Shopify Inc. (NASDAQ:SHOP) Q3 2025 Earnings Call Transcript

Shopify Inc. (NASDAQ:SHOP) Q3 2025 Earnings Call Transcript November 4, 2025

Shopify Inc. beats earnings expectations. Reported EPS is $0.3434, expectations were $0.3366.

Carrie Gillard: 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 that 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.

Harley Finkelstein: 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 agentic 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 reflexively 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 story 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 I 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 when 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 mean 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.

Q&A Session

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 with 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 merchant size, 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 at 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 hard 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 it 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 e-commerce 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 while we’re scaling horizontally across geographies, we’re also growing 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 moving to 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 it’s 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 dollar 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 Ladurée. 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 & Bourke, 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.

Jeff Hoffmeister: 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 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 force 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.

Carrie Gillard: 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.

Colin Sebastian: 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.

Harley Finkelstein: 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.

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

Craig Maurer: 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.

Harley Finkelstein: 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 [ Shopify ] 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.

Carrie Gillard: Our next question comes from Andrew Boone at JMP Securities.

Andrew Boone: 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?

Harley Finkelstein: Yes. 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.

Jeff Hoffmeister: 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.

Carrie Gillard: Our next question comes from Siti Panigrahi at Mizuho Securities.

Sitikantha Panigrahi: 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?

Harley Finkelstein: 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.

Jeff Hoffmeister: 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 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.

Harley Finkelstein: 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.”

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

Michael Morton: Harley, today, you’ve talked about product search. Tobi talked about it, changing on the cheeky 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 in 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 looking like several years from now, I think, would be really beneficial to investors.

Harley Finkelstein: 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, [ even if it is ] 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 that I spend time on these earnings calls and, frankly, all day long talking about all the brands coming on 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.

Carrie Gillard: Our next question comes from Todd Coupland at CIBC.

Thomas Ingham: 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.

Harley Finkelstein: 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 [ confidence ] 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.

Jeff Hoffmeister: 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 and 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 that 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, and it’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.

Carrie Gillard: Our next question comes from Trevor Young at Barclays.

Trevor Young: 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?

Harley Finkelstein: 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.

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

Mark Zgutowicz: 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 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.

Harley Finkelstein: 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 through GMV, we monetize through 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’d do quarter after quarter.

We built AI agent tools last year, now we’re partnering 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.

Carrie Gillard: And that concludes our third quarter 2025 conference call.