flow margin to be in the high teens to low 20s, inclusive of less than 1 point of tailwind from the accounting change in merchant cash advances.

Bringing it all together, when I look ahead, our runway is long. Even though Shopify represents over 14% of the U.S. e-commerce market our margins take a disproportionate share of the growth. According to eMarketer, since the start of 2025, Shopify merchants have captured nearly half of all incremental e-commerce dollars in the U.S. Early results internationally near that trajectory albeit earlier in their maturation. That's headroom in both the U.S. and globally.

Absent any other growth drivers, these are already strong, structural and persistent tailwinds in the base case. And as we enter this agentic era, any acceleration in e-commerce growth or disproportionate value to the long tail of commerce is upside to our underlying growth story.

With that, I'll turn the call back over to Shane for your questions.

Thanks, Jeff. We'll now take your questions before turning the call back to Harley for some final words. [Operator Instructions] Our first question will come from Ken Wong from Oppenheimer.

Harley, you touched on a lot of key points in terms of AI driving the Commerce platform forward clearly providing a ton of value to your customers. How are you thinking about potentially harvesting some of that value back to Shopify? Or is the intent still to kind of open the doors as wide as possible to bring in as many merchants as you can?

Thanks for the question, Ken. I mean, look, when it comes to monetization, the focus is very simple here. We unlock more places for our merchants to sell. And when we earn on those sales the way we always have. We think -- you've seen this, of course, but the Agentic transactions carried the exact economics of an online store transaction. There's no new fees. There's no separate pricing. But more agenetic GMV, it means more Shopify revenue, and that's the model and it's been working really well from this 2 decades.

I will say -- I mentioned in my earlier comments, that we are seeing incremental dollars flow through Agentic. I know there are some questions on the last call about whether or not it was taken away from search, but search is going incredibly well, Agentic has really taken off now.

But the other thing that I think is incredibly important is when you look actually at where -- what is happening here, mean 75% of AI attributed purchases in Q2 were from outside the top 100 categories, meaning a standing desk for a small apartment or I mentioned a car seat that fits 3 across the sedan. These are real Shopify products discovered because an AI agent understood what the buyer actually needed. And that's a structural advantage for these small specialized independent businesses. And that's -- I mean, that's our base. That's our sweep spot. So we think that these trends suggest that merchants on Shopify will disproportionately benefit from this new surface area. And as they grow, we grow with them.

We'll take our next question from Bryan Smilek at JPMorgan.

Great. Harley, I'll steal your words, a great Monster guide and 30% revenue growth. Definitely wanted to dig in more on the enterprise side. Can you just talk about the ability to onboard new enterprises quicker and truncate that selling cycle? And I guess what's next on the product road map here where you can lift and ship that GMV target from $100 million plus to north of $200 million over time?

I'll tell you something sort of in almost real time. I woke up this morning to an e-mail from [indiscernible] one of the most iconic legendary retailers in Europe, luxury retailers in Europe, saying that they migrated to Shopify in a matter of weeks. [ Ballmen.com ] is now fully launched. So let me maybe sort of the top. Shopify merchants on Shopify are simply better positioned than those that are not. And that is true of businesses of all sizes. We think, in particular, you've seen this and I've said this on the call, but you've seen the velocity here.

Larger merchants are now choosing Shopify at a higher clip. They see that there is enormous and often invisible complexity. I think the fact that speed to market, this all-in-one platform, this velocity of innovation, but also, I think our pole position on Agentic Commerce there's no custom stack or legacy platform can match that. So what these larger brands are looking for is they want a future-proof commerce partner. They don't want to have to think about ever migrating again the olden days of enterprise e-commerce, every couple of years, you have to sort of migrate to a new platform. That's not the case with Shopify.

And so they want to kind of go -- we sort of jokingly refer to as their final migration, and that road leads directly to Shopify, which you're also seeing is some of these less modern brands, more iconic brands that have been around for a long time, Barnes & Noble or Claire's or Suit Supplier, Guess jeans or Avon coming to Shopify as well. it's important they come to us, but the best part about this model around enterprise commerce is once they come to as they stay.

And we've seen that with brands that have both started on Shopify or migrated early to Shopify, like Allo or VR or FIGS, they come to us and they continue to stay here. I mentioned Arhaus on the call in my prepared remarks because actually that's a really important point.

We're really getting -- we're seeing a lot of success right now in the sort of cross-sell motion where they come to us for one particular channel, online store, for example, that's the on-ramp in. And then over time, they really migrate towards this unified commerce platform with Shopify. And so in the case of Arhouse, we are moving well beyond just e-com to point of sale into things like B2B and obviously Agentic. So I think the commerce landscape has shifted. I think enterprise -- large enterprise brands see Shopify as the very best option. And we've built our team and our sales function around getting them to launch much faster than pretty much anyone else. And that will continue, whether that's a migration of inventory or SKUs or it's helping them understand how to modernize their stack. We feel like we really have nailed how to get more large merchants on to Shopify faster. And then again, once they come to Shopify, they stay with us.

Thanks, Brian. We will now take a question from Mike Morton at MoffettNathanson.

If we could maybe follow up on those comments, Harley. The question we get a lot is for your total addressable market, what is serviceable? And we'd love to know, is there an upper bound on a GMV per merchant? Or is there maybe a business model like marketplaces that you don't think are a right fit for Shopify over the long term? Would love to know how much of the TAM you think is serviceable.

I mean that's part of, I think, the magic -- the secret sauce or the magic sauce to Shopify, which is that we want to make sure that anyone who is starting a business at their mom's kitchen table use to Shopify. We know not all will succeed, but what we've seen over 20 years that the ones that do stay with us indefinitely over time, they take more and more of our solutions. So we become -- we start by being important, we become incredibly important as they grow. At the same time, getting more of these General Motors, for example, or Amr Sports, which owns Wilson and Solomon and Peak Performance, getting more of these more established retailers to come on, Burton Snowboards is something I think that Toby has probably been salivating over since he started Snow Devil before Shopify, the fact that we're getting these as well suggests to us that there is no necessarily upper bound.

There are some merchants that just -- it doesn't make sense. And there's not that many, but there are times where we may look at a particular type of business model and say, this just doesn't -- a full migration to Shopify may not make sense just yet. So that's where these things like Shop Pay as a commerce component really plays a great role. We'll say to them, look, start with Shop Pay, even if it's a marketplace, use it. We think you're going to see a conversion uplift. You're going to see this accelerated checkout experience that is going to be far better than whatever you have. It's a major draw. And then once they begin to work with us, we can begin to evaluate how do we create this sort of cross-sell with them or how do we get them take on more. But in terms of upper bound, I don't think it's a GMV issue. We have merchants that are doing billions of dollars with a very, very small team. So there's no upper bound in terms of GMV.

Complexity, I think we've gotten really good at. There is something for everyone now, whether that's headless or it's a commerce component. And again, we start with them early on, figure out how we can be very valuable, kind of underpromise but overdelivered to them in that first component. And over time, in the case of Arhaus or in the case of Canada Goose, we see them just taking more of our services. So I think -- I don't think there's an upper bound. I will say also on the international side, that's also where I think we are still underpenetrated. I think we've captured less than 1% of global retail sales. And in the core geographies where we operate, the opportunity is still massive, but I still think we are -- I mean my team hears me great about this all the time. I think we are underpenetrated internationally, and it's growing. I mean, obviously, we saw revenue grow. GMV was up 37% internationally this quarter. But there's just -- there's a lot more we can be doing there because I think that is -- we are less known there than we are in our core geos.

Thanks, Mike. We'll take our next question from Terry Tillman at Truist Securities.

Harley, Jeff and Shane, can you hear me okay?

Yes.

Awesome. So it's a multipart question. On Shopify catalog, I mean, how often is this actually now being a primary driver of demand gen and actually getting the new merchant? And the second part of this is Harley, let's go back a couple of years to COVID. There was a lot of folks that said, "Hey, I want to take my own destiny in my own hands, I'm an entrepreneur, I'm a builder. It feels like we're having another moment here. How does this compare to that moment in terms of this kind of builder economy around AI?

Thanks for the question. I mean, look, in terms of catalog, this is real. I mean if you just look at conversion of our catalog -- Shopify catalog versus general search conversion is 2x. I mean, so I'm comparing catalog to just scraping a bunch of products. So that's a 2x increase. When you zoom out even further, conversion from AI search runs nearly 80% higher than traditional organic search as well. So I mentioned this on the call, but catalog is the most important inventory of products that consumers want. And we've built it in a way that has super high fidelity that knows -- I don't know if you tuned into -- 2 weeks ago, but we talked about these like taste-driven attributes that we're now building into catalog, things like, is it formal enough for a wedding? Is it great -- does it a breathable fabric? What's the wrinkle tendency? Are these sneakers suitable for an endurance run?

These are -- these sort of taste-driven attributes are things you can only get with catalog. So number one, I think consumers are finding -- we have the data to back it up traffic on Agentic is 3x year-on-year. Orders are up 3x as well. And then if you look at new buyers, new buyer orders from AI channels on Shopify are like 2x versus other channels. So one, we are already seeing -- even though it's small relative to a very large GMV, we're already seeing Agentic start to really expand the discovery of these products. That's on the consumer side. On the merchant side, yes, I mean, I meet these very large retailers and the executive teams there literally every single week. Every one of them is being pushed to figure out what their agentic strategy is.

By coming to Shopify, we take their Agentic strategy off their plate. We make it so that they are the best positioned of any company. And so I think we talk about catalog from the consumer perspective quite a bit, but it also is a driver to use to come to Shopify. On the second piece, yes, I mean, certainly, you'll remember sort of the COVID run, we saw entrepreneurship exploding. People were using entrepreneurship to either supplement their income or if they lost their job to find new income. right now, when you look at things like Sidekick, it is remarkable how well that's going.

I mean Sidekick in particular, and again, Sidekick is different for every stage of merchant, but it is becoming a bigger part of how merchants build and run their businesses. And we are seeing that it's helping them reach early milestones faster. It's helping them make smarter decisions as they grow. It takes work off their plate. And because we have so much context, only Shopify can build something like Sidekick. And I mentioned on the call, but it's fascinating -- we see that when you use Sidekick, the onboarding guidance that it gives you as you're just setting up a store, it drove like an 8% increase in new merchants reaching 5 orders within 15 days. We know that if merchants get more orders earlier on, not only they stay longer, but they tend to be more successful. So this is really helping. And I think Sidekick and all the other tools we've made available are just making entrepreneurship far more accessible.

We'll take our next question from Adam Wood at Morgan Stanley.

I have a question about Sykik, coming back to that. So again, some very, very strong data in the quarter. Could you just go into a little bit more detail? You started there talking around the benefits to merchant outcomes. But could we see how retention is happening, how Gym growth is happening, how product attach is happening where merchants using Syki as well as the traditional Shopify offerings? And over time, do you see that indirect monetization as the main driver? Or could those premium AI capabilities become a more direct pricing opportunity for you?

I mean, look, we reserve the right to wake up smarter every single day. But in terms of monetization now, the business model is predicated on merchants doing well. The better merchants do, the better Shopify does and Sykk helps with that. Now I think what sets Sykk apart from any other agent is that it understands the merchant's products. It knows the merchants customers, it knows their transactions, it under the storefront, it knows the entire history of the business. And that context allows us to give advice grounded in the actual practical realities of the merchants' businesses and they can act on it as well. But it's an advantage that actually gets stronger as Sykk becomes connected to more of the work merchants do on Shopify. And it's because we have the merchant data and transaction history that can do it.

What's really interesting is if you look at daily active merchants using Sykk, it grew 3x year-over-year. Daily sessions are up 4.8x. But if you actually look at what they're doing with it, merchants had nearly 34 million conversations with Syk in Q2, and they built 36,000 custom apps in Q2. That's up from 12,000 in Q1. So the pattern is very clear here. More merchants are using Sidekick and each merchant is finding new ways to use it. For new merchants, the first job is just getting that first sale and then the next one. And so I mentioned our onboarding is helping them get to that first 5 orders within 5 days faster. That is super important momentum. What we also see is that as the business grows, Sykick's role grows with it.

During the merchant's first 30 days, 50% of the conversations are about store setup and design and theme configurations. But if you look at 5 years in, setup accounts for like 8% because they're already at scale, and that's where analytics and reporting make up more than 40% -- so the idea is like Syki helps the merchant get launched. And over time, it becomes a way to understand the business to spot new opportunities to make better decisions. And we're already seeing power users, if I can use that term of Sykk, pushing it way further into things like advanced design or content or SEO or even product creation. So the idea is it becomes more cable inside the flow running the business, and it's the context it has across all of Shopify that makes it possible.

And so we're really, really happy with this. We think more people will find success in entrepreneurship. We think more larger merchants will also -- one of the things I get to do as part of my job is I get to meet our largest merchants. And this is sort of one of my favorite things is I often ask them how they themselves are using Syk if they are. The ones who use it will show me right away what you're using it. The ones who don't, I'm able to sit there at a meeting over coffee and show them, like I ask them often, what is the #1 query you have currently for your data team. And they'll say, well, I'm looking to know like what is the exact city of our -- of where most of our customers are from. And I'll say, just as Siki right now and Syk will pull it up within seconds. It is a mind-blowing experience for anyone who hasn't used it and the ones that start using it continue.

Great. We'll take our next question from Deepak Mathivanan from Cantor.

Right. Harley, AI model capabilities continue to expand at a pretty accelerated pace and Shopify has always been at the forefront of building on these cutting-edge capabilities. Can you talk about a few areas where the recent advancements that we've seen with the Fable and GPT 5.6 Series are enabling pretty good product improvements or perhaps improvements in operational capabilities for Shopify.

I mean, look, it's -- it should be very clear now that AI is now baked into how Shape operates. Every decision, every experiment, every merchant interaction AI is helping us get smarter. And over the past year or so, we've really moved in from experimenting with AI to just rebuilding teams and our work around what it can do. And the way we think about these models is, we use the best model for the job. We use Frontier intelligence where it matters. We use less expensive models where it's simply not needed. And everything that we've done runs through an internal proxy, which gives us incredible visibility, gives us control of security.

And then as soon as the task becomes repeatable, we look at how to move it to a more efficient model. And actually, what's really cool is we now have a number of distilled models where we take a teacher model, usually a big frontier model than teaching a specific use case to a smaller model, which results in much faster, less costly and actually sometimes even better at the narrow task. So, I think Shopify, as I think many of you have heard from the leaders of these models out there, Shopify is probably the most AI filled company in the world. Certainly, credit to that goes to Toby, who I think is been thinking about this longer than most and certainly put Shopify on the path of being AI reflexive before almost anyone else. But it's not just what we're using it for. It's also how we're using it, I think, set Shopify apart.

Great. We'll now go to Todd Coupland with CIBC.

Great. I wanted to ask about free cash flow margins. is roughly 20% the new normal? And how should we think about the levers around that?

Thanks for the question. I apologize for my voice of fighting a cold. Nothing has changed, Todd, in terms of how we look at free cash flow and kind of the levers we have at our disposal. The gross margin is something where we've talked about in terms of any pressure we see our gross margin will more than offset that with OpEx success. When you look at what we delivered in Q2, it was roughly 150 basis points ignoring the change on the MCA, it was roughly 150 basis points above where we were last year. I don't think we can say can we have a new normal? I would focus you on the guidance we gave -- and I would tell you, we continue to drive more and more leverage through the system. So.

We'll take our next question from Gabriela Borges from Goldman.

Harley, I want to ask you a little bit about [indiscernible] because you mentioned some of the tooling that your customers are building around the Shopify platform for example, on Basel. So talk to us a little bit about what you think is working well with the headless strategy? And the second roof implications to model longer term as you become more entrenched in some of this third-party tooling?

Yes. I mean I think what Shopify offers that no one else does or can match is this composable architecture that if you can come and take Shopify out of the box as is, which a lot of merchants, especially enterprise merchants want. I think the days of some of these retailers, a cosmetic retailer having to have 100 engineers on staff and thinking and trying to keep up I think those days are long over. I think that cosmetic retailers or brands want to focus on what they do best, which is making incredible cosmetics. And the same thing goes for any vertical.

So what we try to do is we try to create this composable architecture where you tell us how you want to build. And in some cases, they want head list. They want to use hydrogen, and that works really well for them. They want to do some very, very complex commerce experiences. In other cases, they just don't need it. Our job, though, is to provide them with effectively a bunch of -- a ton of different on-ramps into Shopify. The reason that the Shopify commerce component is so effective to us is because it's an easy way to get started with us. It begins as a wonderful relationship. We get to prove to these new retailers. I mean I know us that we are the best at what we do. And over time, they can expand to us.

And the same thing goes with in terms of all these different agents or these other tools like for sell, for example, which are amazing tools to build these great web experiences. We want merchants to build however they want. The key though is underneath all of this commerce retail operating system, which is Shopify. That's where your inventory is at your transactions are, your customer data, your analytics are. We handle taxes for you and shipping for you and all the messy complexity of commerce is underneath it.

But in terms of if there's a particular agent or an agentic application, any merchant retailer wants to use, they can do so and they can do so because we have those extensions directly from them into Shopify. And each of them have a really great use case. But it all feeds back into centralized back office, which is Shopify. And I think that's the reason why pretty much every company, every partner, every application that helps merchants or helps the potential merchant start and get started faster, we want to partner with.

And I think we have a really good history. One of the first things I did when I got the Shopify 20 years ago was work on our partnerships. -- we have this great history of being able to find incredible collaboration with other companies. And I think it's because we know what we're really good at and we leverage what they're really good at.

We will now take our last question from Arjun Bhatia.

All right. Harley, I'm curious just -- it sounds like some of the genetic traction is starting to increase, still very early. But I'm curious if there's any surfaces that are worth calling out where you're seeing an uptick in transactions or usage initially. And as a sort of maybe a follow-up to that, just how do you view the Shop App sort of playing a role in this agentic commerce area? It seems like there might be a lot more room there.

Yes. Thanks for the question. I mean just to sort of start maybe on the Agentic side. Look, it is early and the volume relative to $116 billion GMV is small, but the trends are are really exciting, both in terms of growth we're seeing and the merchants we are seeing it uniquely benefit. I mentioned traffic is up 3x. I mentioned orders up 3x new buyers from AI channels or 2x versus other channels, conversion from our catalog being 2x more than the general AI search is pretty remarkable. But the thing that at a very personal level, and I think at Shopify level, we're really excited about it is that this is a real -- like these trends that I mentioned earlier, the 75% of AI attributed purchases in Q2 being from outside the top 100 categories.

A quick example. We were looking for a screenless phone for our daughter for a 10-year old, and I just started putting in my own prompt look for different products. Five years ago, I would have done that in search, and I probably would have received some big-box retailers selling a bunch of different random products. Instead, I was directed to the [indiscernible] phone, which is this amazing product Shopify merchant the product is amazing. I never found it otherwise. So I think there's a real structural advantage for small specialized independent businesses, and we're really lucky that, that is a big chunk of the Shopify merchant base.

In terms of shop, I mean, shop is getting really exciting. We see it continue to grow. It's just it's this wonderful front door for commerce. It's one of the most important ones we are building. and it's becoming this daily destination for buyers with a high intent discovery. And native GMV was up 70% year-on-year. And we're seeing things like Cartzinc represented of Shop at GMV Cartzinc you haven't used it, is like magic this idea that a shopper can move between the merchant store and the Shop app without the cart braking, having all your inventory filled there. it's becoming this incredibly rich experience.

So Shop App has -- is really starting to grow -- we have a lot of work there, especially as things like catalog and the Agentic application gets built into it. But I would say that both Agentic and the Shop App are 2 major legs of our store for the future.

Maybe with that, I'll just take a moment to close the call. And I just want to kind of start with something that I think I said last quarter on the call, which was -- I said that AI is going to accelerate entrepreneurship more than any other job. Toby mentioned that to me about a year ago, and I'm seeing that. I totally agree with him.

We are already seeing a sign of that happening. Yes, Shopify catalog is driving higher conversion. We're also, of course, seeing Sidekick helping merchants reach their first sale faster. But I want to zoom out from that for a second, because I think the true value of Shopify is so much bigger than any single product or feature even any quarterly result.

The value of Shopify comes from the compounding power of everything we've built over 20 years, all working together. And every new product helps our merchants succeed and drive more transactions. Every transaction gives us more signal making our products smarter and smarter products then drive wider adoption. And as our merchant scale, Shopee becomes even more valuable to them. I think that is a very powerful flywheel but it's powered by this durable operating model, strong operating model.

And I do say so myself, a truly world-class team. Two weeks ago, we held our annual company-wide Summit in Toronto. The energy inside the company at the summit and frankly, right now is the highest I've felt in a very long time. I've never been more proud of this team. We are the world's commerce infrastructure. And whether it's the first-time founder making their first sale or it's the largest retailers and brands in the world or any builder at all like, these exceptional results are not the product of 1 quarter. They are the result of 20 years of focused discipline, hard work.

And I've said this before, and I think it's every more true, we are still just getting started. So thank you for tuning into the call, and we will talk to you all next quarter.

Thanks, Harley, and thanks, Jeff. This wraps our second quarter 2026 conference call. Thanks, everyone, for joining us, and we look forward to speaking with you all soon. Goodbye.

Good morning, and thank you for joining Shopify's First Quarter 2026 Conference Call. I am 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. 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 the U.S. and Canadian regulators. We'll also speak to adjusted financial measures, which are non-GAAP and not a substitute for GAAP financial measures. Reconciliations between the 2 are provided in our press release. And finally, we report in U.S. dollars, so all amounts discussed today are in U.S. dollars, unless otherwise indicated.

With that, I will turn the call over to Harley.

Thanks, Carrie, and thanks to everyone for joining us. We've got a lot to talk about today. Commerce is moving at lightning speed right now and so is Shopify. So first, let's kick off with the headlines. Q1 GMV was $101 billion, that is up 35%. I'll say that again, Q1 GMV was $101 billion. That is the second consecutive quarter our merchants have done over $100 billion in sales. Now that is commerce at a truly vast scale.

Our revenue was $3.2 billion for the quarter, that is up 34%. And our free cash flow was $476 million, delivering a 15% free cash flow margin. That means we've now put up 4 straight quarters of 30% or more revenue and GMV growth alongside mid- to high teens free cash flow margins every single quarter. There are very few publicly traded companies today that are able to make that claim at anything like the scale. It is a very small club and that is something we are very proud of. And the reason is actually very simple. We've never lost sight of our mission to help our merchants win. And that is why every day, we are seeing new businesses light up with their very first sale. And in tandem, we're seeing more of the world's biggest brands migrating to us from all corners of commerce.

In Q1, we signed 3 legends of luxury, Mulberry, BevMo! and LVMH. And in fashion, we welcomed Ragan Bone, luxury outlets, the Outnet and RooGuilt Group and the iconic Lands End. BevMo!, one of the largest liquor store retailers in the U.S., has brought us into power all of their locations with Shopify point-of sale. And Orvis, the outdoor brand that was founded in 1856 is moving to Shopify for a full unified commerce solution.

Meanwhile, Q1 saws go live with incredible brands like The Benetton Group, Victoria's Secrets, Body, Epic Shop by Vail Resorts and Reitmans. And here's the best part. We're not just winning the retail legends of today, we're powering the retail legends of tomorrow, and it's happening really fast. We'll get into some real merchant stories later because the velocity we're creating is important to understand.

Okay. Let's step back for a second. There's a lot of noise around what AI will mean, at an individual level, at a company level and at a cultural level. Now here's our perspective. First, we're not approaching a new era anymore. We are already in it. In 2026, AI is now Shopify's native language. We bet early on AI and forced its adoption. It's embedded in everything we do, the products we build, the channels we power, the way every single person on the team operates. AI has become an exoskeleton for everyone at Shopify, giving them a virtual team of agents and that makes room for rapid experimentation. It allows them to pursue multiple ideas at the same time and then double down on the winners. And here's what else we believe to be true.

No group benefits more from AI than entrepreneurs. The logic is simple. AI is making entrepreneurship dramatically more accessible and in fact, accelerated. That means we're going to see more entrepreneurs, and they're going to scale more easily. AI-powered shopping democratizes discovery. Reach is not just influenced by budget anymore, it is influenced by relevance, which benefits both merchant and buyer. And the right products fund the right shopper at the right moment. And this is enormous potential for new and scaling merchants. And because we win when they win, it also has enormous potential for Shopify.

So let's just say the thing. There's always going to be some market confusion when we see a significant shift like we're seeing right now with the rise of AI. We've seen it before. I'm sure we'll see it again. And every single time the world gets more complex, Shopify gets more valuable. We absorb more of that complexity into our systems and become more valuable to merchants. So when we look at this new era of commerce that we're in, there are really 3 core principles that [indiscernible] by Shopify is in such a strong position. That's what we're focused on, and that's what we're going to talk about today.

The first principle, Shopify has a huge advantage that is about to compound. We have 20 years of commerce data. We have data on purchase intent across millions of merchants, hundreds of millions of buyers and billions of products. And in a world where real-time information is now table stakes, the edge is the insight beneath it. And that requires a depth, not just access but experience. We've seen merchants start, stall, pivot and scale millions of times across every category and geography. It allows us to build on the real behavior of commerce and to keep shipping products grounded in insights only we have. Deep experience applied at speed. That is very hard to replicate and it compounds. Every capability we add embeds merchants further into the platform and grows the value of being on Shopify. And Sidekick is the perfect example of this.

As a reminder, this is our intelligent assistant, which is trained on our knowledge base, payer with completely personalized Intel, it has it each merchant's particular business. Now last quarter, we told you the numbers were encouraging. Well, that was just the beginning. The number of weekly active shops using Sidekick in Q1 was up 4x year-over-year. We saw over 12,000 custom apps created in Q1 alone using Sidekick. And nearly half of all Shopify flows generated in Q1 were built with Sidekick. And Theme Edits just from last quarter are in the multimillions, growing over 1,000% in a single quarter.

Every app built, every automation created, every task completed is the merchant getting more done with less and running a smarter and a more productive business on Shopify. In a world where discovery is changing faster than ever, where AI is reshaping help buyers find products and how information surfaces, these merchants are moving faster using Sidekick to keep pace with where commerce is going.

And then there's Pulse. Sidekick's smart suggestions feature, which proactively delivers personalized recommendations for merchants using market trends and data from their store, which Sidekick then executes on the merchant's behalf. And I'll give you a great example that I just saw the other day. It was an accessory brand, and Pulse noticed that this brand was getting attention in the right places. Its products were being endorsed by fashion publications and showing up on celebrities' Instagram profiles. So it proactively suggested that the merchant create a social proof page on their website to build trust and validation. And once the merchant agreed, Sidekick created that page on the merchant's behalf, and it was already all within minutes.

Now just a few months ago, that process multiple specialists, marketing design, copywriting and often an incremental cost to the merchant and likely several weeks from start to finish. And now it is happening autonomously in minutes at 0 incremental costs to the merchant. And that is just one of the smart recommendations being served up to that merchant as part of their daily operations. This is our compounding advantage. Commerce intelligence, power smart tools that drives merchant success, which in turn, powers more commerce intelligence.

Now that leads nicely into the second principle, which is the demand conversion flywheel. It should be getting more obvious that every quarter that Shopify is no longer just the platform to convert demand, we are becoming the platform to create it to. And that end-to-end position is a major advantage for merchants. First and foremost, online GMV growth accelerated year-over-year. This is our DNA, the core of our business. The online store is not going anywhere. In fact, we believe that new and emerging and AI channels places like ChatGPT, Microsoft Copilot, Google AI Surfaces and Meta will be a tailwind to driving e-commerce growth and penetration over time.

So let's talk about these channels. We are the only platform that enables discovery and selling inside ChatGPT, Copilot and Google, all from one single system of record. And the early signals on AI channels are really compelling. And in the first quarter, AI-driven traffic to Shopify stores has grown 8x year-over-year, while orders from AI-powered searches have increased nearly 13x. And within this, new buyer orders are occurring at nearly twice the rate of other channels.

Okay. Now let's talk about Shopify's catalog because this really, really matters. To date, we've structured more than 1 billion products with clean attributes, real-time pricing and accurate inventory. So AI agents can surface the most relevant products in seconds, and the results speak for themselves. Traffic from catalog-powered AI searches convert 2x more than traffic from general AI searches where the agent is working from scraped or often outdated information from across the web. That is the value Shopify brings.

Okay. I'll give you another example of driving demand. Campaigns, which is one of our ad products, finding new customers one of the hardest things we're running the business. Paid marketing has historically been expensive, complex and simply out of reach for smaller merchants who don't have the budget or the expertise to compete with larger brands. Well, campaigns is changing that. In Q1, the number of merchants with a live campaign was up 3x year-over-year. That is not a small signal, that is a product that is starting to have a true impact on our merchants. And what I love is the impact this is having on SMBs, in particular, because a lot of them would not otherwise have had access to performance marketing at this level.

For some of the smaller merchants, shop campaigns is contributing as much as 1/4 of their total GMV. That is not a nice to have. That is a growth engine. Shopify is giving them economies of scale that were previously only available to the largest brands. And with new channels added in Q1, including ChatGPT, Pinterest and Microsoft monetize, we're bringing more services and more reach and more buyers into the ecosystem. Here's another example of driving demand, the Shop App. Shop App had a strong Q1. GMV was up 70% year-over-year, a clear signal that the buyer network is deepening and shop is becoming a meaningful commerce destination in its own right.

Monthly active users grew over 40% year-over-year and unique buyers purchasing directly on Shop grew over 50% compared to Q1 of last year, meaning more new shoppers are discovering and buying through the Shop app than ever before. And remember, the Shop app is just one facet of shop, which is the buyer-facing side of Shopify.

Sign in with Shop is our user verification tool, which recognizes buyers across devices, stores and surfaces with no sign in friction. And usage is growing steadily. We are up 3x year-over-year, and it is now enabled across nearly our entire merchant store from base. In an agenetic world, this really matters. Agents need to know who they are buying for and we are ready. This is the Shopify flywheel. We're not just converting demand, we're also intelligently creating it by surfacing the right products, personalize the right shoppers at exactly the right time. Our compounding advantage, the billions of data points we've collected over 20 years of commerce, powers our demand conversion flywheel, which is moving faster every quarter. These are not small things. These are the principles that will power the future of commerce.

Okay. The third principle I'll leave you with is what I call invisible complexity. Here's the thing. The hardest parts of commerce are the parts that nobody sees, and this is where Shopify thrives. We saw it when the online DTC boom happened and everybody wanted to build their own stack. We saw it when social commerce started to take off and people predicted storefronts would migrate into their social feeds. And we've been seeing it again this year with some uncertainty around what AI will mean for commerce. But commerce is massively complex. We just spent 2 decades making it look easy. Merchants bring their product and we handle everything else. And every time the world gets more complex, that role becomes more valuable.

And the industry agrees, as you might have seen with the latest news on the Universal Commerce Protocol, or UCP, which we co-developed with Google. UCP is an open protocol that makes agentic commerce work at scale. It enables the full commerce journey, product discovery, checkout, payment post purchase across any platform with any payment processor. We codevelop UCP because we believe the future of commerce runs an open standards, not closed systems. And then we created the UCP Tech Council, the technical body, that steers the protocols direction to ensure it evolves to meet the needs of businesses, platforms, developers and consumers.

We are now seeing the biggest and most innovative companies across essentially the entire industry coming together around UCP to help push agentic commerce forward. And last month, Amazon, Meta, Microsoft, Salesforce and Stripe all join the counsel, committing their expertise in Internet scale transaction processing to build one universal protocol for commerce. The companies that power how the world shops are now building on one standard, and Shopify is at the center of how commerce gets done in the age of AI agents, and this is what it looks like in practice.

Payments is another perfect example of invisible complexity. It's designed to feel simple, but under the hood, it's anything but fraud detection, tax calculation, compliance across dozens of markets, currency conversion, identity verification, payment authorization, all working together invisibly at lightning speed. Shopify Payments is built on top of all that comprehensive tooling, designed to ensure merchants can sell easily across every channel, including a agentic without adding incremental complexity. And for small businesses, especially, this matters enormously.

Managing and reconciling multiple payment processors is a distraction no merchant needs. And we do not do this alone. We work with the best-in-class partners, Stripe, Affirm, Globally, PayPal, local payment methods all over the world, all integrated and all available and all managed in one place. Merchants get the breadth of a global payments ecosystem with the complexity of managing it themselves. This is the Shopify difference.

In Q1, Shopify Payments processed $67 billion of GMV, up 41% from last year, reaching 67% penetration. That number keeps moving up every quarter because merchants trust the full platform, not just the check at moment. And then, of course, their Shop Pay, the Internet's favorite checkout, because we believe it is simply the easiest way to buy anything anywhere, one tap, done. All the complexity of payments completely hidden. In Q1, Shop Pay processed $35 billion of GMV, up 59% year-over-year. Outside the U.S., Shop Pay GMV in Q1 grew over 70% as we continue to expand into more markets, supporting major local payment methods all over the world. making it not just the Internet's favorite checkout, but one that feels native to buyers wherever they are.

In fact, international is another perfect example of massive, but almost invisible complexity. Q1 delivered international GMV growth of 45% with cross-border GMV representing 16% of total. We are consistently rolling out new updates and products to grow our international footprint. In Q1, we quietly shipped updates that individually may not make headlines, but together are steadily making Shopify more native to more places. Things like merchant billing, which is now in 7 new European currencies or capital now available in France or smart market and smart language recommendations where merchants get relevant recommendations based on the markets they sell into. Every quarter, we build more. And we removed more barriers for merchants all over the world to choose Shopify.

Now let's talk enterprise because there's perhaps nowhere that this idea of invisible complexity shows up more clearly. Custom stacks and legacy platforms were built for a world that no longer exists. They're slow to adapt, expensive to maintain and increasingly unable to keep pace with how buyers shop today, let alone tomorrow. Our value proposition is straightforward, better conversion, lower total cost of ownership and a unified commerce system that actually works at a speed and a price point legacy platforms cannot match. You see this shift most clearly in heritage retail, brands like Orvis, Mattel and Hunter Douglas. These are companies that built their names over decades, or in some cases, centuries. They know retail. What they're grappling with is the technology underneath, legacy systems that are costly, slow and holding them back.

And they're not just coming to Shopify for an online store. We're in the room for a much bigger conversation. Unified Commerce, POS, Payments, B2B, agenetic surfaces, the full picture. And once they join, they stay. More products, more surfaces, more of their business running on Shopify. But enterprise growth is not just about brands choosing Shopify, it's also about brands growing up on Shopify.

Groons, for example, the gummy supplement brand that launched in Shopify in 2023, well, last month, they were acquired by Unilever for over $1 billion. In just over 2 years, they scaled to hundreds of millions in revenue. So the opportunity here is large and growing, and we're continuing to go after it. In just the last 2 years, the total number of large merchants doing $100 million or more in GMV on Shopify has nearly doubled. That is real growth. And it's coming from merchants that are scaling into that category as well as those that are already there and looking to modernize for what's next. And all of this puts us in an incredibly strong position to continue driving this part of the business.

On our last call, I said we'll see more billion-dollar brands born in the next 10 years than the last 100. And a lot of people thought that was hyperbole. It was not. Groons is a perfect example, and everything we're building is designed to make this happen faster. So when I zoom out, this is what I see. Over 2 decades, we've collected deeper commerce knowledge than almost anyone else on the planet. We've used that knowledge to build a platform that makes it not just possible, but common for a single entrepreneur to become a massive business in a couple of years, if not less. And we're now moving into an era that will benefit entrepreneurs more than any other group.

There is simply no job that will be more accelerated by AI than entrepreneurship. That means there are about to be a lot more entrepreneurs, and that means more people that need the Shopify platform. And in the meantime, we're continuing to deliver strong and durable growth. real operating leverage, fast product velocity and a platform advantage that keeps compounding.

And with that, I'll turn the call over to Jeff.

Thanks, Harley. Q1 reflects strength across all dimensions of our business, not just any one in isolation. Our growth is broad-based across geographies, merchant sizes and channels. International, enterprise, off-line and BB are all scaling. Underneath all of this, the cohort dynamics continue to compound. I believe that remains one of the most underappreciated characteristics of our business. Each quarter's results are an aggregation of successes over many years of merchant cohorts. Each new cohort stacks on top of the prior one and our newer cohorts are larger than the ones before them, a reflection of the breadth of merchants we are attracting.

But what's incredible is that the older cohorts, even the merchants who have been on Shopify for many years, are not plateauing. They continue to grow. As an example, in Q1, almost 90% of our revenue was from merchants who have been on the platform for more than a year. The driving force is our platform and product velocity. That's the structural advantage of Shopify. We give you everything you need by operating across the entire commerce stack. It's not the power of any 1 element of the platform. It's how they all work together to help merchants accelerate their success. It's a knowledge and expertise readily available through Sidekick. It's the speed, context and simplified complexity behind checkout. It's the ability to sell across every channel, every surface and every geography from day 1.

Internally, we are making every function faster, sharper and more productive. An output per employee is improving through deliberate AI usage. The result is that we are building more, shipping more and serving more merchants. The leverage we have and continue to deliver is what funds ongoing investment. In AI infrastructure, global reach and platform death. That discipline is what we have demonstrated consistently. We will always lean into growth because as we grow, we invest more in driving success for our merchants and for Shopify.

Now let's take a closer look at our GMV. Unless otherwise specified, all growth rates are presented on a year-over-year basis. Q1 GMV was $101 billion, marking our second quarter with GMV over $100 billion, representing growth of 35% or 30% on a constant currency basis.

Diving deeper into different GMV perspectives, let's first look at merchant size. In recent quarterly calls, I've talked about 3 strata, merchants doing up to $2 million in GMV, those doing $2 million to $25 million in GMV and those doing more than $25 million. We saw strength across merchant GMV bands consistent with recent trends. The $2 million to $25 million GMV band added the most incremental revenues year-over-year, but the other 2 segments were not far behind. And the greater than 25 million band merchants are growing the fastest.

Further, when we look at just our merchants doing more than $100 million in annual GMV, we see a consistent and accelerating growth story. The share of our revenue coming from that segment has grown each year, up over 200 basis points in the last 2 years. This is a multiyear view playing out exactly as we expected.

Moving to regions. Europe maintained its momentum with European GMV up 48% or 35% in constant currency. 2025 was an outstanding year in Europe. So delivering continued mid-30s growth in constant currency against that backdrop reflects years of deliberate investment in that market. North America accelerated from an already strong Q4, demonstrating the continued durability of our core market. That is, of course, on significantly higher GMV levels, demonstrating our ability to not only grow well in our largest market, but also further tap into the immense opportunity outside of the U.S.

Regarding same-store growth and new merchant acquisition, the contribution from each was relatively balanced, a split that has remained consistent for multiple quarters now.

Finally, turning to channels. Two channels to call out this quarter. Offline GMV was up 33% and accelerating from Q4. The fastest-growing slice within off-line remain merchants operating more than 20 stores, which this quarter had location growth of 50% year-over-year. B2B GMV grew 80% in Q1 with broad growth across both new and established merchants. In Q1, we made several other features of our B2B offering available to most of our standard subscription plans, given these merchants the ability to manage their wholesale and D2C's needs side-by-side in 1 place.

Now turning to revenue. Q1 revenue grew 34% or 32% on a constant currency basis, fueled by the GMV outperformance. North America grew 33%; Europe, 42%; and Asia Pacific, 30%. The pace of growth in Europe speaks to the opportunity that remains ahead. And while growth internationally continues to outpace North America, North America had its strongest quarterly growth rate in over 4 years. Merchant Solutions revenue grew 39%, driven primarily by the strength in GMV and increased penetration of Shopify payments.

$67 billion of GMV was processed on Shopify Payments in Q1, that's 41% higher than the prior year and 67% of GMV, 3 points higher than Q1 of 2025. We see a clear path for the rate to continue moving higher, stemming from deeper penetration across all geographies, growing adoption in the 15 European countries in Mexico where we launched payments last year, expansion into new countries beyond the 39 where we are today and continued Shop Pay momentum. Near term, Europe will be a headwind to Global Payments penetration metrics, given the recent launches of payments in numerous countries last year, but that should prove to be a tailwind for us over time.

Subscription Solutions revenue grew 21%. The incremental year-over-year revenues were fairly balanced across 4 elements: monthly subscriptions for our plus plans, monthly subscriptions for our standard plans, variable platform fees and lastly, revenue from apps, themes and domains. The growth in our plus and standard monthly subscriptions reflects 2 things working simultaneously, new merchants coming on to the platform and existing merchants upgrading as our businesses scale. Both are driving the growth.

The growth in variable platform fees reflects 2 primary factors. The average VPF rate has increased and plus merchants this past quarter grew faster than our overall merchant base.

The growth in our revenue from apps, themes and domains reflects both the quality of our developer ecosystem, with thousands of apps extending the capabilities of our platform and changes to our developer revenue share terms that created a favorable comparability dynamic, which it largely normalize as we progress through the year.

Q1 MRR grew 16% year-over-year with continued growth across standard, plus and point of sale. As a reminder, Q1 was the final quarter where our year-over-year growth rates in MRR are impacted by our rollout of 3-month trials in our largest markets in Q1 2025. That headwind is behind us.

Plus MRR represented 35% of MRR for the quarter, up from 34% a year ago.

Q1 gross profit grew 32%, coming in slightly ahead of our expectations, driven by the outperformance in revenue. Our gross profit has now grown in a compounded annual growth rate of 29% over the past 3 years. Gross profit for Subscription Solutions grew 21%, with gross margin coming in at 80%, in line with Q1 2025.

Economies of scale and efficiencies and support were partially offset by increased LLM cost, driven by growing merchant usage of our AI products, most notably Sikik. We expect this dynamic to continue. The more merchants use these products, the more data we have and the better the outcomes we can deliver. And the better the outcomes, the more deeply embedded they become in the platform. Additionally, changes to our developer revenue share terms I mentioned earlier also contributed a tailwind to gross profit dollars.

With the biggest benefit expected in Q1, normalizing as we progress through the year. Merchant Solutions gross profit grew 40% with gross margin coming in at 39%, essentially flat year-over-year. No specific items to call out as similar dynamics played out as we have seen in prior quarters.

Operating expenses were $1.2 billion for the first quarter or 37% of revenue, a 4-point improvement from Q1 last year. We continue to drive operating leverage through 2 key elements: growing gross profit dollars and delivering continued headcount discipline. Both of these allow us to invest in further AI usage internally and our returns-based marketing, which in turn helps fuel more growth, R&D, sales and marketing and G&A as a percentage of revenue each improved year-over-year. Transaction and loan losses came in at 3.7% of revenue, up from 3.2% in Q1 2025.

As a reminder, the dollar amounts here tend to scale with volumes in our payments, capital and credit products. Each of these products continues to grow well. So the goal, of course, is to keep loss rates low as we scale merchant adoption.

Payments revenues continues to grow very nicely. As I mentioned earlier, and our loss rate in payments in Q1 was below Q1 of last year. Credit was the largest component of the year-over-year increase.

Q1 free cash flow was $476 million or 15% of revenue, in line with our outlook. As previewed on our last call, these results reflect a slightly higher effective tax rate. One item to note before turning to outlook. Beginning in the second quarter, we are adopting an accounting treatment for our merchant cash advances. That will match the accounting for our capital loans. This transition was prompted by some regulatory changes in Canada and related subsequent changes to our merchant cash advances product in Canada.

For Q2, relative to our current accounting, this change is expected to be a tailwind of approximately 0.5 point to free cash flow margins.

With that, let's move to our outlook for Q2. We expect Q2 revenue growth in the high 20s year-over-year. The expected sources of growth are consistent with the drivers that we saw in Q1 with the one key difference being that our Q2 revenue guidance assumes approximately 0.5 point of FX tailwinds versus the more than 2 points of FX tailwinds that we saw in Q1. We expect our gross profit dollars to grow in the mid-20s. The differential in the revenue versus gross profit growth rates is driven by the continued mix shift between the growth rates of Merchant Solutions and Subscription Solutions, which is expected to narrow compared to 2025 and the continued strength of payments. We expect operating expenses in Q2 to be 35% to 36% of revenue, an improvement from the 37% we delivered in Q1 and a meaningful step forward from the 38% we delivered in Q2 of last year.

Turning to free cash flow. For Q2, we expect free cash flow margins in the mid-teens. In summary, Q1 continued the momentum of an outstanding 2025. We delivered the highest quarterly revenue growth rate in over 4 years, both for the business as a whole as well as the U.S. specifically. Strength was broad across merchant sizes, channels and geographies. Gross profit has compounded at 29% annually over the past 3 years, and our commitment to these free cash flow margins remains unwavering.

The business is durable, our position is unique and our conviction is that the investments that we are making today in AI infrastructure, in the merchant-facing surfaces being built on top of it and the data advantage that comes from powering a meaningful share of global commerce will further strengthen our position.

As entrepreneurship enters a new era shaped by AI, we sit here today with the platform, the scale and the momentum to be at the center of it.

With that, I'll now turn the call back over to Carrie for your questions.

Thanks, Jeff. We will now take your questions before turning the call back to Harley for some final words. [Operator Instructions] Our first question comes from Justin Patterson of KeyBanc.

Great. It seems like there's a natural flywheel between AI supercharging product velocity and Sidekick effectively driving uptake of new features. How should we think about that flywheel playing out and what it means for KPIs? And then just a quick one for Jeff. How do you balance the benefits of AI versus rising token costs?

Thanks, Justin. Next for the call. It's Harley. I'll start with the first part. Look, I mean, Sidekick is really becoming a merchant's co-founder. It's becoming the new way merchants run their business. This is not a tool that they open occasionally, but this is this active presence that shows up every day. It now with Pulse, it proactively suggest ways to improve their business and then execute it on their behalf.

And so numbers in Q1 were not just encouraging, I think are remarkable. Weekly active shops are up 385% using Sidekick. We saw 12,000 custom apps built in Q1, which is up like over 200% quarter-over-quarter. And if you look at Shopify Flow, which is really used for business processes for our largest merchants, nearly half of all Shopify flows generated in Q1 were actually built with Sidekick. So this is a huge compounding advantage. This allows us to not only leverage our 20 years of commerce insight, and this incredible data set we understand about how businesses operate, but also to pair that with the specific needs and the specific use cases of what a merchant requires.

So I think how merchants are using it is important. The early signals really matter here. And we're seeing these. Merchants that are just starting to play with it really become power users very, very quickly. So roughly half the conversations are about store setup, design and theme configurations. And then once they gets set up, it's about growing the business faster. So it is something that we knew would be well received by merchants, but I think the efficacy and the efficiency of driving value is something even we are incredibly surprised by. It's amazing.

Yes. I mean -- and I'll pick up on that very point in terms of where Harley left it. The impact that we're seeing, not only in terms of how our merchants are using Sidekick, but how we're using it internally has been super impactful. Harley in his comments talked about the exoskeleton, which we give our not only our engineers, but really everyone throughout the organization in terms of how they can do more with AI and it's proven to be very, very impactful.

So it's really not even a question of where are we using AI, but where aren't we using AI? Because it's been an extensive usage in pretty much all departments within the company. So we're, of course, mindful of the right tool for the right problem, and we were mindful of the cost and we think through that. But this is something we're seeing significant benefits in terms of how employees are deploying it and how merchants are getting value out of it.

Yes. I think actually, AI right now writes well over 50% of our code today, and that number is going up significantly, not down. But I think more than any other company, AI, Shopify's native language.

Thank you for your question, Justin. Our next question comes from Bhavin Shah at Deutsche Bank.

Great. Harley, as you think about expanding your product capabilities and how you can better serve merchants, how do you approach building versus partnering more broadly? And how might that differ from more software like solutions versus some that are more fintech-related?

Yes. Look, I mean, Shovel's philosophy around partnership has, I think, been long study, but we partner where we can get massive leverage and where we think there's a company out there that's doing a really great job we can plug into. And when we think there isn't something out there that is 10x better than what we can do ourselves, we just build it. And that's always been the case, particularly when it comes to even the app ecosystem, you're seeing at the same time more merchants using Sidekick to build these custom features for their shop.

But at the same time, you're seeing more app developers build for Shopify's ecosystem than ever before. In fact, we've now put the app approval process on rails using incredible AI testing so that we can get more apps into the app store faster. And if you talk to partners and particular app developers that are building for commerce or retail, for the most part, Shopify's and our app stores become their default go-to-market. It is the place where they build for. So that will continue.

And just in terms of how we think about generally, these larger-scale partnerships, obviously, there are these amazing new surface areas. We talked -- obviously talk about agentic quite a bit, whereby it should be incredibly clear that Shopify's at the epicenter right now, this AI era. And so we are currently the only platform on the planet powering, selling inside of ChatGPT, Copilot and Google, all from one system of record.

So when we see these opportunities to work with other companies, we show up with a catalog, we show up with all the functionality and the right APIs and so that they can move faster too. And I think that's the reason why Shopify has been uniquely positioned as one of the best companies to partner with an all of tech.

Thank you. Our next question comes from Dominic Ball at Redburn Atlantic.

So 2 questions on as AI is lowering the barriers to entrepreneurship, are you seeing acceleration in SMB merchant sign-ups? And second question is with integrations with Claude, ChatGPT, does AI risk pushing Shopify sort of back from a merchant's UX perspective?

Yes. I'll take the second part and then Jeff can talk about the first part of that question. Look, agents do not buy pass Shopify, just the opposite. In fact, they write right into Shopify. I mean, I think you saw in sort of recent headlines that merchant store fronts really matter. You saw ChatGPT move to in-app browsers for their checkouts. So it's literally the Shopify store front within the chat. And again, when a buyer is shopping in ChatGPT, they're browsing Shopify's incredible catalog. So the momentum on agentic has been amazing.

We're always trying to find new ways for merchants to have an easier time to build their company -- their businesses better, faster. We have more integrations even announced yesterday, where Shopify now make store building and management as easy as having a conversation where you can sort of effortly connect your existing store right to your favorite chat agentic application and then chat to add products or just inventory across locations. But this idea of combining Shopify's incredible platform and the product the way that we think more entrepreneurs are looking to build, we think, put Shopify and pull position when it comes to the agenetic entrepreneurial evolution. And I think Jeff will talk a bit about ads, but I think there is no -- let me say this actually in the most simple terms, and there is no job that is more AI safe than entrepreneurship.

And I think there's also no place that you're going to see more acceleration with AI than maybe entrepreneurship in general. And I think as Shopify is the entrepreneurship company, I think that's going to be great for entrepreneurship in general, that's also be great for Shopify.

Yes. I think that's the perfect launch point to your first question, Dominic, just in terms of what we're seeing in merchant additions and kind of whether this is going to accelerate some of the things we're seeing, especially on the SMB side. Harley alluded to it, like we do think there will be tailwinds here. I think from our vantage point, you look this -- and you see this in the growth numbers, right? The growth that we delivered in Q1 was exceptional. One of the things I made it -- one of the points I made in my comments was it essentially evenly split between same-store sales growth and new merchant acquisitions.

And so you can see that in terms of what we're doing at the top of the funnel, merchant adds more broadly. It's true across geographies. You see this in some of the data. There was some U.S. census bureau data in terms of the number of startups that you see on a monthly basis. So we're seeing some signs of it. It's early to say, "Hey, AI was the thing that was the specific spur of additional activity in terms of start-ups." But the pipeline looks as healthy isn't as strong as we've ever seen it.

Thanks, Dominic. Our next question comes from Nick Jones at BNP.

You put out some really great kind of statistics or growth rates for Pulse and Sidekick. As we think about AI investments from here and maybe how it translates to margin expansion. How are the AI investments in terms of kind of creating structural advantages versus maybe keeping up with table stakes that we're hearing across maybe other platforms to make SMB's lives easier, more efficient that makes sense, I guess, kind of what is kind of a structural advantage and what is increasingly maybe table stakes that folks are looking for as businesses deploy AI across their platforms?

I mentioned earlier that I think Shopify is internal, like AI is now Shopify's native language. What I mean by that is that we bet really early and we force its adoption across our company. And I think AI has given this exoskeleton everyone at Shopify, where effectively every single person on the team has this virtual team of agents that creates incredible opportunity for these like rapid experimentation. It allows them to pursue multiple use at the same time then double down on what's winning.

And I think I mentioned in previous answer that AI now writes well over 50% of our code and that number is going up. But what that actually means is that our best engineers aren't writing a few lines of code or doing less. It means they're operating at this much higher level. They're directing reviewing and making calls that we're able to provide -- we're able to do because of 20 years of context. So AI handles the execution and they handle the judgment.

And I think the output proves that. We shipped over 300 new products and features last year alone. We kept our flat headcount, which we're very proud of. And that's only possible because something has changed fundamentally. I know Tobi has been taking a bit about river, which is a perfect example of it, but it's this AI coding partner built right into Slack for the entire team where they can pull into any threat, any conversation and do, frankly, a remarkable amount of the engineering work. And we built it because we needed it and now it's deeply embedded in how we operate. So I think more than any other company, Shopify is very much leveraging AI in an incredible way.

All right. Our next question comes from Michael Martin at MoffettNathanson.

Harley, you've had a lot of success with the enterprise over the last 2 years. I wondered if you could talk a bit about your learnings with your go-to-market strategy, if you see any opportunities for tweaks? Or if you're really happy with the product market fit and it's just more of an execution game.

And then quickly one for Jeff. Just on OpEx growth. You've been really tight with headcount management. And any additional color on the destination and duration of the investments you're making in OpEx lines would be really helpful.

Let me start with our enterprise and Jeff could jump into OpEx. I mentioned this on the call, but I'm going to repeat it because I think it's important. The number of merchants doing over $100 million of GMV on Shopify has nearly doubled in the last 2 years. I think we have now -- we're in the right to be in every serious enterprise conversation, and that's the shift.

Our go-to-market engine sort of runs 2 tracks in parallel. Obviously, SMB is all about velocity and the enterprise is really more about depth. And we've built this dedicated team and professional services that embeds into that enterprise motion. Product is unequivocally a major driver. When we show up, we show outcomes. We show speed, we show cost, we show conversion, we show simplicity.

And I think more and more with these very large brands that are coming on, brands that I mentioned on this call, they're looking for this unified commerce platform. They're looking for basically the last migration they're ever going to have to do. And so when Shopify shows up, with this global scale this unified platform, but also allowing them to sell right away across ChatGPT and Copilot, our differentiation is frankly quite structural. And I think at our scale, that compounds. I think that advantage will grow over time. And we can also move at this incredible pace, which works well.

So I think generally, the strategy is working really well. We're focused now on just faster execution. We've also learned that -- I think the enterprise is human executive trust unequivocally moves deals. This is an area I'm personally spending a lot of time in myself. And I think our installed base on the enterprise is a flywheel. I think growth begets more growth.

And if you look across every vertical or product category, the fact that we now have and are adding the top merchants and top brands across every vertical, that means that flywheel is speeding up. And there are places where we are improving pricing clarity, making the ROI way more obvious. There are some edge cases that we're already closing the gaps where potentially deals take longer than they should. But the strategy is really, really working in a way that I think you're -- I mean, you're seeing the results now.

So now it's about execution and consistency. I think now it's about turning more consideration into more winning when it comes to the enterprise, and that's where I'm spending a great deal of my time and I'm incredibly optimistic about that.

Yes. And Michael, to your question on OpEx and where that's going, overall, things remain exactly as we've been talking about in terms of the discipline we're delivering on free cash flow margins. You saw this in the significant growth that we had in That, of course, drops more gross profit dollars down, and that gives us the opportunity to continue to invest like we have been and find the areas where we can continue to drive that top line itself. You referenced headcount. We've obviously been disciplined for 3 years now. We're -- on any given year or in fact, slightly down from the year before. I don't see that changing.

We've talked a few times in terms of already on this call in terms of how we're using AI internally and the efficiencies, the acceleration that's giving us, and we expect that to continue. And as we spend, as you can tell from some of the marketing efforts that we've done, marketing, and I mentioned this on the call that sales and marketing as a percentage of revenue is down year-over-year as was G&A as well as R&D. So we can continue to drive those down as percentages, but marketing dollars themselves will be up year-over-year, but we're just getting better and better and better on the marketing spend. And I mentioned on the last call that roughly 40% of our marketing dollars was in Europe in the performance marketing side. We continue to see success in Europe on this piece.

One of the things we've actually seen on the marketing spend in Europe because we spent a little bit more the granularity we get has been meaningfully increased. The signal value we get has allowed us to be much more effective in Europe than even though we've been historically on the marketing spend. And we've increased the percentage of marketing spend which is performance. So the pieces which were not core, hardcore performance marketing we've reduced. So we're really in a spot where I think we can do some really interesting things on OpEx.

The only difference, and I talked about this a little bit on the last call, the only difference really between last year and this year is going to be a little bit on the taxes in terms of what we're seeing on the effective tax rate. But we're at a spot now where that should level off. So from our vantage point, we feel really good about driving the gross profit dollars growth, which allows us to do everything we need to and obviously have the dollars left to do the share repurchase among other things.

Our next question comes from Rob Wildhack at Autonomous.

Harley, I wanted to ask about the demand creation principle you highlighted in the prepared remarks. We hear you loud and clear on the products and tools that Shopify offers merchants to create demand. I was wondering if you could compare that to what a non-Shopify merchant can do or is doing to get themselves discovered by LOMs. Like what are the table stakes there? What are some of the savvier non-Shopify merchants do? Because I think that would be really interesting context for the Shopify agentic toolkit.

Yes. I mean, as I mentioned, on sort of demand creation, I think we're making a lot of progress on the sort of customer acquisition piece. I think there's now -- started with one way, now there's multiple ways for buyers to discover our merchants, job campaigns. Shop app and obviously some of the agentic discovery. But in terms of some of the stuff we're doing with the agentic plan, for example, again, that rolled out early March. That mean that any brand and any platform can now sell across AI channels via Shopify catalog and no Shopify stores acquired.

It's remarkable. Everyone -- pretty much every merchant, every brand retailer in their Board meetings are talking about how they get it discovered. And so what we're seeing now is that ultimately, it is -- obviously, we have a way to help them with that. And I think we've now made it clear that Shopify is sort of at the center of this. Again, I mentioned earlier, but I'll say it again, we're the only platform powering selling inside of ChatGPT instead of Copilot and inside of Google all from one system.

And what we're seeing already in terms of the proof points is that orders from AI searches are up nearly 13x. AI-driven traffic to Shopify stores has grown 8x year-over-year. And new buyer orders from AI searches are actually occurring at nearly twice the rate of traditional organic search. The big thing though with catalog is that I think a lot of non-Shopify merchants are seeing that catalog is actually doing a much better job of organizing and syndicating their products across every agentic surface versus sort of the old scraping thing that was happening prior to catalog.

So it's doing 2 things. One, it is unequivocally getting Shopify connected with a lot more non-Shopify merchants per se beginning those conversations, which, again, may lead to them joining the agentic plan or ultimately may lead them to come into Shopify for their entire migration, which obviously is our plan and our hope. But even if they just want to be part of catalog and just be part of the agentic plan on its own, that already is a massive lift to them relative to everything else. I mean Shopify catalog is now the authoritative source for product discovery. There's now 1 billion products across millions of merchants. The data is structured, the pricing gets accurate. There's real-time inventory, clean attributes, and OpenAI and Microsoft are already using the catalog to power discovery.

But so I think generally, this plan, this agentic idea, agentic plan idea is working really well for us. And I think the retail industry has certainly taken notice.

Our next question comes from Samad Samana at Jefferies.

So I wanted to pull on the agentic commerce thread. I think Stripe sessions was last week, and they're obviously a very close and successful partner of Shopify's. And they are all that several kind of new updates that allow whether that's agents to buy directly with the product catalog that someone's using and/or native checkout inside of Facebook by partner with Meta. I'm just curious as you see the surface area of commerce expanding. Can you just help us understand that if a Shopify merchant has these alternative channels where they're checking out, how the monetization still works and if the economics change? Because, obviously, you guys sit at the center of all this and are partnering with everybody, but I think investors are just trying to understand how monetization economics look as the surface area expands.

Let me start on your first question. So I feel like I need to say this very clearly, but Stripe and Shopify are really incredible, long-standing partners that -- and I think we've been building the future of commerce together. We've partnered with them now for over a decade across payments and financial products. And I think what you're seeing is both companies are very serious infrastructure companies that are working together.

The key to the -- I think the key to this is the partnership is actually deepening. Stripe recently joined our UCP Tech Council alongside Amazon, Meta, Microsoft and Salesforce, we were the founding member. And just to kind of be clear about this, UCP is now becoming the industry standard. And Shopify built it. It is the only standard that covers the full commerce journey end-to-end. And UCP, whether -- does all the work from discovery to transaction to fulfillment.

We now have about 20 retailers and platforms that are part of the UCP. Stripe has now joined the UCP Governing Council, with us in Google, which is the overarching governance body for the protocol. But this is what it looks like when an open standard wins.

Now in terms of agentic generally and just to kind of be very clear about kind of checkout and how that operates, I think it's really important. So I said this earlier, I'll say it again. As you saw recently, merchant store fronts really matter. So you -- when you saw ChatGPT move to an in-app browser in their checkout that is literally the Shopify storefront right within the chat here. And so it functions exact same way from an economic perspective as it would if any consumer is buying on a Shopify store. It's just a new surface area.

Back to my point earlier that I'll repeat because think it's important is that every merchant, obviously, wants to have recurring customers. They pay for the customer, they want to see more of that. But the idea that now some of these agentic services now introducing new consumers, like net new consumers to Shopify merchants through services, we think, is an incredible thing as it allows our merchants to expand their total addressable market and, therefore, Shopify's as well. So generally, it's going really well, but we're really, really happy with where we lined with UCP. The relationship with Stripe is fantastic. We presented at Stripe session as well to your point here.

But we compete where 2 serious companies naturally wood, but we also partner where our merchants need us to. And every time a new frontier opens, whether it's stable coins, or agentic commerce or financial products, we really do build alongside each other, and that's been true for over a decade.

;

Our next question comes from Colin Sebastian at Baird.

I guess, Harley, I mean, at a high level, I mean just the rapid market share gains we're seeing here on a same-store GMV basis. I know there's a lot of focus on ultimately what the impact will be from agentic commerce. But I mean you're assuming -- we're assuming e-commerce growth accelerates, do you envision Shopify taking even more share or share at a faster rate going forward?

And then a quick follow-up. I'm curious on how you're thinking about the role of the App Store, especially with all the activity in Sidekick. Is there as much utility from the external app store? Is there an opportunity maybe to allow merchants to extend what they're building out to the broader community?

Actually, it's a great question. Merchants that have built, specifically some of the larger merchants, the midsize and enterprise merchants that have built custom apps on Shopify. We've actually seen them at some point, decide to shift from just being a merchant and -- a merchant and as an app developer, some of them have actually discovered this incredible tooling. They're building for their own business and then put in the App Store as well. But in terms of what Sidekick is doing, like Sidekick actually, we see as a real supplement to the App Store, not a replacement.

In fact, if you're -- you probably have noticed that we're spending a lot more time without app billers than ever before. hosted a town hall a couple of weeks ago with thousands of our biggest app developers. We have additions dot dev happening in Toronto this summer, which is in person with our app developer community, which has already sold out. actually, we think there's never been a better time to build on Shopify App Store.

The applications that are being built by Sidekick are really very specific nuanced feature sets for particular merchant businesses. And so for most of them, it really is just for the individual merchant. We see them we see those -- the opportunity for the app developers just to continue. That being said, though, what is happening that is super interesting is that now merchants who may have had to spend weeks or even months building a feature either internally or hiring an agency to do so. They're able to do so much more work themselves using Sidekick and that means they're able to go much faster.

So the first part of your question sort of around e-commerce in general. Remember that e-commerce in the U.S. is still sub-20% of total retail. And what we're seeing is a part of the reason why the stat around this kind of proof point new buyer orders from AI searches are occurring at nearly twice the rate of traditional organic search. The reason that is so important is because what we're seeing is that merchants are now discovering new buyers on these genetic services that they may not otherwise have seen. So we do think it's going to pull more consumers into e-com who may have been laggards.

We also see that it may introduce new on e-com native shoppers to start doing so on a more regular basis. Net-net, though, we think that's going to mean more GMV for merchants. And certainly, our business model is predicated on the more money our merchants make, the better Shopify does.

Yes. And Colin, the only other point I'd add is just think about, again, the quarter we just posted in terms of what that means to the momentum of this business. Like the strongest growth rate we've had in the U.S. in 4 years, the strongest growth rate we've had in our business overall in 40 years. we're believers in what's happening here.

And our last question will come from Richard Tse at National Bank.

Yes. Thank you. There were some recent reports that you guys are considering moving deeper into financial services. Like I'm wondering if you can maybe comment on that and then potentially how that would impact some of your existing partnerships.

Yes. I mean I would say, as you know, Richard, we've had -- if you think about financial services, the first product we really had was capital, and that product is roughly 10 years old. That's something that we've had for a while has worked really well. there's other suites of products that we provide in kind of financial services more broadly. This is 1 of the areas where we have seen merchants, and this is one of the things which is classic core Shopify, which has helped merchants and situations, which they either face complexity or they face opportunities where we can help them do that.

And that's one of the things we found in our capital business where we've been really thoughtful in terms of how we do lending and to help them accelerate their business. So as that capital business has continued to grow, some of the things you've had on balance and credit have continued to grow. And so that's something that we want to support. And that's one of Harley and I have been just as we've talked about the growth levers of this business and all the things are going to provide durable growth over the years. This is one of the things that we've talked about.

There has been -- to your point, there's been some stories out there in terms of some of the money transfer licenses and some of the flexibility that would give us to help us accelerate the growth for merchants, and that's one of the things we're going to continue to do. We're going to go to where we think we can add the most value to merchants, and this is 1 of those segments.

You look at capital, I mean, capital continues to expand more markets, smarter offers, better pricing, look at balance, balance is now deepening its utility for merchants and their data operations. I think financial services is just becoming more embedded in a more valuable part of the Shopify platform. And it's not a [indiscernible] product, it's embedded in the platform that merchants already trust, and it's -- We think there's a lot more to do there.

Maybe before we just hang up here, a couple of sort of final things before we close the call that I think might be helpful. I just want to start with this. I just want to say how proud I am of this team and the current execution that we're into this company. I'm coming up to over 16 years at Shopify, and I think this is Shopify operating at its best.

It's important to remind everyone that the numbers that we're putting up this quarter, they are not an accident. They are the result of a very, very clear strategy that is being executed exceptionally well. We're almost halfway through 2026. And I think AI is certainly Shopify's native language. We bet early on it and we force this adoption. And now it is as reflexive inside our company as any company, it's embedded in everything we do and the products we build and the channels we power, the way every single person on the team operates. And I think it's become this incredible exoskeleton for this company.

Finally, I'm going to say this again because it's important. The AI era is not coming, it is absolutely here. And we think there's simply no job that will be more accelerated by AI than entrepreneurship. In fact, it may be the most AI safe job out there, which -- and what that means going forward is that there will be more entrepreneurs, and we think that means there's going to be way more demand for the Shopify platform. We think tomorrow's billion brands are being born today. They're being board on Shopify and just incredibly proud of the team. This is Shopify at its best.

With that, this concludes our first quarter 2026 conference call. Thank you for joining us. Goodbye.

Excellent. Thank you, everyone, for joining us this morning. I'm Keith Weiss. I run the U.S. software research franchise here at Morgan Stanley. And really pleased to have with us from Shopify, both President Harley Finkelstein; and CFO, Jeff Hoffmeister. Jeff and Harley, thank you so much for joining us.

Always great to be here.

So a lot to talk about in Shopify. You guys came off an astounding quarter, and it's sounding a year really in terms of overall GMV growth, overall revenue growth and good profitability. But there's one topic that everybody really wants dig into and it's Agentic commerce. And it makes sense, right? And that's Shopify has led in a lot of commerce transitions in the past and has benefited from commerce transitions in the past. We see a big pace of change on a go-forward basis and investors are trying to understand how that change is going to evolve.

So Harley, maybe we could start out at a high level and just give us the Shopify perspective, like maybe the Agentic commerce 101 of how the e-commerce experience is going to change, how Agentic commerce is going to roll out over the next couple of years? What should we be expecting to see in the marketplace?

Yes. Thanks, Keith, and thanks, everyone, for being here. Maybe I'll start kind of a really high level and I'll go kind of get down to the ground level. I think at a really high level, first of all, just to level set for those in the room that are not as familiar with Shopify, we power but, at least last year, we powered about $380 billion of GMV. So we are about -- just in the U.S. market, we're about 14% of e-comm in the U.S. market. So we see things, I think, at commerce is sort of a terrestrial level and an atmospheric level, I should say.

And I think the business model of Shopify is actually very simple. We make money when merchants make money, the more they sell, the more we make. And that business model has worked really well for us for almost 2 decades. From a product perspective, the product actually -- we do a lot of different things, but the product in itself at its core, is very simple. We make it really easy to build, to sell, to manage all of your retail, all of your commerce operations regardless of whatever channel you're selling on, whether that's online or offline or on social media platforms and marketplaces.

And we think Agentic actually could be one of the most exciting new trends or new paradigms for commerce, maybe since the Internet. So when we see Agentic commerce is that we think we see it as sort of this new front door to commerce that for those -- for consumers, it's going to act as sort of this personal shopper. It also has actually the opportunity potentially to increase the TAM of e-commerce by bringing some of those laggards who typically don't buy online into kind of the digital realm.

But ultimately, Agentic commerce at its core is like having some sort of personal shopper. And it's going to help you do research, it could help you compare -- it's going to help you potentially even transact. And whenever there's a new kind of front door, a new surface area for commerce, that's actually when Shopify's value increases. And 11 years ago, Jeff was actually our banker at Morgan Stanley when we did the IPO.

We talked about what we were trying to build to Shopify is this retail operating system. This idea that there's going to be all these different spokes where commerce can happen. And the more spokes that exists, again, online, off-line and social media everywhere else, the more the value of a centralized back-office system of record matters. So the more front doors, the more the house actually matters. And ultimately, that's how we see Agentic. We see it as being a really potentially really wonderful new front door.

Now that being said, we think that for anyone who is going to lead in kind of this Agentic commerce era, 3 moats are going to be really, really important to do this really well and to be at the epicenter of it. The first moat that is going to be really important is going to be the transaction layer. Now that is not just the payment. That is the checkout itself, that is subscriptions, that is the inventory, that is shipping taxes, all the different merchandising options that come with any type of transaction. And we do that really, really well.

The second moat that we think is really important sort of this Agentic commerce era is having the data layer, this proprietary data layer. And the way that Shopify is set up, we have millions of stores, millions of merchants. We also have billions of transactions and trillions of data points, which means that over time, our system actually gets smarter and it sort of creates this flywheel effect.

The third moat that we think is really important for the agentic sort of era is this network effect layer, meaning the more that happens, the smarter the system becomes. And for us, again, back to the business model, more checkouts mean more merchants come on, means more customers are buying mean more merchants decide to come to Shopify means we're able to make more GMV, we're able to invest more in our product. And this flywheel really starts to spin. And in all 3 cases, we think Shopify has an unfair advantage around these 3 moats.

If you take it actually down to the Shopify layer itself, the business of Shopify is actually -- and many of you in the room, you especially Keith, know Tobi. We've sort of always been looking towards the future of where things are going. I mentioned on the road show, we didn't describe Shopify as an e-commerce provider. We called ourselves a retail operating system and some of you in the room gave us a weird look to say, well, what exactly does that mean?

Well, we were anticipating that commerce was going to be done everywhere and the company and product that brings it all together, that organizes it will be the most valuable company in commerce. So in many ways, we've sort of been planning for this for probably a decade. And in terms of the actual financials of Shopify, the fact that we can grow 30% top line revenue and have free cash flow, which was about $2 billion of last year, means we actually -- we can see this out for not just 5 years, but for decades.

Now at the ground level, I will say that in the last 2 years or so, you've seen us create a couple of different products, which on their own may not have seem profound. But when you aggregate them, you begin to really see the picture of what we're building with agentic. The first one was this idea of agentic storefronts that directly from Shopify's admin, any of our merchants can click a button and say, push our products to, we have 3 main partners now, the first one being Gemini, Google and AI mode. The second being OpenAI with ChatGPT and more recently with Microsoft and Copilot that with a single click, our merchants can push their products and syndicate them to every agent service.

The second thing we built, which we built with -- we announced about 5 weeks ago at NRF was UCP, Universal Commerce Protocol. What we're trying to build with UCP is a way an open-source language every agent tool to speak to every one of our merchants or every merchant in general, so that the experience on the agentic application feels just as good as it does buying from an online store.

And then the other one we built was this thing called the agentic plan, which in a similar vein to Shop Pay off platform, this allows non-Shopify users to actually begin to use Shopify. And then there's some really other cool stuff which you can get into like Sidekick and SimGym, which we think is the greatest co-founder ever created for every one of our merchants that knows everything about Shopify, knows everything about your business that can help you make better decisions.

So when you kind of zoom out from all those things, starting with the agentic kind of the meta store and then exactly what we're doing at the ground level, I think you begin to see that we've really been building the rails for agentic now for a number of years, and we are really well positioned to take advantage of it, whatever permutation may actually be the one that ends up being the go forward. So in many ways, this is kind of what Shopify has been built for. And I think it's probably -- I mean, anyone who's been studying it, is one of the most exciting times of retail over the last couple of decades.

Excellent. So we had this framework in Morgan Stanley, not more so the team software, we call it our best athlete framework and Shopify was our first best athlete. And one of the attributes that we align to is a speed and speed of innovation. And you sort of -- to talk a little bit about that with some of these new products. So from a fundamental perspective, Shopify has always been about enabling these new channels for your end merchants. Merchants need some off-line capabilities, you develop that for your merchants. Social commerce becomes a thing, you develop that.

Can you dig in a little bit into the initial innovations like the new product innovation that enables the agentic commerce product catalog, you talked about, there's universal checkout that you talked about. Where are we in terms of like are these products ready for prime time today? And two, are they being adopted? How broadly are they being adopted by your end customers?

So I mean the products are ready, the product out that we probably have about a dozen merchants that are already using it. The only reason it's gated is we're just waiting for the agent applications to continue to open the doors. I would say, in the next couple of weeks, you will see thousands of more merchants end up being live on these agentic applications. And then over the next couple of years, maybe in the next year or so, even you'll see millions.

So the products are out there already. If you look at companies like Skims or companies like Gymshark or companies like, what is a good example, Fashion Nova, for example. We probably have put a dozen stores on Shop that are already live on these agentic applications. And effectively, running all of those things, UCP. The catalog has been fully built, which, again, provides an aggregated every single SKU on Shopify price, an aggregated collection and delivers them to all these agentic tools. So this thing is ready.

I think what you'll probably see in the next 1 to 2 years from Shopify perspective is you'll see more agentic source GMV happen. I mentioned this on the earnings call, but maybe it's worth repeating. If you look at traffic to Shopify stores coming from agentic applications, if you compare January 2025 to January '26, it's about 15x. It's on a very small base, but you're already starting to see these thing begins to grow quite a bit.

So I think in the next year or 2, you'll see more agentic source GMV, you'll see tighter integrations from Shopify to all the agentic players and you'll see our own products develop even further back to that moat that I was talking about that proprietary data moat, things like Sidekick will get even better. So it will be able to predict the first thing that a merchant should do and the tenth thing that they should do. It will predict where they should advertise. It's going to predict what the next product you should sell to any customer.

So I think while it's still very, very early days, the ramp-up of this is unlike what you described with social commerce, which I think took a little bit longer. Social commerce ended up becoming more of a discovery engine rather than a checkout tool. But what we're trying to build is this real -- this antifragility in that whatever permutation ends up becoming the standard for Agentic commerce, Shopify and our merchants are best positioned.

Yes. And Keith, the only 2 points I'd add to Harley's comment. Part of what we're doing is agentic is enabled by catalog, right? And we set catalog in motion more than 2 years ago. It's also enabled by Sidekick, which we set in motion more than 2 years ago. And I think that's one of the things that we've done for a very long time is be able to kind of look around 2, 3, 4 corners, see what merchants are going to need and then start building that before people even realize they need it. And so everything that we're going to merchants right now in terms of the agentic plan is a combination of all these things.

It also helps on the agentic side. The fact that I think we've become the core partner for so many of these -- so many of the most important genetic application companies is because rather than showing up with a presentation or some sort of documents, we show up with a working prototype. We showed them catalog years ago. We showed them agentic store fronts years ago.

We started building UCP last year, and we announced it on stage with Sundar at Google in January 8 at NRF. So a lot of the things you're seeing now, yes, we're only starting to talk about it now, but we've been building these rails for 2 to 3 years.

Right. So product catalog, I think, is relatively easy for us to understand. You guys are presenting the products of your merchants in a way that agents can -- will discover and kind of utilize in their algorithms. UCP is a little bit more complex. Can I start with a dumb question? In terms of 15x increase in overall agent e-commerce, but UCP only rolled out in January of this year. Like how was the transaction taking place last year, right, that you're 15xing against? And what is UCP change in that? Like how does that evolve that agentic transaction for the end customer?

So if you go back 6 months ago, and any of you using any agentic application typed in looking for sneakers, you would effect you see a photo, which would then click into the online store. It was very rudimentary. I didn't talk about any of the attributes of it. So one of my favorite stores on Shopify is AG1, Athletic Greens or another good example may be ButcherBox.

These are incredible businesses on Shopify that have been built -- they're category leaders. But if you actually look behind the curtain of these businesses, the subscription side of it is incredibly sophisticated. Some people doubled their subscription 1 month or if they're on vacation, they may want to pause it. They may decide that they want to purchase in the loyalty program. In other cases, there's bundling, for example. So if you bought this particular product, you may also want to buy these products.

The original iteration of Agentic commerce didn't anticipate any of those nuances and actually, commerce on the agentic application has to feel as rich as on the online store. And so we built this protocol with Google because we felt that what was missing from the discussion was the experience. It's not just about a checkout or a credit card of transaction. It's actually but all the other attributes of it.

Another example would be discounting. If there are merchants who feel a particular time of year they want to add a coupon code or I mean, loyalty is massive for a merchant in about Alo or Vori or On Running or some of these great -- Mattel, for example, some of these great Shopify stores their loyalty programs are a huge part of their business. And without a proper protocol that anticipates the actual nuances of commerce, it becomes just a dumb transaction.

And so we feel like our positioning, again, we have 14% market share in U.S. e-com, the only check out larger then Shopify in America is Amazon. We feel like we had a position in the -- we were in a position to go ahead and build a protocol to better anticipate what commerce will become when it's fully fledged on agentic.

Got it. So UCP enables you to really take the richness of the commerce transaction that you've already enabled on the merchant's site and bring that into ...

And then open the sources. So even if you're not on Shopify, you can be used there. And actually part of -- that's the position we've always taken. Even when it came years ago when we were beginning to see what was happening with things like Stablecoins or some of the new payment transactions that were happening, we've tended to always been at the forefront of it because we simply understand commerce in a deeper way. And I think that gives us the right to at least go to the table and say, we think this is the way it should be done.

Got it. So OpenAI and Stripe came out with an ACP or Agentic commerce protocol. Can you help us understand UCP, is it a competing standard versus ACP? Can the 2 work together? How should we think about that dynamic? And on multiple, I'm thinking back to VHS Betamax not very many people in the room understand what that is. But like is there a potential for competing standard to potentially freeze the market and as we understand how like these are going to be built in the future.

Yes. No. From our vantage point, UCP is -- they're not competing standards. And I think to a large degree, in terms of where commerce is going to go or agentic commerce is going to go there's going to be essentially an evolution of morphine and kind of where these are headed. Because as you know, one of the things that Shopify has always done a really good job and Harley just touched on it, is anticipating where commerce is going to go, anticipating what merchants are going to need -- and we want to make it sure it's as easy as possible for them to do this.

So they don't have to, for example, deal with a bunch of different competing technologies if I'm getting a lead from this channel or lead from that channel. That's not what we want. We want it to be easiest possible for the merchant to get on the Shopify admin, their dashboard run all these transactions, see side by side, all the analytics and make commerce -- Agentic commerce as easy as possible.

These things are going to converge. I mean that's the simple way to put it. There's going to be a bunch of products that come out and they will eventually all converge and eventually, they'll be open source in this way, that will be the new language, for every agentic service talk to every single merchant. And what we're bringing the table is, we think, a much richer version of that. But we like the ACP, UCP and if there's another protocol that's going to eventually be created, these things will converge in very, very soon.

Got it. And are you currently having those conversations with your customers, do they understand the progression of these protocols?

Merchants don't care about that. They don't want to hear about open source protocols. They don't even know what ACP might be or UCP might be. What they want from us -- what they're hiring -- what these millions of stores are hiring Shopify to do is to simplify all these things. If this was 30 years ago, we would -- it would be brick-and-mortar. That's what the business would be. We've helped with that.

Now online store, e-commerce, it's still sub-20%, but it's obviously growing very, very fast. It's now a big part of all retail. Then you add social commerce. Then you add the ability to cross-sell and marketplaces. We integrate with Amazon and Target to make it really easy to push products to different service areas. So the idea should be over time, depending on your particular brand and your particular business, you should sell on every single service area where your consumer is spending their time.

We have a Roblox channel where -- which most of our merchants are not actually using. But some of our merchants are seeing a ton of growth in the Roblox channel because their particular consumer is spending time there. And how do they access it? In the Shopify Admin, they go to the list of channels and they click Roblox and now they get to push products there. When a product is sold in Roblox, it's fed back to the Admin.

So we are -- the business is simplifying all these things. And that's what we're trying to do with the agentic -- excuse me, with the agentic storefronts with UCP. We want to make it so that the merchants don't have to think about that. And I think that puts Shopify in a position. I mentioned in last earnings call that we brought in some really big brands lately, brands like Estée Lauder, for example, or Birkenstock for example, or Starbucks and Burton.

When I meet with the CEOs of these companies, when I met with Stéphane, who's the CEO of Estee Lauder, the main question that they ask of us is, will you future-proof our business, meaning I don't want to have to migrate ever again. And the answer to these incredible merchants and retailers for me and from Shopify is unequivocally, we got you. Whatever happens, whatever permutation happens, you are better off with Shopify than anywhere else.

Yes. And the only point I'd add, Keith, too, is just think about from a -- when you think about a macro investment thesis or kind of high or low investment thesis, Shopify has always had its strength in online commerce. And everything has happened with UCP, everything that's happening with Agentic commerce, probably at a minimum, continues to help drive the percentage of commerce, which is online from 20% to some higher number. And so to the extent we can help merchants do this, and there's a bend in the slope of the curve in terms of how quickly we see online commerce happen that plays right to our strengths.

Yes. So we did -- in conjunction with our retail analysts and our Internet analyst, we did a big deep dive on Agentic commerce. And we came to the same conclusion, right? That Agentic commerce is going to shift more commerce into online channels. In addition to that, we did a deep dive on Shopify and Shopify's role in that. And that's what kind of we came away with. Like this is a positive for Shopify in terms of GMV growth, right?

This is going to inflect the opportunity, inflect the TAM in terms of online retail, but also Shopify tends to gain more share when we get to these like kinks in the curve. I think investors are still worried about the economics of these transactions when it comes to Shopify. And so 2 questions in there.

Like, one, is there more to the economics for Shopify and the upside in terms of stuff like take rate that we're not thinking about in our analysis? And two, are there risks on the other side of the equation? Is there -- and specifically, I think the risk people are most worried about, is there a potential that the transaction comes up into the agent layer, right, that you guys no longer are conducting the payments behind that because that's been a big part of the take rate story for the past decade for Shopify?

Yes. I think it's all take in 2 pieces. One is the attach rate and 2 is just kind of how we fit within the transaction overall. We still are fundamentally the only ones really building the commerce stack for the merchants. And commerce by definition, still need to involve a transaction. We as consumers are going to buy something. We're going to buy it from a merchant. And whatever form we do that with the merchant, we are providing the tech stack for the merchant.

So whether you're going to the website, whether you're going through an agent, however, you may do it, we're still the ones that are providing them everything in terms of all their transaction history, their payments, their inventory, their shipping, Shop Pay, all that context is something where we have essentially built through the combination of all these things, Harley alluded to the 3 most earlier, and it kind of comes back to this in terms of how we think about everything that we can do for the merchant and therefore, capture the economics, which we think are deserving of kind of what we're doing.

Part of the reason also that I think a lot of these agentic applications want to work with us is, yes, they want to work with this because of the catalog because we have the products that every consumer wants from every one of your favorite brands, pretty much everyone who's wearing sneakers here, those brands are being sold on Shopify. So that's part of it. The other part of it is the trust factor. Part of why Shop Pay is so popular. It's so well penetrated is not because we force it or defaulted on. It's because it is fundamentally the highest check -- the highest converting checkout, the highest trusted by consumers, if you look at unaided awareness, we have like Shop Pay is successful based on merits.

And so we actually think part of why these agent applications want to work with us is for things like our checkout is for things like Shop Pay is for the catalog as well. To answer your question directly, the economics whether something is sold on a marketplace or in the online store or even on something like an agentic application, the exact same thing to Shopify.

In fact, we think, as Jeff mentioned, we can see a higher increase in GMV because now this new service area exists. But in terms of checkout on directly in chat, the way that social commerce actually happened was everyone anticipated that the checkout would happen directly in Instagram, which we were powering. In the end, it turned out that social commerce was a great discovery tool, but the checkout still happen in the online store. We were indifferent to where that was going to happen because we powered the check same thing on agentic.

We're agnostic to whether they check out directly in the agent tool, we're powering that. It doesn't bypass Shopify check out, it flows through a checkout or if they just use it as a way to find a new brand and then they go to the online store afterwards, and they use Shopify checkout natively in an online store. It's agnostic to us.

Got it. I want to shift gears and talk a little bit about genetic plan. So this is 4 brands that aren't currently on Shopify. You enable them to syndicate their product through these AI surfaces and it feels a little bit like a top of funnel most marketing initiatives for Shopify there, you're getting people into your ecosystem, enabling them to sell -- or potentially you to sell them eventually. What's the go-to-market strategy for agentic plan? How do you get this into the marketplace? And how difficult it is for particularly the larger brands to engage with something like agentic plan?

Part of the reason that we created commerce components, as I think fortunately, you invited us on stage here a couple of years ago to talk about that, Keith. There are some brands in the world who -- very large retailers, traditional retailers, Hunter Douglas, which 1919, Mattel, 1945, Birkenstock 1776, plus or minus a few years, who want to sort of come to Shopify, they want to migrate to us, but maybe they not ready for a full migration yet.

Years ago, we did this experiment where we did the thing called Shopify Commerce components, where we took all the different parts of Shopify, checkout, our inventory engine, Shop Pay, all these different sort of tools and modules inside of Shopify, and we said, we actually, you can pick any of them on their own. What we noticed was it was a really wonderful from a go-to-market perspective, it was a great way for us to start conversations with brands who may not -- might not otherwise have been ready to move to Shopify.

We're doing the exact same thing with agentic plan. We think that now there are -- almost every retailer are -- I'm on the board of NRF with the largest retailers in the world. Every one of them has told me that their board, their executive team is asking them what is their vision, what is their strategy for agentic when it comes. And so we wanted to basically show up to the market and say, even if you're not ready entirely to move to Shopify, just start with the agentic plan now. We can help you syndicate your products right away, right now with all the merchandising information and all the attributes of the product you require to these agentic tools.

Ultimately, what we hope will happen in a similar vein to the commerce components is that starts a commercial relationship. And ultimately, they do a full migration to Shopify. So that's the -- that's where we're going with the agentic plan. It's being rolled out right now. The go-to-market strategy is that we're being very loud about it.

But we also have this massive funnel of merchants that we know have wanted to talk to us about agentic, but weren't ready maybe an entire forklift upgrade. And we think the idea is to help them get started early and fast, but eventually, how do we help them fully migrate to Shopify, which has been incredibly effective on the commerce component strategy.

Yes. And the only thing I'd add is it's in their self-interest, and make sure that they use catalog because why would you rather have someone go in search and find something which is maybe a screen scrape versus they actually go, they do a search, it connects back into the Shopify catalog and everything that the merchant spend time on in terms of the product images, the descriptions, the specifications, all that stuff is captured in the way it was intended to by the merchant. It's just a better solution for them.

Got it. Got it. And then can we look to any historical analogs like perhaps Shop Pay, right? Like it's something that you push out to either -- even non Shopify merchants as a potential indicator of conversion rates or what we should expect on conversion rates of taking these agentic plan customers and making them full Shopify customers?

I mean I think ultimately, agentic will operate similar to the Shop Pay commerce component or the checkout component as well, whereby, in some cases, there was an era of retail and commerce and Keith, you said this as much as I think anyone in this room has where they believe their unfair advantage was building their own stack. That part of the reason they were able to substantiate their multiple or their valuation was they were -- we are a technology company and a cosmetics company. That area is over.

There is no cosmetic company, most of them are on Shopify, the ones that are not, we're in talks to who believe that their unfair advantage is having their own homegrown commerce stack. So I think we're past that point where people believe that to build it themselves. And to be honest with you, a lot of the enterprise -- the traditional legacy enterprise software companies are not doing a very good job keeping up, that's an opportunity for us. We see this wedge, we're taking it.

And part of the way we're able to take it is to say, the migration might take in some cases, 6 to 12 months if they have a lot of ERP integrations and supply chain integrations to do. But what if we can get you up and running within 3 to 4 weeks, simply getting you syndicated right now across every agentic application. That is a very compelling pitch to make.

Over time, we over deliver for them. And now we get to go back to them and say, if you like what we did with your agentic plan, we do you see we can do with point-of-sale or helping you build a much faster online store or helping you with the Shop app, for example, you're not in there, you should be. So I think the way that you're talking about it in terms of the metaphor of Shop Pay to agentic plan, that's the way we think about it also.

Let me double that there for a second. In that -- a broader investor concern right now is cogeneration tools, right? And the ability to use these solutions to develop much more quickly, much more customized to your specifications and then exactly what you want. So why isn't this the easiest time for these brands to say, "Hey, listen, we could create exactly the front page that we want. We can create exactly the experience that we want." Because we have these cogeneration tools, and it's now just so easy for us to develop this ourselves rather than having to rely on a partner and pay rents to a part like Shopify.

It's a good question. Look, for years, basically, since the beginning of the company since I've been the company for almost 2 decades, you could replace Shopify with an open source e-commerce widget plus some sort of payment provider plus some sort of point-of-sale instance plus some sort of cross-sell marketplace tool, you were asking merchants to do the thing that is the opposite of what they're all looking for. You are pushing complexity to them.

At the enterprise level, no enterprise wants to vibe code to check out. They want to actually have the greatest checkout, highest converting most secure on the planet. They want to be able to do -- we power flash cells for Supreme or for Taylor Swift or for the largest brands in the planet. They don't want to vibe code a checkout that falls apart within the first 5 minutes. So the enterprise, they're just not -- they're not looking to cobble together a bunch of single-point solutions and create their own version of it.

And then even at the small business side of it, you could have very easily probably for the last 1.5 decades, use any of the CMS tools, any of the content management tools to create your own version of an e-commerce widget. It is no concept of inventory. It is no concept of loyalty or e-mail marketing or supply chain or taxes or any of the things that you actually need. And so the reason that no one has actually built a large-scale store on any of these CMS because that's not what anyone is looking for.

So could you replace Shopify with a bunch of vibe coded tools? You could. But that -- then you're pushing exactly the opposite of whatever wants, you're asking them to effectively become human synchronization tools. That means they don't get into the right agentic tools. It means they can't fully integrate into Spotify or Roblox or Pinterest or Snap or any of the channels that we power.

It also means you don't get things like Sidekick, you don't get things like SimGym So for $39 a month, you get everything you need and you don't have to vibe code it yourself. I think from a value proposition that is very, very compelling. And that's the reason why I think even well into this kind of vibe coding era, you're not going to see people cobble together 5 different systems and effectively become that human synchronization tool.

Got it. I opened up the conversation talking about the majority of the investor conversation or the investor concern coming out of the most recent quarter was on Agentic commerce. There was a little bit of conversation on margins. So bring that into the conversation as well.

Finally, something for Jeff.

Finally, something for Jeff. So you guys delivered $2 billion in free cash flow in 2025, 17% free cash flow margins. How should investors be thinking about free cash flow margins into 2026? And how are you guys thinking about that trade-off between the potential of driving more margin expansion versus the big nascent opportunities that you're seeing with Agentic commerce and the expansion of the business?

Well, I guess in reverse order, I mean, our financials, and this has been for 3 years now where we basically have been delivering this top line growth and these free cash flow margins in an even quarter have kind of been in the mid- to high teens to low 20s, which is obviously what we've seen in Q4 and a lot of quarters. And so what you'll see from us is that continued as we think about the balancing of the 2, right? We've not suffered in any way, shape or form in terms of our ability to invest in the future.

You see this in additions, which we do twice a year and all the great products we've continued. And even as head count has come -- stayed flat to come down, we've still been able to crank out this many products, deliver this top line. There's not -- and I talked about this a little bit on the call, there's nothing in terms of how we think about it this year, that's any different from last year or the year before. We fundamentally think we've got a very good balance between delivering these margins and continuing to deliver this GMV growth rate, this revenue growth rate, this gross profit growth rate that we've talked about.

In Q1, I mentioned a little bit that there were some tax dynamics in Q1. But for the year, and I was very explicit about saying that's an intra-quarter dynamic. There's nothing for the year that we look at and say this is any different than the excellence we've been able to put forth the last.

I'd also say just on the head count thing, I know that that's sort of the -- I don't know if that's the topic of the Morgan Stanley conference or not the head count in. I know there's talk happening around the corner from here on a company that's making some big changes. Shopify has not been growing headcount. In fact, just to Jeff's point, for the last 8 or 10 quarters or so, headcounts actually come down. I will also say, at the same time, the head count is coming down.

This is -- and I say this with -- like with reference for the fact that I've been around for so long at Shopify. This is the highest quality talent team we've had the talent density of this company is as high as it's ever been. And we think we can continue to do this really incredible top line growth and provide $2 billion of free cash flow and invest in all the right places. I mean, for anyone that follows our addition releases, which is our product releases, which we do twice a year, these big events, if you look at the pace and just the velocity of product releases on a biannual basis, it's unbelievable.

And we're doing that on a team that's gone -- we're below 8,000 now. So we've taken our medicine over the years. And I think the iteration that we're in right now is very strong, super high talent team, grow top line, 30% or so, $2 billion of free cash flow. That allows us to invest for the next 10 or 20 years and really not just take part of this agentic new era, but actually lead this agentic era.

Got it. So we focused a lot of the conversation on the agentic commerce part, but there's a lot of other innovations. What are the other 2 or 3 kind of product innovations, Harley, that we should be focusing on in 2026 that you think it start to really move the needle?

I mean I think we talked about agentic, but we really talked about it from the consumer side, generally, at least in the last 30 minutes or so, which is really the consumer side of how they purchase. I mean, anyone who's not paying attention, what Sidekick has built is truly unbelievable. From an entrepreneur perspective, from an enterprise perspective, I was in L.A. this past week meeting our largest merchants and just showing them like on their own, tell me -- ask a question, like as your largest customer, your individual customer and now ask Sidekick what you should sell the next.

And the ability to get this data at this incredible pace, not just that it makes so that when we have a new feature that we think they should adopt. Sidekick Gives us an amazing tool to push product to them. So I think Sidekick is one of those things that doesn't get a lot of attention, but is incredibly important. I think what we're doing now around point of sale. We still have a lot of merchants on Shop app who don't use point-of-sale who should. Most stores and all of you walk into physical stores. When you look at their cash register and you look at their point-of-sale system, it is like -- it's terrible.

We think it's a huge opportunity. The stuff we're building internationally, this idea that when you sign up for Shopify, you were default global, you should sell across every country. We think it's a really, really big, big opportunity. And maybe the last one, some of the stuff that we're doing around Shop, the Shop app itself, if you -- if any of you that have been tracking it, for the Black Friday, Cyber Monday weekend of the 4-day weekend of 2025, not just in the shopping category across every category, the #2 app was a Shop app.

So the Shop app is not getting a little bit better. It's getting way better. It's becoming a lot more consumers' favorite place to purchase and it's an owned property of ours. And so those are some of the things, I think, that are -- we still have not fully recognized the opportunity there, and that's what the teams are focused on.

Outstanding. Amazing piece of innovation coming from Shopify, amazing execution was make Shopify best athlete for our Morgan Stanley research. So I appreciate you guys coming in sharing the story.

Appreciate it.

Thank you to you both.

Good morning, and thank you for joining Shopify's Fourth Quarter 2025 Conference Call. I am Carrie Gillard, Director of Investor Relations. And joining us today are Harley Finkelstein, Shopify Vice 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, are 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. 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'll also speak to adjusted financial measures, which are non-GAAP and not a substitute for GAAP financial measures. 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. dollars unless otherwise indicated.

With that, I will turn the call over to Harley.

Thanks, Carrie, and thanks to everyone here for joining us. We've got a lot to talk about today. First, we'll talk about 2025. It was another year of durable growth, faster product shipping and disciplined cash generation. We'll also talk about Q4 in particular, which delivered the highest quarterly revenue in Shopify's history and saw huge names from across all industries join the platform from General Motors to Sonos to L'Oreal to the Benetton Group, to Keurig Dr. Pepper, to Amer Sports, who owns incredible brands like Wilson, Solomon and Peak Performance, all moving to Shopify. And we'll talk about where Shopify is heading in 2026. But before we get into the details, I want to start by doing something a little bit differently this time because this year is not like any other year. I want to repeat something that Tobi said back in May 2015 on the day that Shopify became a publicly traded company. He said this, "Shopify will be the only platform needed to build an empire. By the time we're done, we will have created the new normal. Well, don't worry, we are far from done." But this quote perfectly captures both where Shopify is today and what you can expect to see from us next.

Let me explain. Tobi said, "Shopify will be the only platform needed to build an Empire." Well, we believe that 2025 market inflection point in that goal. Empires are now being built every single day on Shopify. Brands like FIGs and Jim Shark and Skims that were all born on the platform, hit over 1 million orders well inside of a decade. And then there's some like comfort that have done it in less than 5 years. That is remarkable. Tobi's vision might have sounded bombastic in 2015, but a decade later, it is reality for millions of entrepreneurs. Now in that same quote, he also said, by the time we're done, we will have created the new normal. Well, 2026 is about to show the world what he meant by that. The AI era has now reached commerce, and you're about to see what that looks like at scale. You're seeing the start of this new normal. And when Tobi said, we would be the ones creating it, he was not exaggerating. Shopify was built for this moment. No one, and I mean no one is better positioned to lead in this new era.

We've spent decades of building the infrastructure that allows every type of merchant to thrive. We have trillions of data points from billions of transactions across millions of merchants. Simply put, we believe we have a more diverse commerce data set than almost anyone else on the Internet. And of course, data is what AI is fueled by. This is an enormous advantage, and it's also a real responsibility. And it's not one we take lightly. You may have seen that we just announced the Universal Commerce Protocol, or UCP, that we co-developed with Google. That means that we are literally setting the standard on how the world will shop with AI.

We've also added more integrations, so our merchants will be able to sell on every major AI platform. And we've launched a product to power AI shopping for brands that aren't even on Shopify yet. As you know, Shopify will always bias towards long-term sustainable growth. And we are not afraid to make big bets where we see opportunity. Well, that's what we did here. And this year is when those bets show up. More on that in a minute. But first, let's get into the results we drove in 2025.

I'm going to talk a lot about growth here because first and most importantly, we are a growth company. And second, growth across all areas of our business in 2025 has been remarkable. But here's the thing. It was not growth at any cost. We grew profitably just as we said we would, and we scaled with discipline. Our free cash flow exceeded $2 billion in 2025, delivering another year of consistent free cash flow margin. This is what building a generational company looks like. Now here's the headline. In 2025, GMV was up 29%, hitting $378 billion and revenue topped $11.5 billion, up 30% accelerating from 2024's growth of 26%.

Now let's pause on that for a moment because putting up these kinds of top line growth numbers at our size is incredibly hard, and it is not common. And we have been growing at this rate for as long as I can remember. In fact, since we IPO-ed in 2015, we've grown our revenue over 20% every single year. That is what durable growth at scale looks like. And that scale is consistently compounding quarter after quarter. Q4 was our first ever quarter of revenue above $3 billion. That's more than all of our revenue in 2020. Let me repeat that. We just did more revenue in a single quarter than the entirety of 2020. Our growth philosophy is simple and effective. We win more merchants to sell for. We build more services from to sell on, and we attract more buyers for them to sell to.

And here's how that played out in 2025. Revenue in our largest market, North America, was up 28%, and we now power more than 14% of the U.S. e-commerce market. We welcome huge names like Estee Lauder Companies, Starbucks, Coach, Michael Kors, Burton snowboards, e.l.f. Cosmetics, Toys "R" Us and Goop and new merchants continue to come from all corners of commerce from [indiscernible] education who manages campus bookstores across America to the iconic snack brand Welshes and even the sports betting company, FanDuel.

That is a seriously diversified mix of brands. And our international merchant base grew even faster. Revenue was up 36% year-over-year and nearly half of our merchant base is now located outside of North America. We welcome huge global brand names like Caring Beauty, which is the Beauty division of Alexander McQueen, Balenciaga and Creed, Karl Lagerfeld, Mila, JW Anderson, Stoka and UGG Australia plus new signings from names like L'Oreal and Topshop in Q4 alone. Our off-line channel revenue grew 27% to $748 million with iconic brands like Tom Ford, David's Bridal and Aldo choosing Shopify to power their physical retail locations. 2025 also saw serious traction in the B2B space. GMV from B2B merchants was up 84% in Q4 and 96% in 2025. We signed B2B giants like Century old industrial manufacturer Sunin and we grew our existing merchants like [indiscernible], who brought their B2B side of the business over to join the D2C side, now all powered by a single platform, Shopify.

And we're not just seeing growth from new merchants during the platform. We're also helping our existing merchants continue to sell more. In 2025, GMV grew 29% year-over-year. And that's not just being driven by a few top performers. We saw huge traction across the entire merchant base. So that's a story of 2025, bigger, faster, more global and more durable than ever.

Now let's move into 2026. You'll hear me talk more about the future than I usually do on earnings calls. And that's because we have been quietly building for this moment for years. Last year, we talked about helping merchants to sell everywhere and to operate smarter. Now that is still our focus in 2026, but it is now being supercharged by AI. Let's start with selling everywhere. As I said earlier, when we think about selling, we think about 3 things: more services to sell on, more buyers to sell to and more merchants to sell for. Well, as you know, 2026 is unlocking a huge new service area, AI shopping. And what I hope you've come to understand about Shopify is that we think in decades, not in quarters.

Well, we've been building for this new era AI shopping for a long time, and it's now here. In fact, since January 2025, orders coming to Shopify stores from AI search are up 15x. Now that's on a small base, but that's still a really big jump in 12 months. And this matters for our merchants, it matters because it powers the long tail of commerce, servicing smaller merchants to the right buyers who might otherwise have never discovered them.

This is a merit-based discovery at scale. For buyers it matters because it's like having a personal shopper in your pocket, someone who really understands them, their taste, their preference, their size. This used to be a luxury, but now it's available to everyone, 24/7. And for Shopify, it matters because we believe it can bend the curve of e-commerce penetration by stripping out friction, pulling late adopters in and moving more everyday purchases online.

That's the tide we're building for, and we're ready to turn that macro tailwind into share gains for our merchants. But here's the thing. Commerce is complex, it's dynamic, and it's also easy to get wrong. It's so much more than just a transaction. It's a leather goods brand like Parker Clay offering monogramming. It's a furniture brand like Borough offering white glove delivery or a nutrition brand like Butcher box offering subscriptions. It is critical that shopping in an AI conversation is at least as good as shopping at the merchants online store. And no one, and I mean no one understands this like Shopify because we spent 2 decades mastering this complexity. So this is a lot more than this new surface area for us.

This is a transitional moment in Shopify's history. We are now designing the new normal, just like Tobi predicted a decade ago. and it will fundamentally change our position in the world. Now remember, last quarter, when I said on this call that we were laying the rails for agentic Commerce. Well, here they are. First, Shopify agentic storefronts syndicates billions of products through our catalog to all major AI platforms. Google AI mode in Gemini, ChatGPT, Microsoft CoPilot, one click and our merchants get instant access to millions of potential buyers who are actively looking for their products. We've already seen huge brands like [indiscernible], Galasier, Steve Madden and Spank sign up and start selling plus through the catalog, our partners get the most accurate up-to-date data for billions of products for millions of the best brands on the planet.

And this is really important because when they tap into our catalog, they're not just ingesting another feed they're plugging into the best commerce source of truth. And that source of truth means cleaner matching and fresher data, which translates directly into faster and more trustworthy experiences. The new agentic plan means that any brand not already using Shopify will soon be able to sell through the same AI platforms as our merchants as well as on the Shop app.

Why? Because, frankly, when commerce flows freely across agents, everybody wins. And here's the one that matters most. I just said that commerce is easy to get wrong. We care that the world gets this right, Shopify Merchant or not, partner or not. So we built a universal Commerce protocol, or UCP's infrastructure. It's not a product. It's the common rails agentic commerce runs on. Shopify co-developed this with Google because we know commerce better than anyone. It's an open standard for any agent to connect with any brand on the Internet.

UCP is built to flex to the many ways commerce happens. It's payment agnostic by design. It keeps the merchants essential checkout logic intact without forcing them to rebuild their customizations over and over again to fit our system. UCP is the only protocol that covers the full commerce journey, end-to-end, from search to cart then checkout to post order. And it's already being used by the world's leading retailers. Put simply, Shopify is foundational in powering the commerce layer of the AI era, and we're just getting started. If the rails were being late in 2025, what now? Well, now we scale what runs on them, more merchants selling in AI conversations that run on Shopify infrastructure. In fact, if Commerce has a sand barrier, these rails have what it takes to help merchants break through it. More velocity, less drag and what could be a faster path to scale than what's ever thought possible. Just like Tobi said, this is the new normal, and we are creating it. Now beyond the world of AI shopping, another service area that we will continue to grow in 2026 is off-line retail. This year, we'll continue to lean hard into speed and simplicity, staying focused on our strength, which is software like bringing subscription product to in-store, helping to drive recurring orders or our partnership with Verifone, making our software available on their industry-leading payment hardware. And this all rolls up to our unified commerce philosophy.

One platform, one catalog, one customer record personalized everywhere, a buyer taps or clicks. Here's the bigger picture. We make it fast, easy and intuitive for merchant reach buyers everywhere, whether that's online, an AI chat or in person. Okay. We've talked a lot about new service areas for our merchants to sell on, but we're also expanding their reach to more buyers. In short, we help merchants drive demand, and then we help them convert it. This is where Shop, our consumer-facing side of the business comes into play. And where in 2026, you'll see the shop flywheel really start to turn.

First, demand. In 2026, Shopify will power multiple ways for buyers to discover our merchants from the Shop app to shop campaigns to the new Shopify product network. Let's talk about the Shop App first. With the Shop app, we are completely reimagining how the discovery process works. Instead of having to seek out products, which normally looks like sifting through hundreds of search results, shops home feed delivers tailored content. Think curated drops, exclusive offers and interactive experiences from our network of brands, all matched to the shopper's interest. It meets consumers wherever they are, whether they're actively browsing or casualty scrolling, making Shop the definitive destination for discovery.

Next, let's talk about Shop campaigns, our advertising product, which is really starting to gain traction. In 2025, Shop campaigns revenue doubled and merchant adoption tripled, metrics we will look to build on in 2026. Shop campaigns is a merchant-first high-intent network native approach. We're giving merchants big platform reach without the risk. They only pay when a customer converts, no sales, no spend. And we've now added X, Snapchat, Bing to join Google, Instagram and Facebook, so our merchants can advertise with 0 risk across 8 channels, including the Shop app and Shopify store fronts.

And finally, the Shopify Product Network. The Product Network is an opt-in app that uses Shopify's data network to automatically surface relevant clearly branded products from other Shopify stores on a merchant site, widening selection with an extra inventory or operations. Merchants can choose where recommendations show up, whether that's collection pages, product detail pages, search results, cart or the post purchase page. And if the shopper buys the product, the host merchant earns a commission while connecting another merchant with a new customer. It gives buyers more choice, it helps merchants grow. And ultimately, that fuels a very powerful ecosystem.

So all that creates demand. And as I said, we also have merchants convert that demand with trust, enter Shop Pay, which is fast, trusted and increasingly everywhere. 2025 saw Shop Pay become even more of a trust marker for buyers on the Internet. In Q4 alone, it processed $43 billion of GMV and powered over 50% of Shopify's U.S. GPV. Think about that, more than half of our U.S. payment volume in Q4 flow through Shop Pay. That is serious adoption. In 2026, we expect to see Shop Pay earn more services across the Internet, delivering better checked conversion rates and a great post-purchase experience as well as driving repeat purchase through the shop out. That's the Shop flywheel. Our discovery levers create intent, our trust markers convert it, then the ecosystem sends buyers back to the Shop app, which drives even more discovery.

Okay. So we've talked about new surface areas to sell on. We've talked about more buyers to sell to. We're also unlocking more merchants to sell for. Our goal is that any merchant on the planet can sell to any customer on the planet with no friction. To make that possible, we will continue to focus on building products that are global from day 1.

Heading into 2026, we now have Shopify Payments in 60 new countries, a host of additional payment methods from shopping installments in the U.K. and Canada to expansion of local payment methods in Europe, U.S. DC Stablecoin is now live as the first built-in cryptocurrency option for Shopify Payments. We have Shopify Capital now in 8 countries, Shop tracking in more than 20 countries and AI-powered translations in 8 additional languages. And just recently, we launched Managed Markets 2.0, which is fully integrated to Shopify Payments, enabling the same payout speed as domestic payments along with more payment methods, faster payouts and more product compliance checks so that selling globally feels like selling at home, global mindset, global design, global traction and increasingly more ways to give our merchants the tools they need to succeed in any market.

Okay. We've not talked a lot about selling everywhere. But what gets a lot less attention than it should is how AI is helping merchants operate smarter. With AI, operating smarter is about leverage, making every task from mundane to the highly specialized faster, lower friction, so the teams spend less time on busy work and more on what matters. Product storytelling and their customers. And because AI is a resource multiplier, we're going beyond what was thought possible just a few years ago.

Put simply, the rules of what's possible are being rewritten in real time.

Let me share just a few highlights from the last addition to show what I mean. Our on-platform AI assistant, Sidekick has come a long lane year. Sidekick is effectively a co-founder for our merchants. It uses everything it knows about your business, and it proactively tells you which task to prioritize, and we will even help you execute those tasks. Because Shopify powers the store, check out data and apps, Sidekick can see the entire picture and do the work in one place. That is entrepreneurship leverage. And in just 3 weeks after our latest addition drop, Sidekick generated almost 4,000 custom apps, created over 29,000 automations with Shopify Flow, built almost 355,000 task lists and edited over 1.2 million photos. So it's clear that Sidekick is doing real heavy lifting for our merchants. And we're kicking this into high gear this year. Sidekick Pulse is our new feature that proactively helps merchants grow their business. It works in the background to surface tailored advice that's [indiscernible] in each merchant's business, powered by over 2 decades of data.

Let me give you one quick example. Last week, Sidekick Pulse made a recommendation to one of our jewelry brands. It suggested bundling 4 separate products and selling them together as a stack. Why? Because it knew that those 4 products were already best sellers, and it also knew that bundles tend to convert better and drive up [indiscernible] value. Personalized data analysis paired with intelligence gained from hundreds of millions of other transactions.

This is where our AI system really becomes the AI co-founder. It's bespoke, it's intuitive and it's unmistakenly Shopify. Here's another example. Our new app, simgym, simulates real buyer behavior to give you feedback on changes to your store before you even ship them. And within our online store editor, more than 0.5 million merchants have used AI to create 6.5 million custom elements. Now anyone can design without code. This is really Shopify at its best. Massive complexity transformed into a tool for anyone with imagination, no technical skills required. And all of this is in service of one simple goal, get more of our merchants from first sale to full scale. Their empires build their way at their speed.

Okay. I know that was a lot. But before I turn the call over to Jeff, let me just leave you with this. Remember what I said earlier that our merchants are about to break the Commerce sand barrier. What here's what that looks like. In 2026, a solo entrepreneur on Shopify, who might be launching a business from their moms kitchen table can access 2 things. Uncapped REITs through our agentic commerce rails and uncapped resources through our AI tools, reach and resources. Those have been the limiting factors for new entrepreneurs. Those formed the commerce barrier. And now they have the tools to break straight through it. And when you combine that with the human ambition that I get to see every single day, here's what I believe to be true. We are about to see more billion-dollar brands born in the next decade than we did in the last century. And our focus is on making sure that we will be the ones powering them.

And with that, I'll turn the call over to Jeff.

Thanks, Harley. We've kicked off 2026 with such a burst of product releases that it's easy to overlook some of the remarkable product and financial achievements of 2025. This is an incredibly exciting time and our role in Commerce makes us uniquely positioned to seize this opportunity. In 2025, our merchants faced daunting challenges, tariffs, the removal of de minimis exemptions, trade wars and the ever-changing geopolitical landscape have forced merchants to adapt faster than they ever thought possible. We worked hard to help them make those necessary pivots. We offered new products targeting customs and duties. We made available to all of our merchants products that were previously plan gated, and we expanded many of our products internationally, making it easier than ever for merchants all around the world to sell all around the world.

Our financial strength throughout 2025 is a testament to our merchants, with us working to arm them with all the tools they could need to be successful. When your mission is to make the complex seems simple, the magnitude and intensity of that hard stuff can get lost along the way. Shopify Power's entire businesses, not just websites, delivering reliable operations across checkout, payments, taxes, shipping, identity, fraud prevention and more. Our single platform spans online, point-of-sale, social, marketplaces, B2B cross-border and now AI-driven interfaces, unified by one inventory and customer record.

This reduces complexity and expands selling opportunities for merchants. As AI advances, Shopify becomes even more essential. AI transforms interfaces and accelerates the pace of change, but it doesn't alter the underlying architecture of commerce. Commerce will always require speed, reliability and trust at a global scale. When I say scale, consider the billions of transactions that we facilitate. But it's not just about the volume. It's the comprehensive commerce experience we support. When an AI agent services a product in any interface, merchants still need a reliable, secure and compliant path to purchase and post purchase. They still need our ecosystem of buyers, developers and partners. We help merchants be everything, everywhere all at once, representing over 14% of U.S. e-commerce today and rapidly growing percentages in many geographies across the globe, we have an unparalleled view of commerce.

Simply, we are the experts at commerce. AI will be a force multiplier that will help us achieve our goals of democratizing entrepreneurship, inspiring more merchants, driving more transactions and creating more commerce channels. We remain committed to investing in speed, quality and simplification, all the hard stuff that has compounded our success to date.

Now let's take a look closer at our GMV from various perspectives. Unless otherwise specified, all growth rates are presented on a year-over-year basis. Q4 GMV was $124 billion, marking our first quarter with GMV over $100 billion, representing growth of 31% or 29% on a constant currency basis. First, let's look at our cohorts. In Q4, our growth was led by the 2024 and 2025 cohorts, which have proven to be larger and more productive than prior cohorts, outperforming older cohorts in GMV and revenue after similar periods of time on the platform. While these newer cohorts are strong, they are only part of the story. That is what differentiates Shopify. The strength of the continuous growth of our cohorts over time, any given quarter's results are a stacking of the successes of our prior cohorts and momentum for future success.

Moving to regions. North America continued to deliver strong GMV growth in the quarter, surpassing our expectations, driven primarily by our Plus merchants. In Q4, nearly half of incremental GMV dollars came from outside North America. Our European merchants, in particular, topped off an exceptional year with Q4 GMV up 45% or 35% in constant currency. Growth was fairly balanced between new acquisitions and growth from existing merchants, a consistent trend across multiple quarters in all regions. We've achieved a scale and global reach that brings us where we now build to be global by default with so much international opportunity still to capture. In terms of channels, Q4 offline GMV increased 29%, and B2B GMV increased 84%. These channels continue to be important growth areas for Shopify, expanding access points into our ecosystem and broadening our addressable market to include more businesses and industries. The opportunities in both of these areas remain significant.

Finally, verticals. Similar to previous quarters, apparel and accessories, health and beauty, home and garden and food and beverage continue to deliver strong growth. Our platform is uniquely scalable for businesses of all sizes and industries, from auto parts to luggage, the pet supplies and kids furniture, covering every commerce surface. Q4 revenue was up 31% or 29% on a constant currency basis. Full year 2025 revenue was up 30% to $11.6 billion, marking the highest annual growth rate that we've achieved since the COVID-driven results of 2021. The strong GMV trends I mentioned drove this revenue growth with these results coming in ahead of expectations, largely from outperformance in North America. Europe continued its strength.

Within the Asia Pacific region, our merchants also delivered above expectations with Australia and New Zealand being notable standouts. Looking at the 2 components of revenue. Q4 Merchant Solutions revenue grew 35%, driven by the strength in GMV and increased penetration of Shopify Payments. $84 billion of GMV was processed on Shopify Payments in Q4, that's 38% higher than the prior year and 68% of GMV, 4 points higher than Q4 of 2024. As a reminder, Q4 is a quarter which traditionally sees the highest percentage of revenue from payments.

Subscription Solutions revenue grew 17%, driven by a larger percentage of subscriptions coming from higher-priced plans and higher variable platform fees. Q4 MRR grew 15% year-over-year, with continued growth in each of standard, plus and off-line. As a reminder, our year-over-year growth rate in MRR will continue to have comparability headwinds until Q2 of this year as our rollout of 3-month trials, particularly in our largest markets, did not occur until Q1 2025. With respect to plus MRR, Plus represented 34% of MRR for the quarter, up from 33% a year ago.

We continue to add more merchants supply from both upgrades of existing merchants and new merchants joining the platform. Plus MRR being relatively consistent as a percentage of MRR is a function of Plus continuing to grow, but our other planes are also growing comparatively well. We've seen the average GMV per merchant in Plus increase a good proof point that we are both scaling our existing merchants and adding larger new merchants. Q4 gross profit grew 25%, coming in slightly ahead of our expectations, driven by the outperformance in revenue. For the year, gross profit was up 24%. Gross profit for Subscription Solutions grew 18%, with Subscription Solutions gross margin coming in at 81%. The increase in gross margin was mainly due to a reduction in support costs as we continue to operate more efficiently as we scale. Merchant Solutions gross profit grew 30%, with gross margin coming in at 36.8%. The year-over-year decrease in gross margin was primarily driven with roughly equal impact from the mix shift towards payments revenue, decreases in third-party referral and transaction fees, which indicate that more revenue is flowing through our payments rails directly and the year-over-year impact PayPal had to our gross margin comparability, recognizing that moving forward, we have now normalized for the PayPal impact.

With Q4 now behind us, we have largely moved past the more temporary year-over-year comparability headwinds in our gross profit, like the changes in paid trials. Operating expenses were $1 billion for the fourth quarter or 29% of revenue. And for the full year, they were 35% of revenue. Both of these being 3-point improvements over 2024 levels. Throughout 2025, we achieved operating leverage in each of R&D, sales and marketing and G&A, largely due to disciplined headcount management. By leveraging AI, automation and our proprietary project management and talent management systems, we have been able to accelerate our product development capabilities without growing the size of the team.

On marketing, our approach remains unchanged, results driven within guardrails and focused on performance marketing. In 2025, we did increase the percentage of marketing spend devoted to our international efforts with roughly 40% of our marketing spend targeting markets outside of North America. We feel good about the effectiveness of the marketing work that we are doing based on the size of the merchant cohorts that we are adding. Transaction loans and losses, the smallest of our 4 operating expense categories returned in Q4 to our more consistent historical trend of equating to approximately 3% of revenue. As a reminder, the dollar amounts here tend to scale with volumes in our payments, capital and credit products, with the goal, of course, being the lower loss rates while we scale those products.

On last year's Q4 results call, I called out some significant milestones regarding both our operating expenses and our operating margin for both Q4 and the full year 2024 and noted that all 4 of those metrics were the strongest that we have achieved since going public over 10 years ago. We sit here a year later, and we have surpassed each of those milestones. Again, importantly, we accomplished all of this while accelerating our revenue growth. We increased our revenue growth by 4 points in 2025 and decreased our operating expenses as a percentage of revenue by 3 points. We have delivered significant leverage to this business. Q4 free cash flow was $715 million or 19% of revenue. For the year, free cash flow was $2 billion, a 26% increase achieving a free cash flow margin of 17%. The annual free cash flow margin in the high teens that we achieved for both 2025 and 2024, provides a financial foundation necessary to support our long-term vision and continue to drive the next generation of commerce, whether it's laying the groundwork for agentic commerce, enhancing Sidekick with deeper data insights and models, investing in marketing to drive merchant acquisition or expanding products internationally, all while ensuring core platform reliability that merchants trust.

As a growth company, we choose to invest in these areas rather than pursue higher free cash flow margins in the near term. Our strength in free cash flow margins brings me to the next topic. As you saw in our press release, our Board has approved a share repurchase program of up to $2 billion. This program builds on our decision last quarter to settle our convertible notes almost entirely in cash rather than using shares. Both of these decisions reflect our confidence in our long-term value given the ongoing momentum of this business and the financial results that we can drive.

We sit here today with a strong balance sheet and no debt, an improving track record of delivering free cash flow. We have delivered 10 consecutive quarters of double-digit free cash flow margin. And as you can see by today's results, the business is performing very well.

With that, let's move to our Q1 outlook. We expect Q1 revenue growth in the low 30s year-over-year similar to our Q4 2025 growth rate. This growth is expected to be driven by the same factors that we saw in 2025. Robust growth in payments led by Shop Pay, continued success of the merchants already on our platform, acquisition of more merchants of all sizes across all channels, strong international growth, especially in Europe and continued expansion of more of our products into more geographies.

Turning to gross profit. We expect our gross profit dollars to grow in the high 20s. The year-over-year gross margin impact versus Q1 of 2025 is driven by the continued mix shift between the growth rates of merchant solutions and subscription solutions, which is expected to narrow compared to 2025 and the continued strength of payments. We expect that our Q1 operating expenses will be 37% to 38% of revenues, reflecting a continued improvement of a couple of points from Q1 2025, which was itself down nearly 6 points from Q1 of 2024. The same factors that help us manage expenses well in Q4 should continue into Q1.

Finally, free cash flow margin. For Q1, we expect a free cash flow margin in the low to mid-teens, slightly below our Q1 2025 free cash flow margin. Q1 is typically our lowest GMV quarter, affecting both revenue and cash flow. And this year, we expect a slightly higher effective tax rate versus what we have seen in prior years. This tax effect will have some slight intra-quarter impacts to free cash flow, but we expect these will be mitigated on an annual basis. With that, I'll now turn the call back over to Carrie for your questions.

[Operator Instructions]

Our first question comes from Colin Sebastian at Baird.

I know you mentioned it's still very early for agentic Commerce, but that it's largely incremental to merchants and to Shopify. But I guess just to address a common question that we get, do you foresee any changes in Shopify's ability to monetize at a consistent rate on transactions that are running through AI surfaces and agents that ultimately run on UCP.

Colin, it's Harley. I'll take that first question. Just to be clear, I mean, we think that the -- the way we think about agentic is it's a new surface where merchants can sell to customers. In fact, they may be able to sell to customers and otherwise they may not be interacting with. But just to be clear, I mean, LLM do not bypass Shopify's checkout. And in fact, I think this is really where Shopify shines. The complex back end of commerce will always flow through Shopify. That is really hard to do. If you think about shipping or payments or inventory or analytics, I mean that is really the stuff below the surface that every merchant requires, and that's where Shopify shows up. Just in terms of kind of the monetization of agentic, the focus like any other channel is driving both merchant and then consumer adoption and then ensuring it's done really, really well. Part of the reason that we feel really excited by the UCP, the Universal Commerce protocol, is that commerce is complicated. We want to make sure that whatever surface, whatever permutation is the one that actually becomes the mainstay in agentic that it reflects exactly the experience that the merchants want similar to what they have in the online store as well.

And so the economics -- for Shopify merchant, economics are the same as if the transaction happened in the online store as well. There should be no difference there. But from a surface area perspective, it is new, it is emerging. It's obviously growing fast than on a pretty small base still, but it's a really interesting area for us. And it's important for us to Shopify that we are really at the center of everything happening when it comes to agentic Commerce.

Our next question comes from Ken Gawrelski at Wells Fargo.

Thank you so much. Two, please. first. Well, the first on the agentic side, could you please speak to how do you think of the ecosystem will develop? Just as you think about -- you gave some impressive stats on early adoption here. But can you talk about the key milestones maybe over the next 12 to 18 months to really accelerate adoption? That's question one. And question two is, as you think about additional opportunities beyond the core subscription and merchant checkout. Could you talk about opportunities for Shopify to monetize its capabilities in the e-commerce -- the agentic commerce enablement that you're offering.

Yes. Maybe I'll take that one as well. So let's sort of just be clear here. I mean, if you sort of look back 12 months approximately to January 2025, we've seen orders from AI searches up about 15x. Now that's obviously on a very small base, and it's still early days. But the idea for us was in 2025, laid the rails for agentic that then allows us to scale them in 2026. And I said this in the previous comment, but we had 2 decades of mastering this complexity of commerce, I don't think anyone is better positioned there. We already have merchants live. I mentioned Glacier and Spanks and [indiscernible] and Stanley is live. Steve Madden is live. So we've been really building for this for a very, very long time. I think one of the advantages for every merchant on Shopify is that everywhere commerce is happening -- to use maybe a racing term here, we are in pole position, I think, on agentic commerce. Now in terms of what we've done even just since the last call, we codeveloped UCP with Google, which now standardizes how these AI agents transact with any merchant. We launched that in early January. We also launched the agentic storefronts, which allows these merchants to very simply syndicate their products to Google AI mode, Gemini, ChatGPT and Microsoft Copilot. And we also have the agentic plan, which is for merchants who are not even on Shopify to allow them to syndicate their products as well, which allows us to begin a relationship with merchants, again, that are not currently on Shopify.

The key for us, though, is to keep building to make sure that the products that we're building become the standard across every single agentic application that merchants that are on Shopify already look to us as being the key partner as agentic continues to evolve. And then merchants that are not on Shopify, yet are having conversations in their board -- around their Board table, around their executive team saying, we need to participate in this. Shopify seems to be at the center of all of it, we need to begin a relationship with them. So that's kind of how we think about it. And part of it is just be too good to ignore when it comes to how this is going to evolve.

In terms of the revenue opportunities, I think you mentioned in your second question, look, Shopify's business model is almost beautiful in its simplicity, which is that we are on the same side as the merchant. When merchants sell more, Shopify makes more. That is the -- our business model is predicated on merchant success. And I know there's some questions around how the agentic commerce is going to evolve relative to e-commerce penetration of total retail. Does it have an opportunity to pull more people into modern commerce or digital commerce or otherwise, not. Perhaps, but our job is to be best positioned so that whatever permutation happens, whichever agentic application becomes the mainstay that our merchants are best positioned. And I think that is -- I think so far, we're doing a really good job of that.

The next question comes from Shweta Khajuria at Wolfe Research.

Let me try two, please. One for Harley and one for Jeff. Just a follow-up on your prior comments, Harley. How should we think about the economics evolving and the competitive dynamics evolving as we think about agentic commerce and your role in laying out the infrastructure? And then the second one for Jeff is, you've done a great job with the free cash flow margins. When we think out for 2026, how should we think about your margins against the investments that you're making and the growth that you are generating.

Yes. So I think I covered it, but I'll just repeat it. I mean for Shopify merchants, the economics are the same as the transaction happened on the online store when it comes to agentic. Specifically on something like ChatGPT, which requires Shopify payments, monetization is through payments. It's the same as it occurred in the online store. And in terms of some of the other applications as well, if you're a Shopify merchant, it will default using Shopify Payments. So that is how monetization occurs. I just want to sort of go back because I suspect I'll get more questions on this around agentic and checkout. So I said this earlier, but I'm going to repeat this, LLMs do not bypass Shopify's checkout. Checkout is really 2 parts.

Think of it this way. You have a front end that's a user interface that buyers interact with. And the back end processing everything server to server. So if you think about a Shopify store today, Shopify runs both the front end and the back end. And under UCP, Shopify still powers the overall experience, but the merchant gets to keep their own checkout system on the back end.

Now with something like ChatGPT, for example, open AI will run the front end, which is sort of the screens and the forms that the buyer uses. But Shopify still runs the back end. And so things like order processing and payments through Shopify Payments, that all runs through Shopify's infrastructure.

One of the reasons that we're so excited by this is because we get to help merchants sell across a new surface area, but we get to simplify the complexity through the Shopify, the retail operating system that we've built here. And again, the idea that we can help them find and access new customers on a new service area that, we think, is an incredible thing. And we're going to make that really simple for them.

The key though is that it's really done well. And [indiscernible] back to the UCP point for a second. UCP is the protocol that covers the full commerce jury end-to-end. And it goes from discovery to checkout to fulfillment even to returns. And so commerce is complex, and it's easy to get wrong. And one of the reasons that we wanted to create the standard with Google is because we want to make sure that it's done in the right way to give the merchant experience, the consumer experience that the merchant really wants to do and we think UCP does a really great job of that.

Yes. And Shweta, to your question about how we think about free cash flow margins for 2026 and just kind of our free cash flow margin philosophy overall. I'd say nothing's changed at all. We've been saying -- Harley and I have been saying now for I think it's almost 2 years about this balance between how we're delivering the growth on the top line while still investing in everything that we want to build and obviously delivering the free cash flow margins that we have.

And when you think about -- we've talked about catalog in its original formation. This is something we set in motion 2 years ago. We've had Sidekick for 2 years. So there's things that we -- and obviously, UCP is a little bit more recent. But as you think about the things that we want to build for the next generation of commerce, we've been doing that for a period of time now where the free cash flow margins reflect that.

So nothing's changed. I gave you some guidance, obviously, as it relates to the free cash flow margin, specifically for Q1. Of course, we don't have guidance for all of '26, but again, philosophically, we're in the exact same spot we've been for a couple of years now.

Our next question comes from Martin Toner at ATB Capital Markets.

Congrats under great quarter. Is agentic AI and UCP and on-ramp that will accelerate enterprise adoption of Shopify.

Look, great question. We announced it at NRF, National Retail Federation, which is the largest enterprise retail show, the agentic plant opens our infrastructure to all brands. And I think this idea that we're bringing it into commerce every brand, whether or not they're on Shopify, we think will be -- I mean, it certainly has already been an incredible way for us to start conversations with the brands who might not be ready to migrate or have not anticipated a full forklift migration just yet, but they don't want to miss out on this incredible opportunity that might be this agentic commerce. And so in a similar vein to how we started -- we created commerce components a couple of years ago where non-Shopify merchants can use things like Shop Pay or they can simply use Shopify Checkout as a component, that allowed us to start conversations with brands that we weren't otherwise talking to.

In some cases, some of those brands who came to us initially just for Shop Pay are now entirely on Shopify. So certainly, we think this could be an incredible on-ramp just like the commerce component play was. But I think generally, it is incredibly important that Tobi said something recently about catalog, he said that everyone else has to scrape the Internet, but we actually have the source of it.

The fact that we have the structured billions of products so agents can surface the most relevant items in seconds, the fact that products are going to be spent surface based on relevance and sort of this merit-based discovery is going to happen. I think that every retailer and every merchant on the planet is thinking about how they can get in front of as many buyers and consumers on agentic. If they continue down that path to do the math, more and more, they realize that Shopify is the company that is front and center. It's not necessarily just about the agentic storefronts, it's also about protocol, it's about the UCP that we built. So I think the agentic plan is another way for us to help merchants on Shopify, access it. We think the more brands that are selling on agentic, the better, and we want to play the role there in sort of setting that standard. I think we laid the rails there, and now we are at the epicenter of it.

Our next question comes from Keith Weiss at Morgan Stanley.

Harley, you're definitely right, all the focus is on commerce for this conference call, and I'm going to continue on that vein. Can you help us understand the UCP versus ACP, the other standard that OpenAI and Stripe are putting forward. Are these overlapping standards do they compete? Are they complementary in any way? And what does this do to the timing of adoption of agentic commerce? Does it confuse the market? Is this like a VHS versus Betamax type thing of that. It has to be resolved first before you have mainstream adoption?

Yes. Look, the goal is simple with UCP. It's one common language for agents and retailers. The idea is that merchants can keep the brand, the attributions buyers get these incredibly trustworthy experiences and agentic commerce can scale. UCP is is specifically geared towards being a protocol that covers the full commerce journey end-to-end, from search to cart then checkout, it includes post order. It keeps the merchants essential checkout logic intact. It doesn't force them to rebuild customization over and over again. It's payment-agnostic by design. It's built to flex in the many ways. I mentioned a couple of examples in my prepared remarks. I mean if you think about Butcher Box or you think of AG1, for example, those -- that subscription logic is really complex because sometimes you want to skip, sometimes you want to double up, if you're on vacation, you want to do a hold some of the larger furniture companies on Shopify that do this incredible white club delivery where you can set the exact time and date for your couch being delivered.

These things need to be ported over into the agentic world, and UCP does that. So in our view, UCP covers the full commerce journey end-to-end. And we think -- we have 20 years of doing this. Commerce is very complex. It is easy to get it wrong. And I think that it's more than just a transaction. It's an entire experience and UCP covers all of that. And we're really proud of what we do. We did with our friends at Google. It was an incredible experience to work on it with them, but it works, and we think we're already seeing incredible adoption from some of the largest retailers on the planet.

Our next question is from Paul Treiber at RBC Capital.

Just a follow-up on Harley's earlier comments, just about the feedback from merchants having discussions at the board level about moving to Shop. Specifically, AI, are you -- the feedback that you're getting from companies in terms of the AI road map, is that -- I imagine it's influencing decisions. Are you also seeing merchants evaluate custom solutions in light of what they can do with AI tools and if that's consideration? And what influence or what impact does your product road map count or the ability of what companies can do internally?

Yes. I mean, I said this earlier, sort of half jokingly, but I think Shopify, we sort of have a pole position right now with agentic commerce. But we also have sort of this pole position when it comes to things like speed to market, this idea of a fully all-in-one platform. I mean, I think a lot of the largest retailers, certainly ones I'm meeting with, I mentioned brands like General Motors or L'Oreal or Suit Supplier, Amer Sports who runs Wilson and Salomon, what we hear from them is they're looking -- if they're not on Shopify already, usually they come to us with a particular problem. In some cases, we want to make sure we don't miss out on agentic. In other cases, they're coming to us because they want to replace their homegrown system that they built many years ago for e-commerce. They don't want to have 400 engineers anymore. They want to effectively come to Shopify because they want to go back to what they do best, which is they want to build furniture or they want to be a cosmetics company. They don't necessarily want to have this massive engineering engineering team. And so I think one of the reasons you're seeing this incredible momentum specifically around the enterprise right now is because we're not just doing agentic, although agentic obviously, something we're focused on. We're also helping with point of sale. We're helping them sell across every channel, whether it's social channels. We're showing the Shop Pay in itself is an incredible on-ramp into Shopify. They're seeing the conversion rates. They're seeing this as a sort of trust badge on the Internet today.

And so I think when you bring all these together and then you sort of add this idea of that a very modern retailer and brand is thinking about unified commerce. They don't want to have a bunch of different systems that don't talk to each other. They want to have this modern stack where they have a single source of truth that scales, whether they're doing massive flash sales for the Super Bowl or they're doing some very complex logic around B2B or point of sale or subscriptions. And ultimately, those roads all lead to Shopify. So I think agentic is playing a role there. But I think the days of let's just build everything ourselves in-house is long gone. And I think that gives Shopify incredible opportunity.

And I think one of the messages we hear from certainly merchants that have been on shopping for a while is that they feel like they are better positioned than those that are not. And I think that narrative is leaking into the enterprise, and it's allowing us to win a lot more deals at a lot faster clip.

Our next question comes from Tim Chiodo of UBS.

Great. I want to shift gears a little bit to Shop Campaigns. So you talked a little bit about the revenue doubling, the merchant adoption, tripling. And you also talked about some of the new services that Shop campaigns are supporting X, Snapchat being Google. I was wondering if you could talk a little bit more about that, expand on shop campaigns in general and some of the mechanics around it and the monetization vehicle?

Yes. Let me start with advertising in general because I think we are making really great progress on this on building tools that help merchants with customer acquisition. It's not just Shop campaigns. I mean we mentioned obviously the Shop App before. We also introduced this new Shopify product network, which we're really excited about. But generally, when -- with Shop campaigns in particular, I mentioned a 3x increase in merchant adoption and a 2x increase in revenue. this thing is starting to gain real traction. What this ultimately is, is the scale to risk-free customer acquisition tool that brings merchants more buyers and drives brand discovery. And I think we're set up for an accelerated, efficient growth with campaigns in 2026.

In 2025, we obviously -- we added new surface areas, shop Shopify stores, Instagram, Facebook, Google, X, Bing, Snapchat. In 2026, really, the focus there is to reinvest the gains back into growth. We want to expand our advertising inventory. We want to improve performance and we also want to scale more efficiently for merchants that use it. And it's becoming a tool that I think as merchants begin to experiment with it, it becomes one of their key tools in their toolbox for finding new customers.

This idea of building this risk-free customer acquisition product that you only pay for if you actually get a sale we think is really, really compelling. And I think that's the reason why you're seeing so much merchant adoption here. So you'll see more of that as well. Now we're really tweaking it to make it the very best product. But when you combine that with what we're doing with Shop, the Shop App and also the product network, which helps merchants sell more by effectively turning the merchant ecosystem into our distribution engine, you're beginning to see that these ads products are really starting to pay off for the merchants who use it.

That was our final question. So I will hand it back to you, Harley.

Yes. Thanks. I appreciate that, Carrie. Obviously, a lot of questions on agentic, which is great. Obviously, something work [indiscernible], but I just kind of want to say this before we close up. We laid out this playbook for all of you listening a few years ago, which I think is really working. We talked about consistent execution. We talked about compounding product engine, and we talked about new durable growth lanes and I think -- and I think you're seeing that we are doing that now. We are serving more types of businesses on more services and more markets. And I think we're doing all of that with discipline. And I think 2025, I hope it's clear that this was Shopify running this playbook at full throttle, just like we said we would. I think you're also seeing that we also quietly laid the rails for this new era of AI commerce. And whatever permutation is going to be the mainstay. Shopify is deeply embedded in the center of it.

And I think from -- for this year, for 2026, you're going to see us kick into an even higher gear. I think 2026 will ultimately be a landmark year for us. It will be for Shopify, it will be for our merchants, and I think it's going to be for all of commerce. So I just want to say thank you all for listening and for all of us at Shopify as the toolmakers, we will continue to keep building these incredible tools for the amazing merchants and builders that we have the huge honor of serving every single day and back to building for us. Thank you.

With that, this concludes our fourth quarter 2025 conference call. Thank you for joining us.

All right. So we'll get kicked off here. Thank you, everyone, for joining us. My name is Keith Weiss. I run the U.S. software equity research franchise here at Morgan Stanley. And very pleased to have with us from Shopify, CFO, Jeff Hoffmeister. Jeff, thank you for joining us.

Great. Of course. Good to see you, Keith.

So super exciting time at Shopify. I feel like it's always super exciting time at Shopify. A lot of stuff to talk about. I'm actually going to start at the bottom of my question list and work away. I want to touch on some of the newer innovations for 2 reasons. One, it's very interesting what Shopify is doing when it comes to Agentic Commerce and this is a new potential kind of channel and a new theme that we've been talking about. But it's also -- I think it really exemplifies Shopify and what makes Shopify special is just how far ahead of the marketplace you guys have been in getting out technologies to help support your merchants for the potential for Agentic Commerce, but also to create new rails for the Agentic Commerce providers to actually be able to execute on this.

So maybe to start out with, take my statement and make it into a question. What's the kind of current thinking on Agentic Commerce for Shopify in terms of where are we with sort of pushing this out? What are the technologies that are going to be important? And what's Shopify's role going to be in Agentic Commerce?

There's a lot in there. So we are definitely -- as you alluded to in your initial statement before the question, we've tried very hard to make sure we're building the technologies, the rails to make this happen and help accelerate what we think will happen in Agentic Commerce. We are definitely bullish on Agentic Commerce. There's people that are kind of bulls and bears in terms of how much this is going to expand consumer spend, how much this is going to change the dynamics of spend, and I'll come to that in a second. But we've tried very hard. As you know, our catalog product is something that we set in motion more than 2 years ago. Some of the stuff that we're doing around sidekick, right? Tobi talked about that more than 2 years ago.

So a lot of these are things that we felt a little bit kind of the analogy, if you build, that they will come. We've tried very hard to make sure that we help the merchants by giving everything they need in terms of the tools, the technologies to be at the forefront of this. That's what we're trying to build. And we'll spend some more time -- I'll spend some more time on catalog and and all that. But effectively, what we're doing is we're starting to see now really over the past couple of quarters, the fruits of some of that labor of what we've been building. Agentic Commerce has a lot of different definitions for various people in terms of how seamless it's going to be. Is it just kind of, for example, giving a budget to an LLM and letting them spend? Or do I -- it's a little like adoption of any technology.

We'll have some early adopters and some people are more comfortable like doing a lot of shopping online. Some people want to do more in person. So with the various changes that we'll see and kind of the pace of adoption, our technologies are helping the merchants, right? There's a lot of people who are trying to spend technology, do advancements, do things to help on the consumer side, right, what the LLMs are doing to try to help all of us as shoppers. We're really the only ones we think that are doing something really significant in terms of building technology to help the merchants. I think one of the things that you'll see in terms of how the LLM searches play out, as you know, generally, they're longer queries. They're more sophistic. You do a Google search, it's usually fewer words than what we're seeing, for example, like the old Google search versus the Gemini search, right?

Usually, it's like 5 words versus 25 words or some kind of longer, more complex, more thoughtful question, which is coming out of the LLMs. And so therefore, the opportunity for us is to help put our merchants in a good position where they're the source of the answer when someone says, all right, I want A, B and C in terms of what I'm shopping for. And we're still, having said that, in the very early days of this. And we see this to a certain extent, too, just in terms of how we're interacting with all the LLMs, some of our knowledge around commerce and how we're helping them think about, to a certain extent, their business models and evolve what they're trying to do, and we're working in partnership with all of them to do that. There's a lot there we can go on.

So let's click into a couple of those components. One, in terms of helping the merchants, product catalog enables the merchant to expose more of the -- not just the products, but about the products. So they can better match the query being put into the prompt engine into what the merchants actually bring to the equation. Where are we in terms of the rollout of that solution, the adoption of that solution? What are you seeing in the customer base thus far in terms of their affinity to participate, if you will?

Yes. Yes. Well, catalog is a huge advantage for merchants because essentially, it becomes a definitive source of truth on your products. And one of the things that we're seeing across all the LLMs, and I give them credit for this, is they're trying to make sure that they have the best, most accurate, most fact-based, most authoritative answer when we type in our questions. And so if we can, therefore, on the back end, be the so-called back end on the merchant side, if we can be the authoritative source of truth in everything they're doing, then it's very natural that all the LLMs are going to want to work with us in terms of us helping them give the best answer possible to the people that are on their websites doing the searches. And so catalog has been -- again, it's something we've had in place for a while, I think of it essentially as kind of like the taxonomy, the definitive source of what's out there for products. And it's worked very well. And so as an LLM, if you're not pointing people towards catalog or if a merchant, if you're not using catalog, you're putting yourself at a disadvantage effectively.

Got it. And then more broadly, you talked about working with your merchants to understand how to position for Agentic Commerce. You also said that you think this is a big positive. You're bullish on Agentic Commerce. There is a bear case, though, that unlike traditional search or SEO, SEO sent the consumer to the merchant's website and everything was transacted on the merchant's website. Part of the reason you paid so much for SEO is because then you have that consumer relationship on a go-forward basis. Does that sustain in Agentic Commerce, right? The risk is the agent is transacting on behalf of the consumer. The consumer is never on your website and the consumer never has an affinity for your brand. You don't get that repeat buying behavior that the merchants are trying to facilitate. So how do you position in Agentic Commerce against that potential bear case that they're losing the connection to their end customer?

Well, I think, again, it's still early days, but we're actually seeing in a lot of -- whether you start with OpenAI, you're still probably going to the merchant's website. Some people -- some consumers will go straight to the merchant's website. Maybe they find the brand as they do a search on Gemini or ChatGPT or whatever. And as you know, a lot of times, the search results come back a little bit differently before, as you point out, for example, you would do a search on Google, you'd get a bunch of links. And while the answer now may look different because you'll do a search on Gemini and you'll get a box that will give you 2, 3 paragraphs in terms of this is what we think the answer is, some pros and cons and things to think about and maybe there's a link to an article or a blog and the merchant's website is listed in that article or the blog.

So the way that they need to -- I agree with you, the way they think about SEO needs to evolve and is evolving. But I don't -- from our vantage point right now, I don't see a fundamental shift in terms of people still going to the merchant's website and the merchants still interacting with that consumer, building that relationship, building that brand. I think brands as much as anything will be even more important in the next world of kind of where we see Agentic Commerce play out. And I also think it's actually going to help some of our small and medium-sized brands, partly because, again, before in the old world, sometimes the advertising budget of some of the brands would impact how you are discovered.

Now if you're asking an LLM a very thoughtful, again, maybe longer complex question, you're more likely to discover some brands that maybe had flown underneath your radar. And so maybe you historically had kind of relied on some paid advertising links to find, right, so I want to buy a new pair of dress shoes. And so I'm going to find it through some of the traditional answers. Now maybe you're going to find, I don't know, maybe there's a small European manufacturer that makes a phenomenal product that you otherwise would not have found. So I think through catalog and through Agentic Commerce, I think some of the small and medium merchants actually will be better off.

What about the other side of the equation? Because you guys have also rolled out universal card and checkout kit.

Yes.

And ultimately, OpenAI doesn't want to send you to the website. OpenAI wants to transact that business themselves and be able to take the fee associated with it. They want to take their 4% to 8% against whatever that transaction is, and you're enabling them to do it within the Agentic Commerce experience. Does that consumer ever make it to the website? Did they ever make it to the -- to understand the brand, understand the merchant that's your customer?

Yes. I think they still will. And I think the other thing to my comment about being in the early stages of all this, part of it is just all the business models to a certain extent, are still evolving as it relates to consumer Agentic Commerce because just all the CEOs you know, like Microsoft is going to think about this slightly different than Google, which is going to think about this slightly different from OpenAI, kind of, et cetera, kind of go down the list. They all have very different business models, cash balances, approaches to commerce. And I think that's going to play out. And again, we're still in the very early stages of this. I think that's going to play out in terms of how they all think about how much they do on platform versus sending to the merchant's website.

Got it. Broadening out the conversation a little bit, we recently wrote a report about Agentic Commerce, along with our Internet analyst, Brian Nowak, and we specifically dove into Shopify and your role there. And one of the conclusions that we kind of led with was Shopify tends to do well in periods of disruption, right? Because of the fast pace of innovation, because you tend to be technology leaders, when we have disruptions in these core markets, there's even more of an affinity to go with Shopify. That's what we thought of as the bull case for Shopify. Overall, Agentic Commerce probably leads to more e-commerce penetration. I mean you guys get a larger share of that e-commerce penetration during the disruption. So the question is like, one, do you kind of agree with that underlying premise? And when you say you're bullish about Agentic Commerce, is it in that same dynamic of that just there's going to be more e-commerce being done?

Yes. No, I would agree with all that. I think there are some people that believe -- and again, it's also too early to tell on this, that Agentic Commerce will make transactions, make shopping easier. So it actually will expand the pie as it relates to consumer spend. I don't -- we don't have a whole lot of data to suggest that. There is a possibility that the easier it is to get something done, the more that it will happen and that there may be an expansion of consumer spend. For the moment, let's assume the consumer spend at a certain level is going to be consistent. And so then it's just a little bit of a mix shift in terms of where does it come from.

And if more of that, as you know, kind of given any given country, geography, roughly 20% of commerce is online versus 80% that is off-line. And you've seen -- I know you know well, the kind of the multiyear trend of the percentage of commerce, which is online and continues to shift year in, year out. If there's an inflection in that curve and more commerce happens online, that plays right into our strengths, right? We have obviously a very good point-of-sale off-line solution. Online commerce has been our historical heritage, right? So -- and I also agree with your premise in terms of technology shifts, that also really plays into our strengths because we have -- across the board, we've always led with technology. We've always led with putting more in the core platform, and we significantly differentiated ourselves and maybe there's some more legacy platforms out there, especially on the enterprise side. So I think this all plays to some very strong tailwinds for us.

Got it. Got it. I want to shift gears and dig into the core business. Results have been very strong. In the most recent earnings call, you talked about strength in merchant adds, right? It's the holiday season. If you want to give me a Christmas gift, merchant count would be a great Christmas gift. I would love to see that number.

There you go. Put it on the list.

Absent that, maybe you could give us some color.

Yes.

When you're talking about strength in merchant adds across geographies, across brands, could you give us any kind of color on the sort of the magnitude or kind of what's driving that strength in merchant adds?

Well, I think our merchant acquisition engine, our top of the funnel overall has been very good. As you know, we've -- the platform itself is very, very powerful in terms of getting more people to transact on the platform. The brand recognition of Shop Pay is drawing more and more from enterprises to the smallest kind of one-person entrepreneur start-ups. It's been really powerful for us in terms of getting more people on the platform. The marketing strategy, we've talked about this a little bit in Europe in terms of how I think we've done a very good job here in terms of getting some products out there, get the product market fit and then have marketing support it.

And I think our marketing strategy has been very effective. I know on some of the MRR numbers because of the change in paid trials that it makes that a little noisy. But the paid trials have worked very well. Part of what you sometimes see with entrepreneurs is they're starting the business while they're also keeping their day job. And so they're trying to kind of work during the day and do the entrepreneurship thing at night or on weekends. And to the extent that we can give them more time on the platform, 3 months, for example, free to get on there and kind of really understand the power of the platform, get some of the sales, get up and running and get really familiar with that in addition to what Sidekick and everything we're doing on Agentic Commerce, it just really helps the merchant be more successful.

And so not surprisingly, and you also know from -- especially from COVID, there's just an uptick and it stayed at this level, an uptick in the number of new businesses that are being started across the globe. All of those things are helping us get more merchants. So while you look at the MRR and it, again, is noisy, if -- when I look at kind of the pace of merchants that we're seeing, you get a little bit of a sense of this from MRR, but the pace of merchant additions we're seeing on the low end as well as we're seeing on the enterprise, it's very solid.

And I guess the other thing I would have you triangulate on is when I talk about the GMV growth in Europe, when I talk about -- and I say this less explicitly when I talk about the U.S. or Canada, when I talk about the growth, I'm usually saying it's kind of half same-store sales and half new merchant acquisition. And so if half of that is coming from merchants that we've added in the last year, then obviously, there's a lot to be said for that. As you know, one single merchant add on the enterprise side can have the equivalent amount of revenue as many SMBs, but we're growing across the board. I also on the last earnings call, talked about the strength across the different GMV bands.

I also talked a little bit about the strength of the different cohorts. The cohorts that we've seen -- there's one of the, I think, often underappreciated elements of our business, and I kind of alluded to it on the last earnings call, is that the cohorts, when you look at -- and it's in our investor deck, if you look at the Q1 '25 cohort and how that's grown over time, it's been excellent. And right -- in the investor deck on the very next slide, I have one that shows the cohorts for Q1 of all the year since 2015, and they all have grown very consistently steady and up and to the right. And the only 2 that are a little bit outliers and slightly below the trend line perspective for 2020 and 2021 for obvious reasons as it related to COVID.

The cohorts have been very consistent on a multiyear basis. They continue to grow. And so when you look at our revenue this year or any given year, it's a stack of all those cohorts, and that's only going to be happening if we continue to add a lot of great merchants to the platform. So we feel really good about the merchant acquisition engine right now. And I know you -- unfortunately to triangulate a little bit on the numbers, but it's -- the proof is there in terms of how we think about it.

Yes. So it sounds like the marketing spend that we all gave you such a hard time about at the beginning of last year is actually, as you predicted, is going to yield gains a year later, like as those become merchants. You mentioned the sort of push up market into the enterprise. And I want to dig into that because the nature of those enterprise customers, while the potential is to be much larger, they don't come on the same way as the small businesses in that they're not going to push the entirety of their business into Shopify all in one go. So can you talk to us about where we are in terms of -- it feels like we got product market fit, and we've got the affinity for merchants and the large enterprises started to come on. Where are we in terms of kind of ramping them up? And it feels like it's going to be a stacking function over time.

No, I think that's exactly right. I think we all can do studies around the size of the opportunity in all the different merchants out there kind of by vertical, by geography, however you want to slice it. I think one of the things that sometimes lost about kind of appreciation for enterprise business was on our earnings calls, we, Harley usually is the one that's talking about, hey, here's a bunch of merchants that we won. And then we'll talk about here's when we now have this large enterprise kind of up and running on the platform kind of selling via our platform. That -- we don't always get into excruciating detail around, hey, maybe there are -- most of them -- the bigger the enterprise, the bigger the brand, the more likely they are to have a bunch of commerce stacks.

They may have done it intentionally because they built the commerce stack for, hey, I have a luxury item, kind of high-price, low-volume brand that has a different commerce stack than the one that's the inverse, which is higher volume, lower price. Maybe I did a bunch of acquisitions. Maybe I just kind of started building it. I have a little bit of kludgy stuff, and this is part of the stuff, which is helping us as a tailwind for us to win more. But a lot of times, they just have a bunch of different stacks. So maybe we take part of the stack, maybe we start with just payments, maybe we take payments, point-of-sale, installments, tax, a bunch of things. But most of the time, we're taking just a piece, either we're taking one full stack and then we're going to take more stacks over time or we're just taking maybe a horizontal slice of the stacks.

And so the opportunity for us exactly, as you said, is a continued stacking of, in a good way, a multiyear steady trend in terms of just doing more and more with each of these merchants. And one of the things that's coming out of Agentic Commerce is, again, the kind of the necessities of the quality of the technology and the platform, the table stakes for that are much higher than they've ever been. And so for our "competitors" and we don't have really many in the large enterprise space, if they're not spending as much on investing in the technology of the platform and we are, we are clearly distancing ourselves.

I don't think we're to the point yet, Keith, where we've got -- in fact, I know we're not to the point where merchants are coming to us and saying, like Agentic Commerce is the sole thing that's causing my decision, but it's clearly in the road map. Like whereas 6 months ago, it wasn't as much in the conversations. Now people are like, all right, so I'm choosing you for these 4, 5, 6 reasons and Agentic Commerce is one. And help me understand over the next 2 quarters, 2 years, et cetera, what are you doing and what are you building? And we clearly stand out in that regard.

Got it. So you've talked about -- and correct me if I'm wrong, winning roughly 4 out of 10 enterprise deals, which is an impressive win rate and also a very honest one. Most people tell us they win 90% of the deals, which not everyone could win 90% of the deals. So when you're not winning the deals, when they're going with either sort of sticking with the incumbent or one of the larger competitors, what's the pushback on the Shopify platform? And what do you guys do to consistently improve that win rate over time?

Yes. The pushback for us is never a technology or the quality of the platform. We do not intend to be the cheapest. But at the same token, we have a lot of pricing power here if we wanted. But there are -- in some situations, people -- some of our competitors will be -- and there's one in particular, will be a little bit more aggressive on price. And if they already have -- if the merchant already has a bunch of other software from one of our competing platforms, it's easy for them to bundle. I mean it's logical because the vendor can bundle and still get a good deal and the merchant feels like, hey, I've got a bunch of data in this platform already. I can integrate it with what I have and I can get a bundle.

I totally get it. That makes total sense. But when you do kind of head-to-head standup competition on tech, like we do extremely well in that category. And yes, sometimes they choose to stay with their existing platform because they've probably invested a lot in getting it there. As you know, mostly on the enterprise side, it's the custom in-house built solutions that we're going up against. And I think we're to the point I think Agentic Commerce is going to accelerate this. I think we're at the point where we're offering something that they've never had before, where they feel like the quality of the external software is better than what they can build internally. And at Shopify, you've got all these engineers that are focused 24/7 on building the best commerce platform on the planet. No one else can say that.

So it really aligns to sort of my thesis of periods of disruption act as an accelerant of market share gains for Shopify.

Yes. Without calling out specific market share numbers, I think it's going to help. And I think if you -- even if you try -- we talk about being 12% of e-commerce in the U.S. But even if you look at some of the Black Friday, Cyber Monday statistics and kind of what we talked about in terms of growth rates, I mean most specifically in the U.S. called out the U.S. growth rate. We've talked about the European growth rate of 34%, the Asian growth rate of 31%, like compare that to what you're seeing across the board. And you have to assume that we're continuing -- I mean, we've talked about this in almost every one of the last 3 or 4 earnings calls in terms of the multiple of the e-commerce growth rates we are in any given country or region, we can clearly continue to take share.

Great. Got it. So when we're talking about Shopify, and we're running short on time, so I'm going to fast that a little. We typically talk about sort of there's the GMV part of the equation, and you guys have been doing an extraordinary job of taking market share, growing that GMV base. Merchant ads is a part of it, uplift into enterprise is a part of it. The offline retail has been additive to it. The international expansion has added to it. All of this is working really well to grow the base of GMV, right? And that helps MRR. The other side of the equation is the take rate against that GMV, right? And the most consistent question that I get about Shopify, I would love to hear your answer, is payments penetration, right? Today, we're about 65% payments penetration. So your payments rails are being used in 65% of the value being transacted through your platform. Where could that go over time? Like what's a theoretical maximum in terms of payment penetration?

Well, I've never given a theoretical maximum. Obviously, there's always some stuff that's going to be done in cash and other forms. But that payments penetration rate is obviously a blended number in the U.S. and in Canada, but most notably in the U.S., it's much higher. And I think it can go higher in the U.S. And obviously, in Europe, it's lower, partly as a function of just -- as you know, we just introduced Shopify Payments in kind of the remaining countries in Europe where we didn't have it, even ignoring kind of all the other geographies for the moment, getting those payment penetration levels up, obviously start with us making payments available in each of those geographies.

Shop Pay is a strong, as you know, strong consumer brand that continues to help not only get merchant adoption, but also pull up the penetration levels. So -- and I think in Europe, part of it is going to be integration of more local payment methods and other things that just continue to give us the tailwinds to drive that penetration level up. So people have for a long time, wondered how high can it go, and we've been asked that question probably for a couple of years now, and it continues to march up. So as you know, this past year, because of the shop -- sorry, of the PayPal integration, we had a little bit of a bump just kind of -- just on an optics level for payments penetration.

But if you look at a multiyear trend, I don't see a change in that trend line. this point, Keith, in terms of what we're continuing to do, I just kind of add to the payments penetration level. And you'll see more from us in terms of rollout of payments. Again, we pretty much have Europe covered now. The last -- a few quarters ago, when I talked about this on the earnings call, I talked about the 16 countries where we introduced payments, 15 were in Europe, the other was Mexico. You should assume that we'll do more in Central and South America. I think we have -- by geography, I think we have significant opportunity in Central South America. I think we have a lot of opportunity in the Middle East. I think we have a lot of opportunity in Southeast Asia, et cetera.

Got it. Got it. So the second most often question that I get is what's next on take rate. Payment has been the vast majority of sort of the take rate overall. Where should we be looking in terms of what could emerge as another material kind of take rate driver for Shopify going forward?

I think there's -- I'd point you to 3 things. Number one, I think some of the products that we've had out for a couple of years now are continuing to ramp some of the success we've had with tax, with installments, with some of the things we're doing on the FX side, those are all going to continue to add. I think the number two on the advertising side, which we won't have a ton of time to talk about, but we're doing more and we have additions coming up, some kind of additions announcements today and tomorrow, you'll see on the advertising side in terms of what we're doing. I think we, in particular, have a real opportunity in what I would call 2P, which is where one merchant will advertise on the website of another merchant and how do we help them do that? I think there's significant opportunity there.

And I think just in general, when you think about kind of the suite of things that we're doing, there's a bunch of little other products that in the aggregate will add up to continued advancements on the attach rate. I don't look at attach rate and say this is a specific target I have in mind. As you know, as we -- for the last couple of years, we've grown kind of 10 to 15 basis points a year. This year, that's not the case because of the headwind that we have because of the paid trials and subscription solutions. Basically, this year, we've seen roughly an equivalent offset between payments penetration and advances on the Merchant Solutions side being offset by some of the headwinds on the subscription solutions side. That's temporary. Next year, we'll get back to growth in kind of more traditional lines in terms of how I think about subscription solutions. So without a specific pace I'm going to give you, continued up and to the right in terms of what we're seeing.

Right. In that kind of rubric, you do a lot enabling your merchants to set up a commerce site to be able to transact commerce. And increasingly, it feels like you're looking to help them sort of attract consumers to the overall platform. One of a big part of attracting consumers to the platform is marketing, right? Marketing, to me, feels like something that you guys have partnered a lot more with than gone organically, but you do have organic efforts when it comes to marketing. How should we think about that opportunity within Shopify? Is that something that you could build out further become more of a marketing front office vendor for their customers -- for your merchants?

Yes. I think I don't see us, for example, doing the full marketing software suite that you see out of others. I do think that I know that we look at marketing kind of getting of consumers as an obvious pain point for businesses. And the smaller you are, the more help you need there. So we talked about the 2P advertising. We are familiar with campaigns and audiences and all that. And we've done some very interesting things internally in terms of how we use technology to do some of our own marketing. And then how do we then take some of that and port it to the platforms that we're offering merchants. So you will see more of that from us. Do I see us building some big kind of marketing software suite that you would see from some of the others out there that you cover? No, I don't see us doing that.

Okay. So it's going to be more focused, more specific type of marketing aligned to kind of where your infrastructure strength lies. We got about a minute left. I want to turn to margins and profitability. On one side of the equation, gross margins have seen some headwinds. Some of that comes from the international mix, some of it from enterprise payments. We're all worried about gross margin impacts from more sort of GPU-based computing. How should we fundamentally think about the gross margin directionality going forward for Shopify?

Yes. Well, to your GPU point, obviously, we don't -- I mean, our CapEx spend is de minimis is probably the best word to use. But -- and I would say the vast, vast majority of that all goes into subscription solutions for us, which is basically providing the provision of the core platform to our merchants. And as you know, that has stayed -- and we've been doing this for a couple of years now in terms of building for Agentic Commerce. And that gross margin for Subscription Solutions has stayed kind of 80% plus. So even though we've been spending -- and we're going to naturally spend more on the core platform as we expand into new geographies and our merchants do higher transaction volumes. That's been the case for a while.

So it's reflected in the margins you've seen from us for a while. So Subscription Solutions has been very stable. In Merchant Solutions, to your point, it's a mix of kind of enterprise and payments and everything that goes in there. As you know, we've had some headwinds this year, in particular. And as I kind of look to next year without giving any specific guidance, some of those temporary headwinds will lessen. But I go back to my comment before that in general, we think about gross margins as being neutral to slightly down in any given year. I don't -- I'm not going to guide you to say, Oh, I think it's going to turn around like Merchant Solutions, at least next year or 2 is going to kind of uplift in the positive.

Got it. And then finally, on the OpEx side of the equation. I think it was 2 years ago at the Analyst Day, you guys came out and said, Hey, listen, we're utilizing this technology really effectively. We have the factory, if you will, that's pumping out a lot of innovation. We don't need a lot more people. And you've executed to that. You've been able to grow the business remarkably well with no real headcount expansion. How durable is that? How long can you keep going without having to invest in humans, like in human capital and expand out more fundamentally that OpEx?

Well, we're really using the tool, as you alluded to, the internally built tools, and we don't use much third-party software because we feel like if we do that, then we're going to find ourselves in a position where we're getting limited versus some of the things that we could do if we built a solution, which is focused on what we want to accomplish. Without giving exact guidance on headcount number, I don't see us next year needing to increase headcount in any way that being an impedance to our growth rate and what we've been able to deliver. It's been over 2 years we've been at this headcount. As I look to next year, I think we can continue to be disciplined on headcount and continue to deliver on the top line. So I feel very good about what we've been able to accomplish.

Outstanding. Unfortunately, we are over time. But Jeff, thanks so much for joining us.

Thank you.

All right. Welcome, everyone. Thank you. All right, we'll get started. Welcome, everyone. We're really glad to have here with us the team from Shopify. We have both Carrie Gillard, who is Head of Investor Relations. Also joining here joining us in Arizona here in the front row is Amy Gilkes, also a member of the IR team. So both to Amy and Carrie, we want to thank you for making the trip here to Arizona and being a big part of this event.

Yes. Happy to be here.

All right. We've got a great list of topics that we're going to try and get through. I don't know if we're going to be able to cover it all, but we're going to give it a go.

Just to set the stage, we're going to start off with a little bit on the holiday trends, then we're going to talk about GMV trends overall, bigger picture this year, next year and beyond. We're going to get into some of the growth drivers. We're going to talk about enterprise. We're going to talk about international. We're going to talk about the in-store business. We'll talk about Shop Pay and we'll talk about some of the kind of pricing philosophy as we head into the next few years.

So it's a lot to cover, but let's get started with some of the holiday trends. So we're about 2/3 into the quarter. We just got through Black Friday, Cyber Monday. Clearly, you guys put out a press release, so we have some of the numbers there. But generally speaking, broader into the holiday season, how is Shopify seeing things?

Yes. So the press release that went out yesterday on our Black Friday, Cyber Monday weekend, right, really proud of what our merchants achieved, kind of $14.6 billion in sales over the weekend, up 27% and 24% on a constant currency basis. So really, really good growth, really proud. A lot of the stats in there that we provide on our merchants is incredible. My first Black Friday, Cyber Monday with Shopify was back in 2022, which the business on that weekend did $7.5 billion. So the fact that in kind of only 3 years, we've essentially doubled, just showcases kind of the growth of Shopify, the platform and the merchants and how we're helping them succeed not only over this weekend, but really every day.

In terms of the trends that we saw, really, we talked a little bit about this on the earnings call, and it's been fairly consistent over the past couple of years of starting to see more shopping happening outside of kind of those kind of 5 key days as well as businesses kind of continuing to have their promotions, et cetera, running for longer periods of time. We also have more international in the mix, which has also been an important growth driver for us, which is a factor that we're contributing as well.

And from a consumer perspective, consumers continue to buy from the brands that they love. They're being very intentional with their shopping and the demand we're seeing has been pretty consistent across the board across all of our verticals.

Excellent. All right. Thank you, Carrie. That was a great way to start things off. We're going to talk a little bit about GMV trends and some of the growth drivers. So clearly, Shopify is no longer a North American SMB e-commerce platform. It's evolved to much, much more than that. We like to say it's EII and B, so enterprise, international, in-store and B2B are some of the new growth verticals that you've added.

Maybe you could just talk a little bit about the evolution of the components of the growth algorithm, which ones are kind of the larger at the moment and which ones could become larger over time?

Yes. I mean Shopify's growth has been very consistent in both the GMV and revenue over the past couple of years, in part to, again, the platform that we've built and the fact that it can scale from somebody starting a new business all the way up to the largest enterprises on the planet.

In terms of how we think about our growth, right, we start with kind of looking at our online business, which is where we started, and that continues to grow really, really well. In many markets kind of around the world, if you look at the online growth or e-commerce rates in those, we're growing anywhere from 1.5 to 4x faster our merchants are. So seeing a lot of continued success in kind of our online store presence.

Then to your point on kind of the other channels and kind of building out our unified commerce approach is really things like retail and our offline business, which continues to grow incredibly well. Still a lot smaller today. It's still I think under 10% of our revenue at the end of last year. So there's still a big opportunity for us to get more offline. It continues to win both small businesses as well as larger merchants. And as we move into the growth you just talked about of enterprise and that being a newer leg of growth for us, that is something that the offline offering works well for us of being able to offer them both online and offline and unifying their business altogether into one.

If I try to stack rank the growth, right, again, online is where the largest piece of our business is today. If I look at it from a merchant perspective or a merchant banding size perspective, we talked a little bit about this on our most recent call. The vast majority of our growth comes from kind of merchants in an annual GMV band of $25 million and under, right, because we are for the small businesses and the smaller ones. The merchants that are kind of $25 million in annual GMV and above, they're growing really well and growing a lot faster. That is an area that we have only more recently really started to get behind more and put more concentrated effort in, in winning these larger merchants, and we are finding success. So our growth algorithm really across the board is there's a lot of opportunity to keep winning the small businesses, both locally and globally as well as larger enterprise ones upmarket.

International in the more recent history has been the kind of driver of more of our kind of outsized growth in any given quarter, really led by Europe. International is growing in the kind of high 30s, low 40s, which is pretty impressive. The growth we're seeing is pretty balanced between both same-store kind of merchants who've been on the platform for a year versus new, which also suggests that our cohorts remain really, really strong.

I think we feel really great that we have so many different growth levers that are all contributing, and we're continuing to execute really well against.

All right. Thank you, Carrie. All right. We're going to move on to enterprise. So I often start this off as a question where as I think back in all of our time covering stocks now for some time and think about the investors here and all your coverage, how many times have you seen a company that has, let's say, a low single-digit share of any market, but is winning 4 out of 10 new opportunities, which are some stats that Shopify published, that's not our estimate.

So with that context in terms of those 4 out of 10 that you've been winning, maybe you could talk a little bit about those drivers. You've called out the integration partners, the commerce components. You've talked about the enterprise sales teams. Let's just talk about all of that bringing it together and how it's helping you win the RFPs.

Yes. So the effort and focus on building out upmarket has been something that's been in the works for now like around 3 years. And so to Tim's point, part of that was building out and really being concentrated in going upmarket. And step one of that was offering and providing commerce components or breaking apart the stack a little bit so that larger enterprises could take a singular item versus feeling like they had to fully migrate over.

Then it was about building out those partnerships with SIs or the System Integrators, making sure that they were trained up on our product, trained up on what we offer so that we could be more competitive and get our foot in the door. And then it was about building up a team that could then also kind of more effectively go out and reach out to these large enterprises and drive growth.

What you've seen then is we started to win some pretty meaningful and large brands, right? Some more recent wins have been Estée Lauder, Canada Goose, which are incredible, and we're very excited to have those brands coming to us. But what's helping us get in there is because it's now been 3 years, right? We have more time on. The cycle for enterprise is a longer cycle from when they kind of initially engage to ultimately are on platform and contributing to the GMV that shows up. And so that longer cycle with where we're at, means we're still very early days in what that opportunity can be for us. But we like where we're positioned. We like the kind of funnel and the go-to-market process that we've built, and we think we'll continue to find success in bringing more of these larger merchants on platform.

All right. Excellent. So you and I had a conversation about this a few weeks ago. So I think it's a good one to maybe we can share with the audience, which is around how investors should be thinking about, at least in the early days, some of the monetization of the enterprise customers. The way we framed it was that some of them are starting with, and you've talked about this on your earnings call with the e-commerce component first and the Shop Pay button. So a lot of that monetization is coming through payments rather than SaaS upfront, but there's a mix of both, and maybe you could just elaborate on this topic.

Yes. So one of the beautiful things about Shopify is that we have a lot of on-ramps into it. There is not a one way in. There is -- especially for enterprise, we offer a lot of variety. It is things like what Tim just talked about of them taking just a singular component, taking our Shop Pay, which is our accelerated checkout, which just converts better and drives. Many of you have probably used the purple button yourselves. And so we offer that as a way in when they can take just a single component, give it a try, hopefully, it drives more sales and then over time, potentially get them to take more or other things.

We also then offer they can come to us full stack and just make a full complete switch and do an integration with them there. We also have then if they want to start with just online or just retail, right, or just B2B. We offer a variety of ways for these large enterprises to consider coming to us, taking all or taking a little. What that means then is that it gives us a opportunity to get our foot in the door as well as drive kind of longer sustainable growth over time because we can ideally then hopefully win more of the business on each of those enterprises over time.

With where we are today from where we kind of started, we have seen some of that happening, right? So we have now enough proof points of brands who have come to us and started with just Shop Pay off platform and are now on the full platform and full stack, right? We have examples like a majeure who came to us and took only online and then after a couple of months was like, "Your product is so great. I actually want to do it in my whole offline." And have taken it, right?

So the kind of expansion in ways in which enterprises can find success with us, especially these upmarket brands, continues to be kind of a factor that helps us with securing some of these.

And just a minor follow-up to that. Since some of these enterprise merchants are starting with the payments, it would imply a pretty healthy payments attach rate within enterprise. Is that fair to say?

Yes. It usually starts with that, right? It's not -- again, not a one-size-fits-all approach. Every entrepreneur or every enterprise for that matter, has specific needs and things that they're coming to us for. But what we're finding today is that the vast majority are coming and taking payments, right, and taking the storefront. So it's showing up most through, yes, Merchant Solutions within our payments business.

All right. Great. Last one on enterprise. So you mentioned this earlier, so maybe we could elaborate on it, but you also gave some great numbers on the earnings call around the size of merchants and what kind of components they make up. We published our estimate of what we think enterprise GMV is. Maybe you could just talk directionally around how much that business is within the mix and some of the stats that you've disclosed.

Yes. We haven't actually ever given the percentage of what enterprise or larger merchants represent. We tend to look at our business more on cohorts and then kind of this GMV banding because, again, merchants have different paths and they have different choices for what they want and what they need. We talked about the fact that the $25 million and above GMV is growing faster. Those merchants in that category is growing faster, but still makes up a smaller portion today. So it is still a very big opportunity for us to win some of these larger merchants, which should be a growth driver, hopefully, for many years to come.

There's a lot of different ways that we can slice our GMV and our merchants. And what we -- is great is it's very broad-based. And any way you slice it, we're continuing to see really strong growth, whether that's across verticals. So again, apparel and accessories is like our largest vertical, but we're making a lot of headway into a lot of other ones. If you look at it from an existing merchant versus a new, we're still continuing to see a lot of really good strong growth across both. So we feel really kind of well positioned with the ways we're driving growth. There isn't any one single piece. Enterprise is just one way and one growth lever amongst the many that we see ahead of us.

All right. I think we covered enterprise quite well. Let's move to international. So you mentioned some of the growth rates just a few minutes ago. Maybe you could talk a little bit about the drivers there. And then also mix. Is that more SMB? Is it more enterprise? Have you had to compare it relative to the contributions within the U.S.? And then we'll come back on a follow-up on payments penetration.

Yes. So international has done really, really well for us. This is an area where we have been investing a lot more in the past couple of years, both on the marketing front and the product front. And what you're seeing today is kind of the manifestation of those investments playing out with the strong growth that we're seeing.

When you look at international or global in total, right, the same kind of metrics are stat supply. So same-store sales versus new, it's been fairly balanced. In any given quarter, it might skew a little bit more of the GMV growth from new versus same-store. But on average, it's been fairly kind of consistent on where the growth is coming from. And that's in part because, again, the cohorts we have are really strong from an existing base. And then the ones we're adding are also then contributing a lot to us.

Europe, in particular, has been an area where we've added a lot more products that are really helping us kind of continue to offer something unique to those customers. So we've added 15 more countries on the payment side this year alone. Our capital product, we added 4 countries. So it went from 4 at the beginning of the year to now 8. So we've doubled the amount of countries with that product offering. A product like installments, who is now in Canada and has recently rolled out to the U.K. and tax is also one that we've rolled out more recently.

So there is not as many products available internationally as there are in North America, but we are working to get more of them in local markets so that we can also then help those local merchants continue to grow and flourish and have them adopt more of the products that we offer.

All right. Excellent. Well, that's a good segue into -- and we can cover the international piece as we get into this. We can kind of morph it all together. But Shopify Payments GPV penetration. So it's up to 65% now as of Q3. And we often get asked by investors as we build out our longer-term models for Shopify, and we're putting a payments penetration into the outer years of the DCF. We often get asked, well, can it go to 100%? And what are the reasons why or why not?

Our answer, at least often to that is there are 3Cs, a P and some E. So cash, countries, categories, PayPal outside the U.S. and then some exceptions and/or some minimal parts of enterprise. So again, 3Cs, a P and some E as the reasons. The question is, does that allow eventually the payments penetration to get into that 90% plus range? And how should investors be thinking about the continued evolution from the 65% level?

Yes. We haven't never given what it can reach to. It will not go to 100% for some of the things that Tim just mentioned, but we do believe that there is opportunity for us to drive our penetration higher, right? A couple of years ago, I think if you had said we could get to 65%, I think people would have stopped, but yet here we are, right? So I think there's still opportunity, both in North America, where we have higher penetration and higher adoption. There is still room for it to go higher. There's also room on the international side following on what I just said, right? We just launched payments in 15 countries. So adoption penetration is lower there, but it's something that we do anticipate will grow over time. So there is an ability for it to continue to penetrate higher.

In the nearer term, though, because international actually is newer, it actually can be a bit of a headwind to payments penetration until it can get up to parity more. So it can go higher across the board. We haven't said how much higher. Things like cash is always going to be a payment method, which is going to kind of just be what it is. In terms of kind of other third-party payment providers, some merchants have some of those as well. That will also be a factor to always consider why we will never fully get to 100%.

Excellent. I think you covered that quite well. And it's a good point on the international. So the GMV is growing faster, but with a relatively lower GPV attach so it kind of puts a little bit of pressure on the 65%.

Okay. All right. Great. Well, I think we can move on to the next topic, which is very related, which is the Shop Pay button. So it's been accelerating for the last few quarters in a row here, recently reached 67%. And maybe we could just talk a little bit about the underlying U.S. growth versus the international. Clearly, the international is much faster than the 67%, which puts it at a very impressive number.

Yes. So international in the same boat, right? Again, Shop Pay is available where Shopify Payments is available. So it is still on the earlier curve of adoption and usage internationally because it just hasn't been as available there. There's no reason why that we can't continue to also gain greater kind of recognition and usage with consumers as the kind of accelerated checkout feature that it offers, right? So I think we feel well positioned with Shop Pay to continue to kind of gain that momentum, right?

The reason Shop Pay is so effective is because it is so fast, it's so easy to use, and we make it incredibly frictionless for a consumer which is great for a merchant because it usually leads to more sales. That is a product that we continue to work on at speed and some removing as much friction as possible so that we can kind of stay in the lead, if you will. But yes, a lot of opportunity for it to continue to grow.

Great. And it's also got some adjacent or additional benefits, right? So it kind of relates to the first topic on enterprise. When -- maybe just bring it to life a little bit. When you're having these conversations with enterprise merchants, the Shop Pay button, I'm assuming that's one of the wars.

Yes. So it's one of the things because, again, it's driving an accelerated checkout. And every second counts when you're trying to get a person to go from looking to buy, right? And that's what matters. And so if we can help a merchant, there are some older studies at this point that have actually proven out the kind of lift we can drive to having a merchant -- a customer actually purchase faster. Those are really important stats for a business who's trying to get somebody to buy and draw a new customer in.

The benefit of Shop Pay, though extends beyond that, right? I mean if you think about Shop Pay and those of you who use the purple button, right, you buy your product, all your information loads very seamlessly in a one-page checkout and boom, you've placed your order. All of your information is in there. Then you get sent essentially to what's the Shop App where you can track that order, right? The Shop App is a place that only merchants that are on Shopify have access to, right? It's a unique thing that makes Shopify special and different. And what that does is that you can track the inventory across a bunch of different things. So to that exact point, for Black Friday, Cyber Monday weekend, I bought a pair of Dior leggings. I bought some bar stools from this company called Denver Modern, and my kids latest highest subscription was set to come out the door.

Within my Shop App, I can see all of those different brands, all in a single spot, and I can track my orders and track what's coming to me. You can't get that anywhere else. And that as a consumer makes your life very easy. The easier my life is made there as a consumer, right, the more likely I am to go back and buy. And when that purple button shows up again, it's going to enable me to just have a much easier and much more enjoyable consumer shopping experience.

So those are the things that Shopify offers in a unique way that, again, ties back to the bigger ecosystem than just the Shop Pay checkout button that is helping us kind of continue to be a differentiator, and we use some of this information to help with winning businesses large and small.

All right. Excellent. Thank you, Carrie. We're going to move on to the in-store business of the point of sale. It's already a low double-digit portion of your GMV. So it's already a big portion. It's driving growth. Maybe you could talk a little bit about the product and how it's winning against some of maybe the more legacy retail point-of-sale providers.

Yes. This comes back again to kind of like on-ramps and ultimately, the platform and what we have built and how easy it is and what a joy it is to use kind of our product and our admin, right? It's just very -- it's designed nicely. It's easy to use. It's intuitive. And so as businesses are considering upgrading their offline side, if they already are on Shopify and already have online, we're obviously a very natural choice, right? They know how it works. They're already using us there. We can now unify and connect all of that information on the back end.

So moving over to online or offline, excuse me, for Shopify is very straightforward. When we're out though in the market trying to win new businesses, some of these larger retail-first type brands, right, these imagine the 30 stores, I don't know, in the Northwest that are all -- I'm mostly a retailer. I have an online presence, but I mostly care about my 30 stores, right? They're looking to upgrade something modern, something quick, something that unifies again, their data and information in a unique way. That's what Shopify can provide, right? Obviously, there's a hardware component to it. But the software, the platform side of it, what we offer is competitive from a pricing perspective, very easy to use and again, integrates back into that online side, which allows them to have, again, a unified look at their customers.

So POS for us is an area of opportunity to continue to grow. We've added a lot of features so that we can handle more from an inventory perspective, handle more locations, do some of the things that matter for retail versus online. But the selling point usually comes down to, again, the connection back to online. The cost is usually, again, for the value of what you're getting is pretty competitive. And if you're looking for something more modern that is, again, getting updated quickly, frequently with a rapid pace of innovation that we're bringing to both online and offline, Shopify becomes kind of a clear choice.

All right. Thank you, Carrie. All right. We're going to move into this one starts to get into a little bit more of the financial side of things. But we'll talk a little bit about some of the revenue drivers and some of the considerations investors should have as they start to model out 2026 and 2027. And then if we have time, we'll talk a little bit more about the pricing thoughts.

So as we look into '26 and '27, there's a long list of items that we're considering. One is the plus pricing that you took in 2024, which has effectively a 3-year lag and starts to really come into the model more in 2027. We'll have the removal of the paid trial headwinds, which starts actually here in Q4, starts to lap a little bit. We have the potential for further pricing on the core side, given the last pricing was back in 2023. And then we also have some greater contributions as we think about coming from some of these growth verticals that we talked about earlier. And if I would add one more, and maybe it's on the smaller side, but the 15% commission on the first $1 million of sales is also something that should impact numbers to a smaller extent maybe next year.

So with all that as context, maybe you could add to that or elaborate some more.

Yes. I mean I would say, right, like a lot of what's driven the growth in 2025 was the same factors that drove a lot of the growth in 2024, right? And it's a lot of these growth drivers we've talked about, right? International continues to do well. We're winning more and more upmarket, right? We're kind of expanding our retail offering and getting more businesses to take the offline side.

So for 2026, it's going to be more of kind of leaning into all of these as these are all still -- have lots of legs of growth left on them and leaning into the investments to continue to do that. I wouldn't put one over the other. I'd just say we feel like they're all going to continue to grow as well as we continue to roll out more products into more countries, right? So product expansion will also continue to help us as we can get capital into more places. We can get installments into more places, payments into more places. As we roll out more product offerings, there's also more growth to come from those.

So I think when we look out to 2026 and 2027, not looking at pricing, the things that are driving the growth so far are the things we expect to continue to drive the growth going forward. Pricing is obviously going to play a role in that at some point. It played a role a bit a couple of years ago, to Tim's point on 2023 on the standard side and 2024 more on the plus side. It's not something that we sit here today and say, yes, we're going to take pricing, and that's going to be a lever of growth. It is certainly something that we can do and will contribute to growth. With where we're sitting today, it's not something that we're doing.

So I would more think about our growth in 2026 based off of the factors and all of these growth drivers I just laid out.

All right. Excellent. I think that covers the pricing philosophy quite well. So I think we should move on to the next topic, which is -- and you got -- you hit on this a little bit in terms of your Black Friday experience with the Shop App. But there's the Shop App and there is the campaigns offering. So one, you recently gave a stat on the Shop App seeing about 140% year-over-year growth in the GMV running through that app. And then some small subset of that is monetizing what is effectively an advertising product, which is Shop Campaigns.

Maybe you could talk a little bit about that offering and how that maybe longer term could evolve to maybe a larger advertising type of product for your merchants?

Yes. So advertising and finding customers, right, is always one of the biggest pain points that our merchants have. We're looking to obviously try to help them in kind of 2 ways in which we're building products. And the first is on this kind of customer discovery side through things like the Shop App.

The Shop App, as I just said, is a great way for tracking, but the Shop App itself also works as a kind of channel for merchants to not only discover new customers, but reengage and drive kind of better relationships with their existing customers, right? Repeat purchasing and building that kind of brand loyalty is incredibly important to businesses just as much as it is about bringing in new customers. And so the Shop App gives us the space and opportunity to do that again in a unique way that is only available to those who are on Shopify.

We've done a lot in the product area to enhance kind of search functionality, give brands the space to kind of showcase who they are to either attract new customers or not or connect with their existing ones. And so it continues to be something that we're building out and why you're seeing more in-app GMV then is a result of that, right? Being in the app is an enjoyable experience, and we're doing things that help kind of merchants find new customers within it.

On the broader side, though, on the campaigns, which is kind of our more traditional advertising type product, it's still really, really early days here with what we're doing there, but we are continuing to kind of invest behind it and seeing some interesting things. So campaigns is essentially helping our merchants with more of a fixed CAC or a fixed cost, giving us their kind of ad dollars and we go find new customers for them and bring those customers to them. With the merchants that have been using it so far, we're seeing pretty good results and good success there. I think this is something that as we look into the future years, advertising could become more meaningful for Shopify, but it is definitely on the earlier stages today.

I'd say kind of stay tuned for some of our additions and things to come up. We'll likely have more on kind of what we're doing there.

All right. Great. We will definitely do that. All right. In the time we have left here, let's hit on Agentic commerce. So clearly, and we've said Shopify has been a fast and first mover on this, and you really positioned your merchants to be able to take advantage of any and all volume that's coming through the Agentic channel per se. And I think that's been a hallmark of Shopify over the years, whether in the past if it was social channels and now it's Agentic, but the story is the same.

So maybe just talk a little bit about -- and we've had conversations about this again, maybe we could share with the group around some of the mechanics there. I just want to clear up some of that in terms of unit economics, how they're the same and not very different, and this is more of a volume driver for the business.

And then lastly, a little bit more around just on the mechanics of how a merchant would go about kind of opting into this program.

Yes. So Agentic commerce is obviously a big area of focus and interest for everybody. It's something that Shopify has been building for, for a while, right? So we talked back in August about our kind of Agentic toolkit around our catalog, our universal card and our checkout kit. And then internally, we have our Sidekick tool as well, which helps our merchants.

So we kind of look at AI is Agentic commerce, which is the consumer side, AI for our merchants and then AI for our kind of internal use. Agentic commerce, which is the one that's a topic for everybody these days, it's still really early in where this is all going. What we've done is built a catalog that basically helps categorize all of our merchants' data and information in a way that makes it easier for these LLMs to go query or pull that data on our merchants and hopefully then serve them up to customers who are using the different agents to go kind of search and discover.

It's something that we are deeply bullish about of it becoming a way in which consumers are likely to shop. How fast and when and the pace of it all, I think it's still too early to say, but we are definitely building for a world where Agentic shopping is a thing.

In our partnership that we announced with OpenAI earlier this year, that kind of falls into -- when we look at Agentic commerce across the layers of discovery, purchase and post purchase, it kind of falls in that purchase, so enabling kind of instant checkout within a LLM or within an agent. It's still early days there. But for us, we view this very much as just optimizing our merchants GMV and giving them the ability to find customers wherever. If a customer wants to, if a person wants to search in GPT for their next pair of shoes, like we want to make sure our merchants are served up there. If they want to find them on their site, we want to make sure the merchants are found there as well.

So the economics from a Shopify standpoint is essentially the same. We're just trying to optimize for our merchant success and drive their sales. Those sales ultimately will benefit us because we have a merchant-based success business model, and we will then get the economics in the same way we would have had it happened on the storefront or within the checkout -- within the OpenAI.

Carrie, I have to say thank you so much. I mean it's a pleasure, our team, working with you and Amy and the team at Shopify. We really appreciate you making the trip here to Arizona, and I'm sure the investors do as well. Thanks for being a big part of our conference.

Thank you.

Good morning, and thank you for joining Shopify's Third Quarter 2025 Conference Call. I am 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 could cause actual results to differ materially from those projected. Undue reliance should not be placed on those forward-looking statements. 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 the U.S. and Canadian regulators.

We'll also speak to adjusted financial measures, which are non-GAAP and not a substitute for GAAP financial measures. Reconciliations between the 2 are provided in our press release.

And finally, we report in U.S. dollars, so all amounts discussed today are in U.S. dollars unless otherwise indicated. With that, I'll turn the call over to Harley.

Thanks, Carrie, and good morning, everyone. It's been another strong quarter for Shopify. I'll take you through the numbers and what we've built and shipped in Q3 shortly.

But first, I want to zoom out as I always do. There's a real shift happening in the world of technology right now. And I know you're all going to ask about AI and there's a lot to cover, from enabling agenda commerce with some of the biggest global leaders in conversational AI, to our AI assistant Sidekick supercharging merchants' businesses, to how we are using AI reflectively across the entire business and company to tighten our product loops and to ship world-class solutions more efficiently than ever.

But here's the thing. There's a bigger store behind the updates, and it's a story of the evolution of commerce. Now evolution teaches us to adapt or die, and Shopify is built for this pace of change. It's in our DNA. So while you'll certainly see it in how we're leveraging AI, you will also see it in our international expansion. You'll see it in the development of our offline B2B channels. And you'll see it in how we've dramatically lowered the barrier to entry. Every 26 seconds, a new entrepreneur makes their first sale on Shopify. I'm going to say that again. Every 26 seconds, a new entrepreneur makes their first sale on Shopify. In fact, it's happened at least 3 times since they started talking here. That is TAM expansion at its best. And any of those merchants could easily become one of the world's biggest brands in a decade or less.

As I said before, that's what we mean we say we're not just growing our piece of the pie; we are growing the pie itself. That is our superpower. Commerce never stands still and neither do we. We are always building for what's next. And now as we're entering what is likely to be a whole new era of agentic commerce, our scale and agility means that Shopify is perfectly positioned to lead the way and empower more businesses using AI.

AI is an incredible tool for us in what has always been our goal to enable more entrepreneurs in the world. More on that in just a moment.

First, back to the numbers. While we're continuously evolving, the story of our results remains incredibly consistent. Normally, I hate repeating myself, but this is one place I'm very happy to do just that. For quite some time now, we've demonstrated that we can balance both growth and profitability. Well, here it is again.

Q3 delivered 32% GMV growth, 32% revenue growth and an 18% free cash flow margin. And this is not just a one-off. Revenue grew 27% in Q1 this year, 31% in Q2 and 32% in Q3. At the same time, free cash flow margin has held steady at 15% in Q1 to 16% in Q2 and 18% again in Q3. Consistent, strong, executing just as we said we would.

We are really proud of these results. Delivering these numbers quarter after quarter at our sale is a huge achievement. And this consistency is not an accident. It's incredibly intentional. It's a direct outcome of how we operate. We build what merchants need, we ship relentlessly and we grow consistently.

This is the right balance for a growth company: invest to capture opportunity, keep margins at a profitable level and deliver durable results quarter after quarter. It's how we operate, powered by a model built to accelerate merchant growth, a team built for execution and millions of businesses pushing from their first sale to full scale. And that's why you continue to see consumers' favorite brands come to Shopify to power their businesses. More on that later.

Now let me walk you through what we've built and shipped in Q3 and how it's fueling our growth. I touched on AI at the start of the call. That's because, simply put, we all recognize this could be the biggest shift in technology since the Internet, and Shopify is preparing to be at the center of it. The products we're talking about today could very well become a quintessential piece of technology that will be used by every one, every day. That's how big this could be. And we believe Shopify is perfectly primed to help lead the way.

Think of it this way. If AI is fueled by data, then Shopify has a clear advantage. We power millions of merchants and billions of transactions. That gives us access to a world of data across a spectrum of commerce. And we're using that data to create better shopping experiences for both merchants and shoppers. This is the strength of our platform: massive scale paired with unmatched velocity.

We think about the evolution of AI in 3 ways: how AI will help our merchants sell everywhere, how AI will help our merchants operate smarter, and how we, as a company, will use AI to build better. Sell everywhere, operate smarter and build better. Let me take each in turn.

Let's start with how AI is helping our merchants sell everywhere, what's known as agentic commerce. Put simply, AI is able to fundamentally change how we shop, moving from search to conversation, helping all consumers purchase more efficiently. And that's why we built the Commerce for Agents tools that we introduced on our last call, Catalog, Universal Cart and Checkout Kit. These tools make it easier for agents to shop across merchant stores on a buyer's behalf.

But here's the thing. Agentic commerce is so much more than just the last click. Think about it in 3 layers: product discovery, purchasing experience and the post-purchase journey. Now if you're only looking at the payment or checkout layer, you're missing the bigger picture of what we're building: a seamless and intuitive shopping experience end to end.

First, let's talk discovery. We've structured data across billions of products so our partners can surface the most relevant items in seconds. It's clear where this is going. Shopping is becoming more conversational, more personalized and much more efficient. And that's why the leading AI partners are already using Catalog to power product discovery inside their experiences. I'm sure you all saw the announcement about our partnership with ChatGPT, which is a strategic play that we're really excited about.

But let me be clear, we're also partnered with other leaders in conversational AI like Perplexity, and our goal is to power product discovery for all agents, making us the standard across the Internet.

Up next, on purchasing experience. Once a shopper finds what they want, Universal Cart and Checkout Kit make add to cart and checkout seamless inside the conversation. ChatGPT, along with Microsoft Copilot have already partnered with us here to make in-chat shopping flows possible.

And finally, post purchase. We're investing in tools that help agents keep customers engaged and informed, order status, return, support, reorder prompts, so the experience stays smooth and merchants build durable relationships with their customers. Of course, different permutations will emerge as agentic commerce evolves, and we are preparing our merchants to be well positioned for whatever path wins.

What all this should tell you is that our merchants are primed for success in the new world of agentic commerce, just as they will continue to be armed with the tools for their online store, physical retail stores, B2B channels or wherever commerce goes next. This is the advantage of being on Shopify, we are everywhere commerce is happening and we always aim to get there first.

Okay. Let's now talk about how merchants are using AI to operate smarter. We set an extremely high bar for every AI feature we build and ship. We're not just here to keep pace with change; we're here to set the standard for what's possible in commerce technology. Sidekick, our on-platform intelligent assistant, is a prime example of that commitment. And frankly, the rate of adoption speaks for itself. In Q3 alone, over 750,000 shops used Sidekick for the first time. And to date, Sidekick has had almost 100 million conversations with merchants, with $8 million in October alone.

And it's quickly becoming the default way merchants get things done. Hundreds of thousands of merchants are running core parts of their business using Sidekick. In fact, conversation can go from 50 to 100 turns deep, covering everything from analytics and building new customer segments, to automating better SCO and so much more. Five years ago, none of this would have been possible. And today, it's a reflexive daily habit for many of them.

At this scale, Sidekick will only get smarter and more powerful. We've been betting on this from day 1, and that bet was correct and it's already paying off. Sidekick is central to have so many merchants operate their businesses.

Let me be clear, this is not just about automation. This is also about autonomy. This is exactly what we had hoped for when we started out on this journey. It's also something we knew we were uniquely positioned to build given everything we know about the merchants' business and commerce at large. This is what building a purpose-built agent and deeply integrated into the platform looks like, and we are just getting started.

The last thing I'll touch on with AI is how we're using it to build better products. For years, we've been honing our internal capabilities in the same way we've been empowering our merchants: shipping fast, measuring what matters and scaling what works using AI. Shopify's founder mode mentality really comes into play here. We're turning vast amounts of raw signal into ship products and features quickly and relentlessly. This is what building what AI looks like at Shopify, using our scale to gain insights, our culture to move really fast and shipping more of what truly matters so merchants win sooner.

Let me share one quick example to illustrate this. We have a tool effectually known as Scout. Now Scout is an internal voice of the customer system that indexes hundreds of millions of merchant feedback items, making them searchable within our tools. Any PM, designer, engineer or, frankly, anyone at the company, including myself and Jeff, can ask a question and get grounded answers in seconds. That used to take weeks. Patterns emerge by market, vertical and merchandise, allowing us to write clear specs, prioritize better and ship with confidence.

And Scout is just one of many tools we're developing to turn our own signals, whether it's support tickets, usage data, reviews, social interactions or even Sidekick prompts into fast informed decisions. If you take away one thing from this call, let it be this, AI is not just a feature of Shopify. It is central to our engine that powers everything we build.

Okay, that's a lot about AI, which should give you some idea about how much is happening behind the scenes over here. But now let's shift our focus to other key products and growth areas that are driving our results. Starting with Shopify Payments.

Payments continues to lead the way for driving growth, hitting 65% penetration of GMV in Q3. Shop Pay has seen significant growth as well, up 67% year-over-year to $29 billion this quarter. Now I want to underline what I just said because it's important to understand what we're building here. If there was ever one company that could own the checkout, we believe it can be Shopify. And that's no small feat. If we've made it look easy, then that means we're doing our job.

But in reality, the checkout is an incredibly complex system. It's the engine room of commerce. That one simple buy button is a contract between merchant and customer that has to cover a whole world of optionality, from taxes, shipping and inventory, to pricing and payments in any currency, to bundles and upsells and subscriptions, our checkout scales in terms of volume and functionality, all while ensuring compliance with various regulations.

Think of it like a really well-made watch. The watch face or the buy button is just the tip of the iceberg. What's underneath is an intricately built network of complications that handles a world of nuance all designed to make the experience beautifully simple. And it doesn't end there. Once the sales complete, we handle refunds, exchanges, store credits, partial captures and loyalty programs, all seamlessly allowing merchants to focus on growth instead of paperwork and building trust with their customers.

So why does this matter? Because it demonstrates that we execute incredibly well at scale. No one else can handle this complexity as seamlessly and with such a focus on the merchant as Shopify can.

And for our partners, we keep it simple as well. Platforms like Microsoft Copilot can easily plug in to activate commerce quickly embedding checkout and maintaining a native field. And the result, we simplify online stores and check out at scale, empowering our merchants and our partners to thrive wherever commerce happens today and wherever it goes next.

So we've talked about AI, we've talked about the checkout, but you'll see this laser focus in everything we build. In Q3, every upgrade we shipped, cut friction simplified selling and put merchants within reach of new markets. I'll give you a few examples related to our payments business.

Merchants, using Global-e's managed markets products can now offer Shop Pay as a payment method. Our Klarna partnership now includes local currency displays and streamlined payouts, and Shop Pay installments launched in the U.K. following Canada that rolled out earlier this year.

So why am I talking to these specific rollouts? Because it shows how each integration makes it easier for merchants to convert wherever they do business. And we're not close to being done. There's significant runway ahead, especially internationally where our adoption rates are increasing but still remain lower than our core market in North America. We see that momentum continuing. In Europe, penetration gains for Shopify Payments in Q3 were more than 50% higher than the gains in the same quarter a year ago. This is how we continue to capture growth and drive greater payment penetration, by making the heart things simple and putting merchants at the center of every transaction.

Let's stay on international because, frankly, the results speak for themselves. International GMV grew 41% in Q3, on top of 42% in Q2 and 31% in Q1. The momentum is real, and we're still only scratching the surface. Europe's market share continues to make gains, while revenue from the region now accounts for 21% of our overall revenue in Q3, up from less than 18% 2 years ago.

On top of the payment product enhancements I already mentioned, Q3 was packed with solutions across our business that further break down barriers and open new markets for merchants everywhere. I'm going to drill into the details here because it's important to understand the velocity of progress we are making internationally to add more products in more markets.

In point of sale, we launched Shopify Payments for POS to 3 additional countries and rolled out Tap to Pay in 7 more countries. Shopify Capital has now doubled its footprint from where we started the year, with Ireland and Spain launching in Q3. And Shop app expanded track with Shop and translations in 6 new markets, making a top destination for local buyers around the world. On the cross-border front, as I mentioned earlier, Shop Pay is now available for merchants using our managed markets product.

Let's talk about shipping and fulfillment next because we made big strides here this quarter. We expanded merchant optionality across the stack for both international and local. This quarter alone, we partnered with Amazon of multichannel fulfillment, Big Blue, DHL Fulfillment Network, Go Bolt and Maple all to give merchants more fulfillment flexibility. We partnered with Australia Post, Royal Mail and DHL Express Canada to give more carrier diversity. And we launched DHL Express DDP, DHL eCommerce DDP and enabled Canada Post DDP, so merchants can collect duties at checkout. With a single integration, we've empowered merchants to eliminate the customs delays that kill international sales.

But this is not just about adding integrations. It's about giving merchants the optionality to choose the best solution for their business, whether that's the lowest cost, fastest delivery or best cross-border experience, all managed from a single platform. As regulations shift and merchants' needs evolve, this depth of choice gives our merchants even more ways to be successful, while continuing to build an ecosystem that is truly world-class.

And when we're scaling horizontally across geographies, we're also going vertically across merchant types and channels. As you know, we've built multiple on-ramps into Shopify: online, off-line, B2B and enterprise, so brands can start and scale on their terms. And that is why the biggest brands and retailers are choosing Shopify.

Just last week, the Estee Lauder companies announced they're coming to Shopify. This is a global beauty Empire with 80 years of heritage and more than 20 iconic brands under 1 roof, Clinique, MAC, La Mer, Bobbi Brown and more. And now they're trusting us to power their next chapter.

So why are industry legends like Estee Lauder, Mattel, Aldo, Hunter Douglas all move into Shopify? Because our technology wins: on speed, on scale, on agility. And our price-to-value ratio is unmatched.

But it's more than just tech. Estee Lauder is still a family-led company at heart. For them, this isn't just business, and it isn't for us either. We simply outcare everybody else. Sometimes that means me spending the weekend on calls with both potential and existing merchants. And sometimes, it's Tobi jumping in to explain a new feature to a merchant. But all the time, it's the roughly 8,100 people at Shopify who're relentlessly merchant-obsessed showing up every day to help them win. And that mix of world-class technology and true partnership, that's what sets Shopify apart and that's what's driving us forward.

And you can expect to see that continue to set us apart as we scale. Every day we are seeing some of the world's biggest brands with complex, high-volume operations choose Shopify to unify channels, to cut complexity and to move faster. This quarter alone, we have signed an incredible mix of brands that shows just how versatile and scalable Shopify is.

Affordable billion beauty giant, e.l.f. Cosmetics; Italian luxury label, TWINSET; iconic American snack brand and household staple Welch's; 3D printing company, Formlabs; the sport betting company, FanDuel; and the 170-year-old French retailer, Laduree. And in the growing baby category, we just welcomed Stokke. Anyone who has small children at home will know this company. Their signature high chair has sold over 16 million times. And just like Estee Lauder, they have an incredible heritage, a 90-year-old company, and they're bringing Shopify in to supercharge their next chapter.

And I hear stories like this every day. It's one of the things I love most about what we're building, partnering with generational businesses and setting them up for future generations to come.

Meanwhile, some of our other recent signings are now ramping up on Shopify. Since we last spoke, brands like Michael Kors, David's Bridal, goop, Mejuri and Dooney and Burke, they're all live on Shopify. That's a serious list of companies I just mentioned, on top of the incredibly diverse brands we mentioned last quarter, which included everything from coffee to luxury outerwear to mining equipment.

What's most exciting is that we're increasingly welcoming more brands from all corners of commerce. And this growing merchant diversity, both in the U.S. and all over the world, make Shopify more resilient, expands our addressable market and it fuels our growth. No matter how the market shifts, Shopify is built to thrive. We're widening our reach, we're deepening our offerings and we're laying the groundwork for long-term success, from entrepreneur all the way to enterprise.

Now I want to quickly touch on offline as it's one of our long-term growth drivers that is continuing to power forward. Offline GMV in Q3 was up 31%, and we welcomed a host of incredible brands to Shopify. These are retail-first brands led by in-person experiences that are expanding to more channels and looking for a unified commerce solution. Iconic names like UGG Australia, COMME des GARÇONS are choosing Shopify to power their stores, expand their reach and deliver seamless experiences online and offline.

These are not small wins. Our progress with the retail-anchored brands is another strong signal that Shopify is becoming the platform for all brands selling everywhere: in-store, online and across countries, channels and markets.

Finally, a quick note on B2B. Our momentum remains strong and steady. Following 2 years of consistent growth over 100%, we nearly doubled B2B GMV again in Q3, up 98% year-over-year. This isn't just 1 cohort or 1 region; we're seeing broad GMV growth across both new and established merchant cohorts. For example, in Canada, Q3 B2B GMV was up over 155% year-over-year. From a vertical perspective, B2B continues to deliver strong results across the board, with home and garden standing out at 150% year-over-year GMV growth in Q3. Shopify's platform is delivering for merchants no matter the size, vertical of our market.

Now before I hand it over to Jeff, I want to close out where I started. Shopify is evolving at a pace that is entirely unmatched, while maintaining consistent durable growth. We're 3 quarters into 2025 and we've delivered exactly what we said we would: relentless growth, consistent margins and unwavering execution. We build, we ship, we grow.

We're also about to kick off what will be my 16th holiday season or, as we call it, BFCM here at Shopify. This moment has evolved too. It used to be a few peak sales days, but now it stretches across the whole quarter. And it's more global than ever. And more than ever before, AI will play a significant role in how shoppers discover and buy. And we are ready for it. Our merchants are primed to win. They've got AI tools that didn't exist a year ago. They're shipping internationally with options that didn't exist a year ago. And they're doing it all on infrastructure designed to handle peak demand at global scale. This is Shopify at full speed.

And with that, I'll turn the call over to Jeff for a deeper dive in the numbers and trends we are seeing. Jeff, over to you.

Thank you, Harley. Q3 was another exceptional quarter for Shopify, continuing the strength of what has been an impressive year. Before I dive into the numbers on a line-by-line basis, I want to examine our GMV from a few different angles in order to give you a holistic view of what we are seeing in our business. Let's examine GMV by merchant size, cohorts, geographies and channels. Note that all growth rates mentioned are year-over-year unless specifically stated otherwise.

First, regarding merchant size. We saw strong growth across all merchant sizes. In Q3, merchants with annual GMV below $25 million generated the significant majority of our GMV. And we saw a relatively equal balance between GMV from merchants in the $2 million and below band and merchants in the $2 million to $25 million band. Two trends that have been relatively consistent for a while. Merchants with GMV greater than $25 million grew at a faster pace in Q3, but admittedly, that is the smallest segment of the 3 bands I discussed.

Next, looking at our cohorts. Q3 was another strong quarter where our growth was fueled by both recent quarterly cohorts and the strength and durability of previous cohorts. In fact, one of the elements of our business that I believe is frequently underestimated is the stickiness and continued growth of cohorts from 2, 3 or more years ago. Year-over-year growth in GMV was primarily driven by the strong performance of our 2024 and 2025 cohorts. But our earlier cohorts also continue to perform well. Notably, the 2025 cohort is currently outpacing and generating more GMV than previous years' cohorts at the same age.

Moving to regions. Europe continued to be a standout driving significant growth with GMV up 49% or 42% in constant currency. Approximately half of our GMV dollar growth in Q3 on a constant currency basis came from markets outside North America. We experienced stronger growth from existing merchants compared to new acquisitions in Q3 across all regions.

In terms of channels, offline GMV increased 31% as we attract more retail-first brands globally. Our B2B GMV was up 98%, fueled by existing merchants embracing our offerings and our go-to-market initiatives targeting more B2B specific verticals and merchants.

Finally, verticals. We saw strong performance in apparel and accessories, health and beauty, home and garden, and food and beverage. We also continue to experience rapid growth in emerging verticals like pet supplies, which grew over 50%, and arts and entertainment, which was up 45%.

Our merchants have consistently delivered over 20% GMV growth for 9 consecutive quarters, with Q3 GMV growth rate of 32%, representing the highest growth rate quarter that we've had since the COVID-impacted growth rates of 2021. In short, our merchants are performing well across size, cohorts, geography, vertical and channel.

Let's now turn to our Q3 results. In Q3, we reached $92 billion in GMV, marking a 32% increase or a 30% increase on a constant currency basis. This strength was driven largely by North America, which outperformed our expectations, driven by an acceleration in growth rate fueled by stronger contributions from both Standard and Plus merchants. Revenue for the third quarter was up 32% or 31% on a constant currency basis. The strong GMV trends I mentioned drove this revenue growth with these results coming in ahead of expectations, largely on the backs of outperformance in North America.

Looking at the 2 components of revenue. Merchant Solutions revenue increased 38%, 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 65% for the quarter. This quarter's higher GPV penetration was driven by continued adoption of Payments by more merchants around the world and the strong performance of those merchants, and the expanded partnerships with PayPal and Klarna. These dynamics are partially offset by our continued growth in Europe, which accounted for a larger share of GMV but which has lower payments volume penetration compared to North America. Over time, we expect that this will become less of an impact for Payments penetration as we continue launching Payments in more countries.

Subscription Solutions revenue grew 15%, primarily driven by a larger percentage of subscriptions coming from higher-priced plans and, to a lesser extent, higher variable platform fees.

Q3 MRR was up 10% year-over-year, led by growth in our Plus plans, which represented 35% of MRR for the quarter. We had 2 headwinds impacting our year-over-year growth rates in MRR. MRR for Q3 last year benefited from the 1-month paid trial, which drove MRR higher and made for a tougher comparison this year. Second, we are also lapping the Plus pricing changes, which went into effect in Q2 of 2024. We will have some year-over-year comparability headwinds on MRR until Q2 of next year as our rollout of the 3-month trials happened in Q4 of last year and Q1 of this year. We now have had a full quarter where all of our regions are back on 3-month trials, which clears up a lot of the noise and comparability of our recent merchant acquisition efforts. We're seeing the results of these efforts settle generally in line with historical trends and are pleased with this part of our business.

Gross profit grew 24%, coming in slightly ahead of our expectations, driven by the outperformance in revenue, primarily due to stronger growth of Payments. Gross profit for Subscription Solutions grew 14%, slightly less than the 15% revenue growth for Subscription Solutions, with gross margin coming in at 81.7%. Gross margin was down slightly year-over-year as a result of higher hosting costs needed to support higher merchant transaction volumes and our continued geographic expansion as well as higher AI usage. This downward pressure was partially offset by lower support costs. Gross margin for Subscription Solutions was almost exactly the same as last quarter and healthily above the multiyear trend line of 80%.

Gross profit from Merchant Solutions grew 33%, with gross margin coming in at 38.2% compared to 39.7% in Q3 of 2024. The decrease was primarily driven by the same factors we have seen throughout the year, including the impact from the expanded partnership with PayPal, which will become less of a headwind in Q4 and beyond as we will have now lapped the initial expansion of the partnership, and lower noncash revenues from certain partnerships, which carry a high gross margin.

This brings our overall Q3 gross margin to 48.9%, compared to 51.7% in the prior year. This year-over-year change in gross margins is driven by the mix shift from Subscription Solutions to Merchant Solutions this year that I have mentioned above and on prior calls, coupled with the continued strength of Payments overall. Increase in Payments penetration will generally drive lower margins initially, but Payments is often the on-ramp for merchants to adopt other Merchant Solutions products. So that is a trade-off as many of you think through your modeling how our business trends over time based on your assumptions regarding payments penetration levels.

Operating expenses were $1 billion for the quarter or 37% of revenue. To put this leverage into context and focusing on how Q3 has trended the past 3 years, we've reduced our operating expenses from 45% in 2023 to 39% last year and further down to 37% this year. Our discipline on head count has been the key for us behind our increased operating leverage. For over 2 years, total head count has consistently been flat to down, both sequentially and year-over-year, as we redeploy talent to the highest-impact work. Our team's productivity is rising through automation, better tooling and the reflexive use of AI, so we can build, ship and deliver more for our merchants.

In Q3, transaction and loan losses represented 5% of our revenue, an uptick above our historical trend line. This increase stems mostly from higher losses in our Payments business, resulting primarily from some testing and experimentation with merchant onboarding. Our Payments loss rate is already turning back towards historical levels as some recent changes have already had an impact in lowering these loss rates. We also saw an increase in capital losses driven primarily by the continued volume growth of our capital business, but with a slight increase in the loss rate for the quarter, and with Q4 trending below Q3 and year-to-date.

Operating income for the quarter was $343 million or 12% of revenue. Stock-based compensation for Q3 was $116 million and capital expenditures were $6 million for the quarter. Q3 free cash flow was $507 million or 18% of revenue, coming in slightly ahead of our outlook. For the first 9 months of the year, free cash flow margin is at the same 16% as last year at this point, delivering on the consistency of free cash flow margins that I've highlighted in past calls.

Moreover, we have done this all while accelerating our year-to-date revenue growth rate in 2025 versus 2024. Note that subsequent to the end of the quarter, our convert became due and settled on November 2. If you pro forma our September 30 cash balance for the settlement of the convert, we sit at $6 billion of cash and marketable securities and no debt.

Before we move to our outlook, an update on some of the items that I've discussed the past 2 quarters regarding tariffs and where we are or are not seeing an impact on our merchants businesses. In short, the trends that we are seeing remain very similar to what we have called out on our 2 preceding calls.

Two items to highlight briefly. Cross-border GMV was 15% of GMV in Q3, consistent with prior quarters. The U.S. inbound and outbound demand within that, which, as a reminder, is roughly half of the 15%, has remained relatively steady. We still see that our merchants have in the aggregate raise their prices some since the April tariff announcements in the U.S., but the level of pricing increases is, in fact, slightly lower than the trends that we were seeing last quarter.

Turning to our outlook for the fourth quarter. We expect Q4 revenue growth to be in the mid to high 20s year-over-year. A few items for appropriate context. We were up against a high benchmark from Q4 last year, which was the highest-growth quarter in 2024. Also, as a reminder, we will lap the expanded partnership with PayPal, which benefited last year's Q4 revenue growth rate. Finally, we have factored into Q4 guidance FX tailwinds that are expected to be slightly higher than what we experienced in Q3.

We expect Q4 gross profit dollars to grow in the low to mid-20s. We expect Q4 gross profit to be impacted by essentially the same dynamics that I discussed earlier in the call regarding our Q3 gross profit.

We anticipate that our Q4 operating expenses will be 30% to 31% of revenue. Q4 stock-based compensation is expected to be $130 million.

Finally, on free cash flow. We expect Q4 free cash flow margin to be slightly above Q3. Two items will affect Q4 margin by a couple of hundred basis points in the aggregate. One, the higher payments losses that I mentioned earlier, which are already trending back towards historical levels but which we expect will remain elevated in Q4, and some tax receivables, the timing of which are outside of our control and which we expect to negatively impact Q4 net working capital. Even with these 2 factors and based on the Q4 outlook that I have provided, we are on track to achieve a free cash flow margin for 2025 similar to 2024. As I've mentioned consistently, we believe that these free cash flow margins strike the right balance between profitability, discipline and investment in future growth.

Let me end where it matters most, merchants. We build, we ship, we grow, we execute. Our performance metrics are aligned with merchant outcomes. Our strategy remains unchanged: deliver results, elevate merchant value and foster long-term growth.

With that, I will turn the call back over to Carrie.

Thanks, Jeff. We will now take your questions before turning the call back to Harley for some final words.

[Operator Instructions] Our first question comes from Colin Sebastian at Baird.

Great. Good morning, and I appreciate the opportunity here. We see that the integration with OpenAI has already begun. So just curious on any initial observations from those transactions. I guess how quickly you'd expect incremental contribution from -- or versus other channels? And generally, your expectations for how volumes will originate through AI platforms would be helpful.

Colin, Harley. I'll take that first call. Look, I mean, if you just look at the sheer numbers outside of even OpenAI, just around agentic in general, since January, we've seen AI-driven traffic to Shopify stores up like 7x. And we've actually seen orders attributed to AI searches up like 11x since that. So the data is showing it's already growing. And we actually just recently did a survey for -- to consumers to better understand some BFCM trends, and something like 64% of shoppers told us they're likely to use AI to some extent in their buying.

But look, we've been building and investing in this infrastructure to make it really easy to bring shopping into every single AI conversation. The fact that we're already working with the leaders in this space should, I think, be a testament to the fact that we want to make sure merchants on Shopify are better prepared than those that are not. It's still obviously very, very early. But what we're really trying to do is laying the rails for agentic commerce.

Now in terms of how that's going to affect Shopify, that's the beauty of the business model. The business model is really is perfectly aligned with merchant success. The more money they make, the more money we make. And so the way we think about the agentic channel, like any other channel for that matter, whether it's a marketplace or it's social commerce, is that the more money our merchants make, the more customers they're able to sell to, we're able to obviously share in that upside through the GMV, through Payments. That's kind of the way we look at it.

But in particular, to your question, this partnership with OpenAI around conversational commerce is really exciting. And again, it's just one more surface area that merchants on Shopify are going to be able to service customers.

Our next question comes from Craig Maurer at Financial Technology Partners.

I wanted to follow up on the prior question. One debate we've been having with investors is how, in an instant checkout flow, accelerated checkout solutions might get prioritized in terms of presentment. So I was curious your view on how over time when you have tons of instant checkout solutions available in the market, how those might be prioritized or presented to consumers. And at the same time, how you're positioning as the merchants platform might advantage, say, Shop Pay in that type of scenario.

I mean, look, that's the value of Shopify and these relationships. The reason that we're able to be front and center, whether it's obviously OpenAI or it's companies like Microsoft or Perplexity, is that fundamentally what's most important is that these agentic products have the best brands, the best brands are on Shopify.

Now in terms of the Shop Pay thing, I mean, look, Shop Pay in Q3 processed almost -- I think it was $29 billion in GMV, which is up like 67% year-on-year. It's now processed over $280 billion. So the fact that it is the #1 accelerated checkout on Shopify means it's becoming very popular amongst consumers that are very discerning when it comes to buying from the brands they love, which again are on Shopify.

So our mission is to make sure that merchants and shoppers are best set up. The way that we bring it to these partners is that we make sure that it's the easiest way for these agentic products to get access to all the brands that the consumers are looking for, but also to do it in a way where the technology stack is really simple. This idea of creating this agentic kit, which allows these partners to plug in, checkout, to plug in our Catalog means that it's kind of a no-brainer to work with Shopify.

In terms of which accelerated checkout they'll use, the more people that you Shop Pay, which, of course, is growing amazingly well, means that we just will have more of an advantage. Now again, this is still very, very early days for agentic. Obviously, we've been planning for this for years now, but we'll see how things progress. But we think Shopify and our merchants are incredibly well positioned here.

Our next question comes from Andrew Boone at JMP Securities.

I wanted to go back to the marketing investments and given the fact that MRR is just a little bit complicated at this moment. Can you just help us understand the guardrails and what you're seeing in terms of the efficiency of that spend? And then how should we think about that as we think about next year?

Maybe I'll start there on the marketing side and then Jeff can jump in to some of the MRR stuff. Look, I think we've said it on almost every single call, but Shopify, we are a growth company, and we are focused on driving merchant growth, which leads and fuels our growth. If we see opportunities to lean and accelerate growth in key areas, we're going to make that decision. But ultimately, marketing is an area where we have a lot of flexibility.

So let me be very clear. We really like this approach. Our investments in marketing are working really well. It's driving merchant adoption across verticals, across industries, across geos. I mean obviously, you're seeing that happen really well right now in Europe. And for Q4, we don't expect any change in the environment. So we're going to keep spending money where it makes sense.

That being said, we have very tight guardrails to make sure that where we spend marketing dollars, we do have the appropriate returns. And you guys have heard us talk about this on the previous calls, where we just see opportunities for us to double down in one particular area or one vertical, we double down on it, we see the payback from that fairly quickly. So we're going to keep doing that. But this is an area -- marketing is an area where we have a lot of levers. And when we do see opportunities, we're a growth company, we want to win.

Maybe I'll hand it to Jeff on some of the MRR side.

Yes. I would add 2 points. One, Andrew, I think as we look at -- and I referenced this a little bit on our call. When we look at our merchant acquisition engine overall, we're very pleased with what it's doing. I recognize some of the noise, as you allude to, in looking at MRR in terms of some levels of comparability. I would point out, and I gave the percentage of MRR, which was Plus versus the remainder obviously being Standard and point of sale.

And when you look at the Standard piece, this was the first quarter where we had sequential growth. We were up 4% the last few quarters. It's been flat, but that's purely a function of the paid trials, because Q3 was really the first quarter where you had a clean sequential comparison, because Q1 was when we were essentially finishing the migration back to 3-month trials. So that was, in terms of looking at Q2 versus Q1, that was not a clean comparability opportunity for you when you look at Q3 versus Q2, it's up 4%.

We're still going on a year-over-year basis. We're going to still have some headwinds until we get to Q1 of next year, because of the timing of the paid trials. But we certainly expect with what the merchant acquisition engine is doing, as Harley mentioned, no change in marketing philosophy, that we feel good about what we can do in terms of merchant adds.

Our next question comes from Siti Panigrahi at Mizuho Securities.

I just want to dig into the enterprise business. Could you talk about the success there in changes to the go-to-market and pipeline there? And then specifically, as you're expanding in the enterprise segment, displacing some of the incumbents, how should we think about the take rate from that segment?

Thanks, Siti. I'll take that question. Look, I mean, just to say the thing, I mean, the enterprise is migrating to Shopify. I mentioned last quarter, some of the largest companies in their respective verticals are coming. Obviously now, companies like e.l.f. Cosmetics or Estee Lauder joining us is -- should tell you that the pipeline that we are seeing is quite incredible. Not to mention brands that we talked about a couple of quarters ago, Michael Kors, David's Bridal, Goop, Mejuri, they're now fully launching on it as well.

So I think it's not just that we're winning the enterprise in one particular vertical. It's a broad spectrum verticals, and I think that strengthens our platform. We're also being able to go after more international merchants now with proper go-to-market in places like Europe, for example, obviously, our core markets, North America, Australia and New Zealand, Canada are still doing very, very well.

But it's still -- I mean, it's hard to say this because I'm mentioning all these great names, but it's still fairly early days for enterprise. I think we are the best positioned to attract merchants while making sure that the existing ones also improve efficiency. This is also we're seeing a lot more partner-led deals. We're seeing Europe and Japan do really well right now. I think a lot of these companies are -- these large enterprise, especially the more -- the older ones, the ones that have been around for decades, they're having conversations in their boardrooms talking about where do we go to future-proof platform, where do we go to make sure that we don't miss out on agentic commerce? And all roads lead to Shopify. So whether it's food or manufacturing or education or even automotive, these are verticals traditionally we didn't go after, and now we're winning them. And we're winning them both from in-house built custom solutions, we're also winning them from some of the larger -- we're displacing a lot of the larger existing enterprise platforms.

And I think it's because of the product and, frankly, on the value side, the price-to-value of Shopify's enterprise product is simply best-in-class. And so we're going to keep winning these larger deals. I'm deeply involved in this particular area of our business. I often am and on the calls with the CEOs of these companies. And what I hear is that they're looking to future-proof their business, they want to sort of have what they call their final migration, and Shopify is that partner for them. So I think you can continue to see some of those incredible brands, consumer saver brands continue to migrate to Shopify.

Yes. And Siti, the only point I'd add, because you referenced the attach rate, one of the things that you see in our enterprise business, of course, is all these brands that Harley talked about, is we have more and more success bringing more and more of these large GMV brands on the platform. That obviously gives encouragement to even more brands to follow behind and continue to adopt all the great solutions we have.

And so I think we're at the front end of the funnel in terms of a lot of these larger enterprises maybe starting with just Payments. But when you look at what we're seeing over time, compare that funnel to how many are also taking point of sale or taking other elements of our business, whether it's installments, some of the cross-border things we're doing. And so this, in a good way is a multiyear step in the right direction as we continue to have merchants take on, especially the larger merchants, take on more and more products from us. So we feel good about while there's short-term headwinds with attach rate, what that means long term for our business is a positive.

It is also quite interesting to watch some of these merchants, these very large enterprises, first come to us for a very specific commerce component. So they'll come to us really just talk about Shop Pay, or just to talk about checkout. I mean our checkout, obviously, we think, is the best in the world. And frankly, checkout is so complicated. And we've really nailed checkout on a global scale and -- for scale for these massive merchants. But it's so interesting to see them first come to talk to us about exploring, "Hey, we just want to talk about checkout." And then within a couple of weeks, it's a full stack. It's, "Hey, we want all of Shopify now."

That sort of land-and-expand strategy that we've been implementing for the last couple of years, maybe the last 2 or 3 years or so, it's really starting to work out. And it's really cool to see these brands moving from just one thing to saying, "Yes, just give us all of Shopify."

Moving on to the next question comes from Michael Morton at MoffettNathanson.

Harley, today, you've talked about product search. Tobi talked about it, changing on the [indiscernible] pint. And I would love to know, I know Shopify has a model you will always be where commerce occurs. But as you see product search changing and conversational commerce, what do you envision happening for the product discovery funnel? Does that compress?

And then in your world over the next several years, how do you see the winners and losers of the e-commerce landscape evolving? Is it more merit focused on brands, as Tobi referred to in the past? Anything on how you see the world playing out, not your product road map, but what you see commerce something like several years from now, I think, would be really beneficial to investors.

Yes. Great question. We think about this a lot. Let me say this. I think there's going to be different permutations of how agentic commerce will evolve, how conversational commerce will evolve. It's really exciting. We're all talking about it, we're all excited about it. But the way that Shopify and the way that, certainly, Tobi sees it, ultimately, who's really thinking about the vision around our product he's the one that really understands more than anyone on the planet how commerce and, certainly, retail is evolving, is that whatever permutation will emerge, that we have to be prepared for whatever path wins.

That was the same thing when social commerce starts to get a lot of attention or when this idea of it's not e-commerce versus physical commerce, but it's going to be this idea of commerce everywhere. We think that one of the advantages of being on Shopify will be that we are everywhere that commerce is happening, and we always aim to get there first. So in terms of exactly how these conversations are going to happen, what we're building right now are these deep connections to AI agents. So when a shopper asks, it's a Shopify merchant who appears and that is powered by our Catalog. The idea of this Catalog where buyers ask for products and the agent searches millions of items and displays interactive product cards directly in the chat, where the product is robust, it's in real time, it is accurate inventory, localized pricing, [indiscernible] like smart product clustering, that's what we're bringing to these agentic tools.

And I think in terms of your question around who is going to win on the brand side or the retailer side, the one thing that I will say is this has been happening for years, but you're seeing it now more than ever, is that consumers are really voting with their wallets to buy from brands that they absolutely love. And we've always said that Shopify is the place where consumers go to buy things that they want, things that they have a connection to. More and more, if not entirely, those brands are on Shopify.

The reason I spend time on these earnings calls and, frankly, all day long talking about all the brands coming out to Shopify is I love the fact that these brands are coming on. It's very personal and it's also -- there's a lot of pride for us at Shopify that the biggest companies on the planet are choosing us. But what I'm also trying to suggest is that consumers' favorite brands are on Shopify, and those consumers, they have a different connection with those brands than maybe they historically did where it was just some sort of staple item.

And so I think brands that have incredible product and incredible brand and incredible connection with the consumer, those are the ones that are going to win ultimately. And we're really fortunate that those are the brands that are on Shopify.

Our next question comes from Todd Coupland at CIBC.

I'm wondering if you can talk about your view of the state of the consumer by geography and post tariffs now that we've seen a little bit of data there.

Maybe I'll start with the consumer, and then, Jeff, you can talk a bit about tariffs. Look, consumer confidence for us is measured at checkout. That's the truth. That's what we look at. And on Shopify, shoppers keep buying, they keep returning and demand remains really resilient across channels and categories. So I can only comment on what we see at Shopify, but whether it's the GMV, but like I said earlier, consumers are more selective right now and they're buying from brands they love and those brands are on Shopify. And I think even our Q4 outlook suggests that.

But we're not complacent. I mean this is not a place where we rest on laurels ever. We always monitor these macro factors, whether it's consumer spending, it's household savings, tariffs, frankly, even FX trends and supply chains with a lot of our partners. But the strength of our merchant cohorts are pretty clear. I think quarter after quarter, they're growing faster than the broader market.

In terms of geo, I mean, obviously, Europe is definitely gaining traction for us. I mentioned that in my prepared remarks, which we expect to continue. But again, if you look at consumer [indiscernible] measure at checkout, you saw it through the GMV this quarter, $92 billion. We see that the consumers that care about brands that are buying from brands they love, they're buying them from Shopify stores.

Yes. And Todd, on some of the tariff pieces, on my call -- sorry, on my prepared remarks, I mentioned that there's not been a whole lot of change what we've seen this quarter versus the prior quarters. There was a little bit of a downtick in what we're seeing in terms of merchants in terms of how they're raising their prices. We've basically been tracking that since April when there was a bunch of tariff changes, obviously, in the U.S. It's ticked down a little bit versus what we had seen before.

Pretty much everything else has been consistent versus last quarter. When we look at the trade routes, when we look at the percentage if it is inbound versus outbound in the U.S., when we look at what we're seeing on de minimis, we've not seen any significant impacts on our merchants, at least from what we can tell from the data we have. We obviously put a lot of primacy in our proprietary data. We don't have as much visibility admittedly into some of the P&Ls of our merchants, so we can see from a price perspective what they're doing. Some of them are obviously choosing to, as they think about some of these price levels, pass those on to consumers in some way. And I think others are basically choosing not to do that, that's impacting some of their own P&Ls.

But you can see this in our GMV, our merchant base remains strong, they're adapting quickly. And we're trying to do everything we can to help them on cross-border. So from a tariff perspective, between the April announcements and then obviously the elimination of de minimis, things have been relatively constant from our vantage point.

Our next question comes from Trevor Young at Barclays.

Great. Can you expand upon Shopify campaigns? How do merchants get ramped onto campaigns? How do the economics work? And what do you foresee as the revenue opportunity from that initiative over the next few years?

Yes. I mean, look, I think customer acquisition remains one of the hardest problems that merchants face. We've been working on this for quite some time now. And the way we're sort of looking at it is solving this problem in kind of 2 primary ways. The first is on shop campaigns, which I'll get to in a second specific to your question. The second is on sort of discovery and merchandising enablement, which Shop app obviously plays a role in with helping merchants drive more traffic, increase lifetime value and then Shopify Collective plays a role there as well.

Specifically on campaigns though. I mean, what we're really trying to do is we want to run commerce-native performance ads across these high-intent services. And our strategy has been and continues to be to reinvest any gains we achieved through the ads business back into the growth. We want to ensure our advertising inventory and our scale continues to grow.

And the proof has been really great. I mean we've seen 9x year-on-year increase in budget commitments from merchants this quarter for campaigns. In fact, if you just look at Q3 2024 to Q3 2025, we've actually seen a 4x year-on-year growth in merchant adoption of campaigns. So it's going really well.

And on the product side, this thing keeps getting better and better. We introduced Gross Sales, which is this new default high-reach objective in campaigns. We just shipped an AI-powered ranking improvement, which is showing some really good early results in terms of performance gains.

But net-net, I mean, what we're trying to build with campaigns is the scaled, ROI-positive ad engine that really brings merchants more buyers and also unlocks more brand discovery to connect new consumers. So again, this is an area that we're going to continue to work on. We think that early signs have been good. But we whenever there's a merchant pain point, we always much prefer to solve it for them than have them solve it themselves. And I think customer acquisition is one of those that we're going to keep working on, and it's already going pretty well.

And our last question will come from Mark Zgutowicz at Benchmark.

Harley, on the last quarter's call, you mentioned more to come on advertising opportunities. And if we think about your merchant spending, roughly 20% of their GMV on advertising, is there a longer-term strategy in terms of a piece of that that you want? Maybe if you could talk a little bit about that. And then specific to ChatGPT, I'm curious if there are ad rev share opportunities there with -- in the future with promoted or sponsored listings for you.

Yes. I mean I'm not going to talk about any particular economics of any particular deal. What I will say when it comes to how we make money from these channels is we've always been able to monetize when our merchants do better. So this idea that merchants sell more, Shopify makes more, we monetize the GMV, we monetize Shopify Payments. That will always be the case across any new channel. And any specific individual deal that has additional economics, we're not -- we don't disclose.

To your first part of your question around sort of ads, as I said in the last question, it still remains one of the hardest problems merchants face. We think we can do a better job. We have a ton of data, we have a ton of scale to do this with. The goal here with -- when it comes to advertising for us is that we want to drive greater scale against this opportunity. The way that we do this is we were testing, we're measuring and we're reinvesting to drive really great outcomes for merchants in the future.

I still think it's still in early stages. I'll give you a little nod to the fact that you should tune into our next Shopify edition, if you're interested in ads because we're going to spend some time on that as well. But this idea of focusing both on campaigns and then also focusing on the discovery and the merchandising elements through the Shop app and Collective, you're already sort of seeing quite a few breadcrumbs that we're laying down here to show that this is an area that we think we can add even more value to.

And again, it's one more thing that we do. We want to make sure that the relationship that we have with the millions of stores who use Shopify is way more than simply being just some software provider. We are their partner in commerce. And as commerce gets bigger and more complicated and more interesting, that they can continue to rely on us to be their partner. It's the reason why the biggest brands come to us and it's the reason why they stay with us.

Maybe I think it was the last question, so maybe I'll just spend a quick second or 2 just on some closing remarks, as I've been doing the last couple of quarters here. I just want to kind of say this in case it's not clear, but I hope what is obvious now to all of you is that we are doing exactly what we said that we do quarter after quarter. We built AI agent tools last year, now we're partnered with everyone that matters. We built Sidekick 2 years ago, well before any of the hype around that. And in Q3, 75,000 -- excuse me, 750,000 shops used it for the first time. 8 million used it, in October alone, we saw 8 million conversations happen there.

So we built enterprise on-ramps into Shopify almost half a decade ago. And now the Estee Lauder Companies, David's Bridal, Aldo, Michael Kors are all choosing us. We're not guessing the future of commerce here. We're really building it.

And the thing that I'm most impressed with and most proud of at Shopify is that I think we're balancing 3 critical things simultaneously here. You're going to see us investing aggressively to capture these opportunities. You're seeing us maintain profitable margins, I think, that demonstrate our discipline. And you're also seeing us deliver durable results quarter after quarter. And that is compound execution. And I don't think there are many companies out there that can do all 3 at once at this scale, and we are doing that.

So with that, I just want to say thanks for joining the call. And on behalf of Jeff and Carrie and I and the entire Shopify team, we're back to building for our merchants. Thank you so much for joining.

And that concludes our third quarter 2025 conference call.

Software sector here at Citi. Welcome to day 1 of the tech conference. We're happy to have Shopify's CFO, Jeff Hoffmeister. Jeff, I think it's been about 3 years since you joined the company, and appreciate you making the appearance here. I thought it would be great 3 years ago, I think shortly after the prior Shopify CFO presented, they announced you were joining. And so...

It sounds ominous.

Yes. Hopefully, no surprising news this time.

But it'd be great if you could just start us off, walk us through what were your priorities when you joined Shopify? How would you sort of measure how the company is doing against those goals? And how are you thinking about the years ahead?

Yes. Obviously, Shopify is an amazing company. It had a lot of success before I joined. And I had known in my prior life, I had worked with Shopify, with Tobi and the team on taking them public. So I had a long-standing relationship with Tobi, with Harley, with a bunch of others. It's obviously a business which has done very well to your -- over time.

To your specific question, for me joining, it was coincided with us thinking about and me trying to do my own part along with the whole team in terms of how we think about free cash flow, how we think about free cash flow margins. Obviously, there were some changes we made to some elements of the business just in terms of mix shift, and specifically from a financial perspective, we changed a little bit how we talk about guidance.

And again, some of the -- just kind of the way we talk about the free cash flow profile of the business. But this was me joining Tobi and team and trying to accomplish some good things. And obviously, the business over these past few years has done really well, as you can tell by the numbers.

Sure. And I think the efficiency that, to your point, it was underway maybe a little bit before you joined, but exiting logistics business, really doubling down on efficiency, every dollar kind of being scrutinized.

Talk to us a little bit about that in more detail because obviously, the growth, I think, gets a lot of attention, but what is kind of that underlying philosophy that underpins this great free cash flow and margin expansion story?

Yes. Well, as we've talked about on some of the calls, as you know, we've tried to be really thoughtful in terms of -- and we've talked about now for 3 or 4 calls in terms of getting to a free cash flow margin profile that we think is appropriate for this business and not looking to maximize more for free cash flow margin than getting to a level which we think demonstrates the health of the business and allows us to continue to invest in the future, and as we think about -- and there's various time lines in terms of how you think about the investment thresholds for all of those, right?

As we think about a product that, hey, maybe we want to introduce a new product and it's going to take us a year or 2 to develop a little bit like what we announced with -- I'm sure we'll talk about this more later, catalog on the AI side, but that something in motion that's going to be a multiyear effort and obviously, will hopefully reap rewards for years and years to come.

And you see that with a lot of the -- it was roughly 2.5 years ago that we introduced a lot of the things that fall within other merchant solutions. So you think about like tax, some of the things we're doing with installments, B2B, a real push on point of sale, a real push on international, a lot of those things, they just get momentum in the first year or 2 and then really take off.

And so we have various time lines in terms of how we think about those investments on the product side, and we also have talked a lot about the time lines and thresholds that we have on the marketing side, for example, right? We've talked a bunch about some of the paybacks and how we think about that. And again, international is a piece where we're continuing to make a lot of investments. And you've seen that in some of the product announcements in terms of some of the rollout of capital and payments and some things like that.

Right. Right. And we'll dive into the products in a minute, but I think I would be remiss not to start off on the strength that you've seen on the top line. I mean, GMV and revenue growth of 31% last quarter, pretty remarkable considering everything going on.

So maybe just what are some of your observations around the broader e-commerce and consumer environment? Obviously, a lot of changes as it relates to de minimis exemptions and everything. And how are you kind of seeing that -- those trends continue here into September?

Yes. There's a lot in there. I'll start maybe in terms of the -- to your point about the top line. As I mentioned, it's a month or so basically since the last call, I talked about the strength we saw in Europe, which we've had for several quarters right now, the last couple of years, the GMV growth rate, the revenue growth rate in Europe has been very strong.

It had an even an additional uptick last quarter. And I also mentioned the same thing in the U.S. The U.S. has been very strong for us for a while, and Q2 was an even better performance. And it was also performance across all the different merchant sizes. As we think internally, we look at various stratification levels on size of merchants in terms of what their annual sales are.

And you look across those various sizes, the merchants were strong across the board. To your point, we recognize that's in contrast to some of the other things that we're seeing out there. You talked about de minimis. I can talk about some of the tariff pieces aside. But we've really, I think, testimony, again, and when I talked about Europe, I talked about the 4 to 5x growth rate that we're seeing in a lot of countries, even more than that vis-a-vis the e-commerce growth rates in those countries.

So I think what we're doing is everything we can to help be an accelerant behind the merchants, not taking credit for their success, just helping them take advantage of the tools that we can give them so that they can be even more effective in getting more consumers and advancing their business. And I think we're doing a good job of that in Europe.

I think we've got the product market fit in a good spot in Europe. And I think we've been very thoughtful in terms of how we had some of the marketing spend to support that. So we are -- and at the Investor Day a couple of years ago and also in Harley's prepared remarks, we talked about how frequently almost every quarter where our merchants outperform the overall e-commerce growth rate in terms of quarterly cohorts. So I think we're doing some things to help the merchants be more successful.

Yes. And I almost feel like that cap maybe has even accelerated since the Investor Day, which has been great to see. And I guess just any observations in the last month on kind of the macro environment since you last reported, it's pretty broadly consistent with what you said.

Yes. I'm going to have to stay to the comments from the last call. I don't want to be given kind of inter-quarter guidance. I would go back to what I said on the call, which as we talked about some of the things I talk about -- to your point, I can talk about the tariff piece, I can talk, including de minimis and some of the things we've seen on the buyer side.

I went into it -- the call a month ago, I went into less detail on some of the stuff on the buyer side. The call before that, I mentioned that one of the things -- one of the wonderful things that our merchants are enjoying is that on the margin, their consumer base tends to be a little bit higher in terms of wealth income, and that's helped, I think, in some regards for them in terms of tariffs and the impact, we talked about de minimis, we talked about price levels. We talked about inventory.

All those comments are ones I tried to give pretty good detail on. And we spend the majority of the time -- I spend a majority of my time focusing on the internal data. Like as you know, you can go out there in the press and you can hear one story and then an hour later, you can hear something completely different.

Some of it is very retailer specific in terms of what we're seeing. But for us, in terms of the impact of tariffs, we're trying to be very specific on what we're seeing with our own data, and that's what I tried to cover on the last call. And so again, de minimis, we -- you've kind of alluded to it twice.

Like on the de minimis piece in the call back in May, we were basically a month into what had been announced with China, and we talked about that being roughly 1% of our GMV. And then on the last call a month ago, I talked about roughly 5% of our GMV was subject to de minimis and then how that was allocated more broadly.

And so as we look at those various trade routes, obviously, we monitor that daily in terms of how we think about this stuff. And as I mentioned in the last call, we had not seen any impact from China.

Right, right. And that also includes sort of the supply chain and logistics distribution side, too.

Yes. Obviously, post -- you alluded to Deliverr before. Post Deliverr, our vantage point on fulfillment is a little bit different than it was before. But obviously, we still have the partnership with Flexport. We have partnerships with a few others in the 3P space. And of course, as we monitor tariffs, we kind of look through the supply chain as best we can to see that.

Right, right. Is there a scenario where you see these tariffs actually as a positive for the business in the sense, I think last call, you did allude to some higher-than-normal price increases or inflationary dynamics within your merchant base. Obviously, business is a take rate business in parts of this. Do you think that's a possibility?

Well, I guess that the -- it feels a little odd to be cheering for tariffs. I'm certainly not doing that. What I would say is that -- but two things. Number one, we have seen some price increases. You're absolutely right. And I alluded to that on the last call that of all the different things when we looked at inventory levels and trade routes and de minimis and all this stuff, we had -- that was the one spot where we had seen some movement in prices. And it's -- we look at it on a merchant-by-merchant basis. And logically, there's just some segments.

Maybe you're in an industry which is a little bit more competitive, it's probably a little bit harder to raise prices. Maybe if you're in a different competitive position, you probably have a little bit more ability to do that and/or if your supply chain is linked to spots where maybe you've seen a little bit more tariff impact, and that's a logical spot where maybe you would need to do a little bit more.

I do think just as I take tariffs and kind of elevated it to kind of dynamic macro uncertainty, movement change, I think that works really well to our platform only because the quality of the engineering team, the product development team we have is we can make enhancements to the platform very quickly. And we've done that over the last few months.

We've made a lot of changes, tweaks, things here or there, even if there are a bunch of small ones that in the aggregate add up to some meaningful change to help merchants deal with changes in cross-border trade, changes in pricing, changes in inventory, all those things. And so what that does is essentially help differentiate our platform versus anything else out there. And that's not something where I expect some sort of immediate impact or a bunch of merchants say, oh, I have to shift to Shopify because of all this.

But I do think it is a continuation of the long-term trend and another demonstration of a product first, build an amazing product and then that will get more merchants to realize how impactful to their business it can be if they use that platform. I think that's one of the things we've been able to do over the past few months.

Right. And on that thread, I mean, the international growth was really impressive last quarter, accelerating from Q1, which was already a pretty high number. What would you attribute that to? Is that kind of driven by some features and stuff you put in the product? Or is this kind of more go-to-market, maybe a little bit of both? I would love to just hear how you're thinking about that.

Yes. It's a little bit of both. I think we've -- it's really a couple of years ago that we started to make a more concerted push internationally. Obviously, we had meaningful international revenues if you go back several years. But -- and we've disclosed and we disclosed on a quarterly basis kind of what is percentage of revenues.

Europe is -- it's a meaningful portion of our business, depending on how you look at it on GMV or revenue or merchant count. I mean I think of it as roughly 1/4 of our business, and it's been growing. I mean it's all in the disclosures. And part of it is product market fit, part of it is introducing more products. As I mentioned, we've introduced capital. We've had it in 4 countries for a long time. We recently introduced it in Germany a couple of months ago. We introduced it in the Netherlands a little bit over a month ago.

We obviously introduced payments in 15 new countries in Europe. That's something we talked about 2 calls ago. And I think we've been very good and thoughtful in terms of how we have marketing support some of that. And I think the brand of Shopify throughout Europe is very strong, just the brand recognition, the power of the brand is good.

So all those -- and as you know, like when you start to get above I don't know if I'll say a tipping point, but you start to get to a point where you are the brand that people think just intuitively, like that's the platform I should be building on. And so you get to a point where you've had enough successes that just kind of brings more success. And I think that's part of what we're seeing.

Right. And I know you don't specifically guide to GMV for the year, but obviously, there's some range of GMV within the quarterly guidance. But just the building blocks of that, how are you thinking about that kind of between new customer acquisition versus same-store sales effectively? Is that any different than kind of the most recent quarters?

No, it's not really that different. I talked about one tweak on the last call, which I'll come to in a second. But we've been -- I've been most vocal about this in Europe and talking about this in the last few calls where I've talked about it's roughly half and half. Half new merchant acquisition, half same-store sales growth in terms of helping existing merchants. And for us, that's a merchant that's been on the platform for over a year when I talk about same-store sales growth.

And even though I've been most explicit about it in Europe, I've also kind of hinted out, made references to in some of the Q&A following the calls that it also has applied to North America. It's been roughly half and half. This past quarter, the one that we announced a month ago, only because of some of the things we're doing on the paid trials and some of the changes on subscription solutions that had a slight tweak to it.

But if you look over a multi-quarter period, it's been pretty consistent in terms of evenly split. And so that to me says, one, as we alluded to before, we're helping merchants be successful, and we've talked about that in a few different ways.

If you go back to the Investor Day, what's now a couple of years ago, I talked about -- and I had a chart which looks at the various cohorts in terms of how merchants on quarterly cohorts on our platform have essentially outpaced e-commerce more broadly.

Harley gave an updated statistic on the last call about that. So we're, one, helping existing merchants be more successful. And two, I think it also speaks to the merchant acquisition engine working.

Right, right. Got it. And on the new customer front, obviously, you've seen a lot of strength in some of the company-specific stuff you've done on the trial motion. One topic we often hear kind of in the SMB space is just the topic of search engine optimization, the impact that's having on some of the marketing automation vendors.

But I guess, specifically for Shopify, how do you think about your own lead gen as it relates to SEO? Has that been a headwind at all for you? Or do you kind of have a diversified enough strategy to offset any pressure that might be there?

Yes. I think just for our own marketing overall, obviously, we've talked a bunch about kind of some of the different strategies we're using. And we had one call in particular, which is now, I think, 5 calls ago, where we went into some of the things that we're building, and we've tried to use a couple of case studies in terms of the different platforms that we're on.

And I think we've been doing a very good job of building a lot of things internally, and that's really how we do this in terms of the marketing space, a lot of different tools, algorithms, models internally and also doing a very good job of pattern recognition and the data that we see, which we get from the platforms, right? Because the platforms will give you information in terms of kind of this is how effective your ads were and this is what you see, and then we correlate that with what we see.

And to the extent that we can find signal much faster, that allows us to be much more effective on this. So SEO and all the different platforms we work on to us is just a combination of how do we think and we try and be as dynamic real time on this as possible.

How do we think about the returns across the different platforms? And where does that next incremental dollar of marketing spend go? And so any platform, channel, geography, on a given day, week, month, it may go up or down in terms of efficacy, but that means we can be thoughtful in terms of where do we shift that dollar, all staying within guardrails.

Right. And if I recall at your Investor Day, I remember sort of talking about reducing your paid search budget at that point and kind of seeing incremental leads and traction even after doing that. So...

Yes. We're always testing. We're always trying to find what's the most effective way to do it. And there's a balance between how do you think about paid marketing, how do you -- we don't do a whole lot of product-specific marketing, but how do we think about certain products or geographies or things we want to support.

And obviously, the Shopify brand is very strong, and I mentioned that before. And so there's a balance between where does the Shopify brand in and of itself pull in merchants and how do we think about the platform, the time, the merchant type that we want to get.

Right. Great. Let's definitely talk about AI. I know that's -- we've gone through half the chat without mentioning it. So last call, a lot of great announcements, examples that Harley gave on the call. Maybe just for the audience here, there's a lot of folks in the room, like what is Shopify's approach as it relates to helping merchants with AI? What's the strategy?

Yes. Well, there's a couple of pieces. And obviously, it started with Sidekick, most specifically, which is something that Tobi announced a while ago now. And that is doing what we can to -- and this is why we call it Sidekick to basically capture the brain of an entrepreneur and have it be the Sidekick, the kind of person on your shoulder, helping give you advice in terms of some decisions you should be making to grow your business.

And that is, in its own way, separate from everything that Harley talked about last quarter in terms of the things that we're doing, the partnership with Microsoft and things we're doing with catalog and checkout and all that. As it relates to Sidekick, like that is a technology which is focused on the merchant.

And so I think what sometimes lost is a lot of people think about what is being developed in Agentic commerce for the consumer, which is excellent and needs to happen because for this "network" to happen, both sides of the network need to grow and need to get more sophisticated.

And actually going a little bit back to your SEO comment, if you're a merchant and if the way that consumers find brands is going to change, then you need to adapt and get more sophisticated at the same time, and we're trying to make sure we have the tools for merchants to do that.

And so in the "SEO-driven world' where you had to make sure you're trying to figure out the keywords or things to be found as a merchant, obviously, as those algorithms as the search platforms as a starting point for the consumer on their buying journey changes, how does a merchant adapt to that.

And so we want to make sure that we are -- the catalog is effectively making sure we're the source of truth, the taxonomy, the library, the hence the name catalog for all the things that merchants have on their websites and capturing that in the most factual accurate way.

How do we use our excellence in checkout to continue to via partnerships, make sure that the checkout experience is as wonderful as possible for both the consumer and for the merchant. And how do we help the merchant overall just succeed in a way where they feel like as a merchant, if you're not using the Shopify platform, you're making life harder than it should be. And that's what we're really trying to do.

Right, right. Got it. And in terms of the way this flows through to the financials, is there plans to kind of have incremental monetization of these AI features? Or is it, hey, we just want to make our merchants more efficient. If they're more efficient and can target customers better, obviously, you get paid for that at the end of the day. What's kind of the monetization strategy?

Yes. When you look at Sidekick, this is something that's really been built into the platform. And when you look across all of tech, as you know, there's some business models that are built on monetizing AI. There are some companies that have both some AI platforms that they charge for and other stuff that's built into the platform.

For us, right now, this is what we're building into the platform. This is separate from some of the things we talked about Agentic commerce, right? If someone is coming in through an LLM and they're using Shopify Payments or a form of Shopify Payments in the engine, obviously, we get monetized for that.

But as it relates to the advice, the Sidekick, helping merchants be successful, where we are right now is building it into the platform. And as you know, like we are still in the very early stages of all this. So business models will change for everyone in this ecosystem, some a little bit, some drastically. But from our vantage point, we're trying to just help this whole process be successful as we do think Agentic commerce is good for the consumer.

Right. And as we think about Agentic commerce for Shopify, I mean, is your sort of take rate and opportunity in an Agentic-driven commerce kind of the same or greater than in a traditional sense? Like how should we think about that?

Yes. It's a good question, but it's just too early. So -- and it's -- and that's just a function of a lot of these -- a lot of the LLMs are figuring out how they're going to do this. Google is adapting. Like everyone involved in the commerce side is adopting, and so there will be some changes I don't think we've seen yet.

But I do know from our vantage point, we have an amazing set of merchants that we work with. We've talked about our market share in commerce. We talk about all the different just in terms of running these businesses, effectively the platform that runs these businesses, all the insights we get on that in terms of just from how they are themselves running their business, how they're thinking about marketing their business, how they're thinking about getting more consumers, all that stuff.

So I think we're in a position where with the strength of our checkout, our knowledge of commerce, the products that we've built and everything there and especially with what we set in motion a while ago on catalog and how catalog has manifested itself is, again, kind of the source of truth for what's out there on the websites for our merchants. I think that puts us in a good spot.

Great. And I wanted to come back to some of the product innovation that you hit on earlier. But just for the audience, as we think about the biggest drivers for Merchant Solutions growth going forward, obviously, payments is still the bulk of that business, but there have been a lot of new products that seem to be doing well, whether it's tax, installments, markets, et cetera. How would you sort of stack rank the biggest growth drivers on the Merchant Solutions side of the business?

Well, I guess I would -- maybe I'm going to take it slightly differently and think about just the growth drivers overall, some in Merchant Solutions, some not because some of them are just broader. Like we've talked about international a lot, like that's -- that remains a very large opportunity, right? Even as successful as Europe has been as a percentage of our revenues, it's -- again, that's roughly 1/4, and we disclose all this by region. Like we -- do we have a lot of presence in Latin America? Yes. As a percentage of our revenue, is it still very small? Yes.

Like in terms of what are we doing in the Middle East, what are we doing in Africa, what are we doing in India, like there's significant opportunity, Southeast Asia. As you know, we're strong in Australia, Japan, New Zealand. But there's a lot of countries where we have massive opportunity still. And so international is a big one.

B2B is another important growth driver for us for -- in addition to B2B in and of itself, it's doing two things. It's essentially enhancing what we're doing for enterprises, which is another growth driver I'll get to in a second, but it's also getting us more and more industry verticals where we're serving and it's just really broadening the appeal or maybe the awareness by merchants in Shopify, and that's helped a lot.

Enterprise continues to be an opportunity, not only in terms of what we're doing in the actual revenues, but just the breadth of things that merchants are buying from us. And Harley talks about that on a lot of the calls with a couple of big wins. And for some smaller merchants, when they see some very well-regarded large multinational retailer using our platform, that gives them the confidence, there's no way I'm ever going to outgrow Shopify, and so enterprise is helpful in itself, but it also brings a lot of ancillary benefits.

Retail point of sale, if you will, is another thing which even though roughly 20% of commerce is online, there's 80%, which isn't, and so this gives us access to the other 80%. There's a lot of things -- good things going on there. We've talked about advertising. There's just a whole slew of things in addition to what's in other merchant solutions.

Capital is the one in other Merchant Solutions that's been around the longest. So -- and it's had continued success. And as we talked about, the two new countries where we recently introduced it. So that one is one of the bigger drivers of that segment. But you're absolutely right when you look at like tax has been very successful, installments has been very successful. The FX feature functionality of payments, which is also an other Merchant Solutions have been very successful. So we feel good about it.

Yes. I guess is there anything as you look across the product portfolio that maybe hasn't gone as well as expected and could be an opportunity as you kind of reexecute and reimagine it?

Well, I think the biggest thing for us right now is because a lot of these products are still new, like I don't want it to get lost that these products are still new. The international push is still relatively new, like we have massive opportunity there. And so as we think about durability of growth going forward, it's a compilation of the S curves, the growth rates of all these products that really says, all right, of all these different segments, even if I had one maybe slow down or trip or something, I have so many others that can pick up the slack. But of course, our goal is to have none of them slow down.

Right, right. You hit on enterprise and that opportunity. Clearly, the accelerating GMV growth, I think, is another strong signal that you're adding larger merchants to the platform and certainly we can see from Salesforce and Adobe's disclosures that their commerce offerings kind of continue to slow. So what have been the big unlocks in the enterprise space? And how have you kind of seen that competitive landscape evolve?

Well, I think for the enterprise space, it's -- I think, sometimes forgotten the capabilities of the platform really going into this because it's about 3 years ago -- roughly 3 years ago where we really started to make a bigger push to go to the larger markets. Plus at that point, still had been primarily a mid-market solution.

But when you think of the flash sales that we've done for some of the biggest celebrities out there and some of the biggest brands out there that will have a huge spike in traffic on a given day. So for example, if a famous singer who I won't name who like has a big merchant drop and says tomorrow at noon, we're having a merchant drop and the demands on the network on our platform are super high, and if we can handle that, we can handle what some multi -- large multinational needs to do on any given day in terms of what they're doing.

And so enterprise for us, I won't call it only a go-to-market effort, but it was largely kind of how do we build the system around what is already there from a technology perspective, and so we started to build some of the partnerships with some of the SIs, which have been very helpful for us because whether the systems integrator is sitting alongside us or the systems integrator is advising the retailer or the merchant on what's the best technology out there, that's wonderful for us, to have like a third-party assessment of what's the capabilities of the platform because we have invested a lot in this platform.

And we've built some great things, and we have a team of engineers that can build and enhance the product very quickly. And so how that platform continues to stand out, it's "easier" for the systems integrator to say Shopify is the best platform that use a merchant should be using.

We had to grow some of the sales force, and that's something we set in motion a while ago is we've accomplished that in terms of general size. So it's not like we need to add a bunch of people there. B2B was a little bit different for us, but that's where we had to build some new capabilities. We had some B2B functionality in the platform before because even when you go back to some medium-sized merchants, for example, they may have the vast majority of their business be direct-to-consumer, but they probably had 5% or 10% that they maybe were selling through some bigger brand or retailer.

And so they had a B2B element of the business. And so this was something which a couple of years ago, we said, hey, we should really make a concerted effort here, build out some of the modules. Sometimes it in terms of industry-specific functionality can get very nichey.

And so it's not like you're building a new engine, but you are building out the UI, some of the flows, some of the things that help that. And that's helped the enterprise a little bit, too, because it's just the larger the business, the merchant is, the more likely to have a B2B piece. So that's helped.

So in a lot of -- we say enterprise, but I'll just say larger merchants. So a lot of these larger GMV merchants, like it may be an Italian or French fashion house, which is still run by the founder or one of the children of the founder, and so there's still like founder mentality to these businesses, and that really helps, let's say, merchant we know and understand how they make decisions.

But ultimately, we're helping platforms, merchants be more successful, and I think as we have -- and I alluded to this before, as we have more and more changes because of AI and other things, it makes a lot of merchants that have their own in-house platforms up into this point, say, I just can't adapt as quickly as Shopify can for me, and I think we're giving merchants for the first time a third-party software solution, which is better than anything that they could have had. And so in the past, they would have decided to build it.

And so this enterprise segment is part of a great multiyear continued march for us in terms of maybe for one of the big brands, we get -- many of them have a lot of commerce stacks. So maybe we get one of their commerce stacks or maybe we just get payments across all their commerce stacks or maybe we just get A, B and C, and we kind of slowly start to build trust and build more and more solutions with them. And that's playing out in terms of what we're seeing in the funnel.

Right, right. So a lot of mix of displacing homegrown as well as some of the legacy.

It's still -- at this point, Tyler, it's still more homegrown than anything else, but we are definitely doing some displacements of other vendors.

Got you. Got you. I did want to hit on payments because obviously, that's an important part of the business. So how do you think about just the ability to potentially negotiate better economics on the payments business over time? And obviously, there was a somewhat recent partnership with PayPal. So just kind of walk through those dynamics for the audience.

Yes. I don't think there's anything in terms of renegotiating a contract where people would just say, oh, this fundamentally changes the economics of Shopify. I would -- we've obviously been successful in helping a lot of merchants for many years. And so we've been a platform that I think from a payments provider perspective, you want to make sure you're working with Shopify, just like we want to make sure we're working with all the platforms out there that merchants want to use.

I think that's one of the things that's made us very successful is we try very hard to make sure that if a merchant wants a capability, a payments partner, a marketing partner or whatever, like let's give them the capabilities to do that.

Let's put that all in the admin, which is what we did with PayPal. Let's put that all in the admin. So this is super easy for them to use whatever they think will help their business be more successful. It's a little bit like what we did with Stablecoin, too.

Like there are certain geographies or niches, B2B is one where we say, you know what, we think this can have a real impact. Not everyone is going to use it, but that's okay. And that's some of the things we've seen with the Amazon partnership, too.

Like let's give the merchants the tools to be successful. And so from a payments perspective, yes, our payments contracts generally come up every few years, and we have a great relationship with Stripe.

We have this relationship with PayPal, which you just alluded to. We've worked with them for a while. We worked with them in France, obviously, working with them now in the U.S. We work with Adyen in Europe, which was a natural evolution as we were doing more in enterprise, and we're doing more in Europe, and that's obviously a particular strength for Adyen, and we had a few merchants in Europe that came to us and said, "Hey, we'd love to be able to do more and more with Adyen." And this obviously goes back a couple of years, and we obviously want to make sure that was in the platform.

Right. Right. And lastly, I did want to hit on margins. So obviously, free cash flow margin improvement was a big focus for you since you came in, and we've certainly seen that growth in the business, which has been great to see. But what are the sort of the next big areas of efficiency you're targeting? And how are you thinking about the role that AI plays in that kind of internally?

We've used AI in a lot of different segments internally. And we've also, as you've seen Tobi's memo, we've made sure that this is something people across the company use it, irrespective of department. And so I can tell you there are certain departments which have seen more aggressive adoption than others.

And this is -- for us, this is acceleration of the capabilities of the team. How can we make an engineer accomplish more on a daily basis? How can we make our salespeople more efficient? How can we make our finance people more efficient, et cetera? How can we make our support capabilities even better? And it's not from a support perspective, for example, to say, well, we need to get headcount from X or Y.

It's saying, let's make AI a powerful tool so that if a merchant calls in and wants to ask a question, maybe a "dumb" question, which they wouldn't normally ask a human, they feel like they have a sophisticated agent, AI agent that they can ask a bunch of questions with kind of work with that and if they have elevated questions and they get to a person.

And so from our vantage point, it's how do we use AI throughout the business and give the whole business more leverage. And you can see that and obviously us keeping headcount flat for 2 years now and continue to grow the top line very meaningfully. And that's a function of using AI or automation more broadly to do everything we can to continue the product development, the engineering engine moving as quickly as possible.

Yes. And you think that's kind of sustainable in terms of keeping headcount flat with the top line growth?

Yes. Without giving specific guidance on anything, I think we feel good about what we can do with this headcount.

Awesome. Well, great. I know we're running out of time, Jeff. Thank you. Appreciate the discussion, and thanks, everyone.

Thank you.