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    SHOP
    Earnings call· Mar 2026(Q1 FY26)

    SHOPIFY Q1 FY26 earnings call SHOP

    May 5, 2026 Source

    Executive summary

    Shopify Q1 FY26 — Strong GMV and Revenue Growth Driven by AI Adoption and Payments Penetration

    Shopify delivered robust Q1 FY26 results, showcasing strong GMV and revenue growth, fueled by increasing AI product adoption and payments penetration. The company emphasizes its compounding data advantage and the demand conversion flywheel, positioning itself at the center of the AI-driven entrepreneurial era. Management remains focused on execution and leveraging AI for internal efficiency and merchant success.

    Highlights

    5

    • Q1 GMV reached $101 billion, up 35% year-over-year (30% constant currency), marking the second consecutive quarter over $100 billion.

    • Revenue grew 34% year-over-year (32% constant currency) to $3.2 billion, the strongest quarterly growth rate in over 4 years for the business and U.S.

    • Free cash flow was $476 million, delivering a 15% free cash flow margin, marking four consecutive quarters of mid-to-high teens FCF margins.

    • Shopify Payments processed $67 billion of GMV, up 41% year-over-year, reaching 67% penetration (up 3 points from Q1 FY25).

    • Weekly active shops using Sidekick were up 4x year-over-year, with over 12,000 custom apps created in Q1 using Sidekick.

    Concerns

    3

    • Credit was the largest component of the year-over-year increase in transaction and loan losses, which rose to 3.7% of revenue from 3.2% in Q1 FY25.

    • Increased LLM costs, driven by growing merchant usage of AI products like Sidekick, partially offset gross margin efficiencies in Subscription Solutions.

    • Europe will be a near-term headwind to Global Payments penetration metrics due to recent launches, though expected to be a tailwind long-term.

    Guidance & targets

    4
    CategoryTargetConfidence
    Q2 Revenue Growth
    high 20s year-over-year
    high materiality
    High
    Q2 Gross Profit Dollars Growth
    mid-20s
    medium materiality
    High
    Q2 Operating Expenses as % of Revenue
    35% to 36%
    medium materiality
    High
    Q2 Free Cash Flow Margins
    mid-teens
    high materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    North America (Revenue)
    North America had its strongest quarterly growth rate in over 4 years.
    		—33%——
    Europe (Revenue)
    The pace of growth in Europe speaks to the opportunity that remains ahead.
    		—42%——
    Asia Pacific (Revenue)
    		—30%——
    Europe (GMV)
    Delivering continued mid-30s growth in constant currency against an outstanding 2025 reflects years of deliberate investment.
    Constant currency growth: 35%
    		—48%——
    Offline (GMV)
    Accelerating from Q4, with the fastest growth from merchants operating more than 20 stores.
    Location growth for merchants with >20 stores: 50% YoY
    		—33%——
    B2B (GMV)
    Broad growth across both new and established merchants, with several B2B features now available on standard subscription plans.
    		—80%——

    Operational metrics

    34
    Gross Merchandise Volume
    $101 billionup 35%
    Q1 FY26

    GMV strength was broad-based across geographies, merchant sizes, and channels.

    Free Cash Flow Margin
    15%
    Q1 FY26

    Fourth consecutive quarter of mid-to-high teens free cash flow margins.

    Shopify Payments GMV
    $67 billionup 41%
    Q1 FY26

    Processed on Shopify Payments, reaching 67% penetration.

    Shopify Payments Penetration
    67%up 3 points from Q1 FY25
    Q1 FY26

    Management sees a clear path for the rate to continue moving higher through deeper penetration across geographies and new country expansion.

    Shop Pay GMV
    $35 billionup 59%
    Q1 FY26

    Outside the U.S., Shop Pay GMV grew over 70% as expansion continues into more markets.

    International GMV Growth
    45%
    Q1 FY26

    Cross-border GMV represented 16% of total GMV.

    Cross-border GMV as % of Total
    16%
    Q1 FY26

    Part of the 45% international GMV growth.

    Weekly Active Shops using Sidekick
    up 4xyear-over-year
    Q1 FY26

    The number of weekly active shops using Sidekick in Q1 was up 4x year-over-year.

    Custom Apps created with Sidekick
    over 12,000up over 200% quarter-over-quarter
    Q1 FY26

    Created in Q1 alone, demonstrating rapid adoption of AI tools.

    Shopify Flows generated with Sidekick
    nearly half
    Q1 FY26

    Used for business processes for largest merchants, indicating significant AI integration.

    Theme Edits from Sidekick
    multimillionsgrowing over 1,000% in a single quarter
    Q1 FY26

    Demonstrates merchants getting more done with less and running smarter businesses.

    AI-driven Traffic to Shopify Stores Growth
    8xyear-over-year
    Q1 FY26

    Early signals on AI channels are compelling.

    Orders from AI-powered Searches Growth
    nearly 13x
    Q1 FY26

    New buyer orders are occurring at nearly twice the rate of other channels.

    Conversion Rate from Catalog-powered AI Searches
    2x morethan general AI searches
    Q1 FY26

    Highlights the value of Shopify's structured catalog of over 1 billion products.

    Merchants with Live Campaigns Growth
    3xyear-over-year
    Q1 FY26

    Shop Campaigns is having a true impact, especially for SMBs, contributing up to 1/4 of their total GMV for some.

    Shop App GMV Growth
    70%year-over-year
    Q1 FY26

    A clear signal that the buyer network is deepening and Shop is becoming a meaningful commerce destination.

    Shop App Monthly Active Users Growth
    over 40%year-over-year
    Q1 FY26
    Unique Buyers purchasing directly on Shop Growth
    over 50%compared to Q1 FY25
    Q1 FY26

    More new shoppers are discovering and buying through the Shop app than ever before.

    Sign in with Shop Usage Growth
    3xyear-over-year
    Q1 FY26

    Now enabled across nearly the entire merchant store base, important for an agentic world.

    Total Number of Large Merchants ($100M+ GMV) Growth
    nearly doubled
    last 2 years

    This growth comes from merchants scaling into the category and existing large brands modernizing.

    Revenue Growth
    34%year-over-year
    Q1 FY26

    Fueled by GMV outperformance, this is the strongest quarterly growth rate in over 4 years.

    Merchant Solutions Revenue Growth
    39%
    Q1 FY26

    Driven primarily by strength in GMV and increased penetration of Shopify Payments.

    Subscription Solutions Revenue Growth
    21%
    Q1 FY26

    Incremental revenues were balanced across plus plans, standard plans, variable platform fees, and apps/themes/domains.

    Monthly Recurring Revenue Growth
    16%year-over-year
    Q1 FY26

    Q1 was the final quarter impacted by the rollout of 3-month trials in Q1 2025.

    Plus MRR as % of Total MRR
    35%up from 34% a year ago
    Q1 FY26
    Gross Profit Growth
    32%
    Q1 FY26

    Came in slightly ahead of expectations, driven by revenue outperformance. Compounded annual growth rate of 29% over the past 3 years.

    Subscription Solutions Gross Margin
    80%in line with Q1 FY25
    Q1 FY26

    Economies of scale and support efficiencies were partially offset by increased LLM costs.

    Merchant Solutions Gross Profit Growth
    40%
    Q1 FY26

    Gross margin came in at 39%, essentially flat year-over-year.

    Operating Expenses as % of Revenue
    37%4-point improvement from Q1 FY25
    Q1 FY26

    Continued to drive operating leverage through growing gross profit dollars and headcount discipline.

    Transaction and Loan Losses as % of Revenue
    3.7%up from 3.2% in Q1 FY25
    Q1 FY26

    Dollar amounts tend to scale with volumes in payments, capital, and credit products. Payments loss rate in Q1 was below Q1 FY25.

    AI Code Writing Percentage
    well over 50%going up significantly
    current

    Indicates internal efficiency gains from AI adoption.

    Products and Features Shipped
    over 300
    last year

    Achieved with flat headcount, demonstrating increased output per employee due to AI.

    Marketing Spend in Europe (performance marketing)
    roughly 40%
    prior period

    Increased granularity and signal value from this spend has made it more effective.

    Headcount
    flatslightly down from prior year
    current

    Expected to continue, enabled by internal AI usage and efficiencies.

    Industry KPIs

    6
    MetricValueDetails
    Headcount dsoflat
    Customer logo metrics90%%
    GMV take rate payments$101 billionUSD
    Large customer cohortsnearly doubled
    Software recurring arr16%%
    Ai agentic channel product adoption8x

    Product announcements

    4
    ProductTypeDetails
    Universal Commerce Protocol (UCP)milestone
    Merchant Billing (7 new European currencies)expansion
    Capital (France)expansion
    Smart Market and Smart Language Recommendationsupdate

    Deals & partnerships

    17
    Mulberrycustomer contract

    Signed as a new luxury brand customer in Q1.

    BevMo!customer contract

    Signed as one of the largest liquor store retailers in the U.S. to power all locations with Shopify POS.

    LVMHcustomer contract

    Signed as a new luxury brand customer in Q1.

    Ragan Bonecustomer contract

    Welcomed in fashion in Q1.

    The Outnetcustomer contract

    Welcomed in fashion in Q1.

    RooGuilt Groupcustomer contract

    Welcomed in fashion in Q1.

    Lands Endcustomer contract

    Welcomed in fashion in Q1.

    Orviscustomer contract

    The outdoor brand founded in 1856 is moving to Shopify for a full unified commerce solution.

    The Benetton Groupcustomer contract

    Went live with Shopify in Q1.

    Victoria's Secretscustomer contract

    Went live with Shopify in Q1.

    Bodycustomer contract

    Went live with Shopify in Q1.

    Epic Shop by Vail Resortscustomer contract

    Went live with Shopify in Q1.

    Reitmanscustomer contract

    Went live with Shopify in Q1.

    Groonsdivestitureover $1 billion

    Gummy supplement brand launched on Shopify in 2023, acquired by Unilever for over $1 billion.

    Unileveracquisitionover $1 billion

    Acquired Groons, a Shopify merchant, for over $1 billion.

    Googlepartnership

    Co-developed the Universal Commerce Protocol (UCP).

    Amazon, Meta, Microsoft, Salesforce, Stripepartnership

    Joined the UCP Tech Council and UCP Governing Council, committing expertise to build the Universal Commerce Protocol.

    Risks & headwinds

    3
    Increased LLM costsQ1 FY26

    partially offset by increased LLM cost

    Mitigation: Driven by growing merchant usage of 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.

    Near-term FX headwind to Global Payments penetration metrics in EuropeNear term

    approximately 0.5 point of FX tailwinds (for Q2 revenue, implying less tailwind than Q1's 2 points)

    Mitigation: Given the recent launches of payments in numerous countries last year, but that should prove to be a tailwind for us over time.

    Credit lossesQ1 FY26

    Credit was the largest component of the year-over-year increase in transaction and loan losses, which rose to 3.7% of revenue from 3.2% in Q1 FY25.

    Mitigation: Goal is to keep loss rates low as we scale merchant adoption.

    Q&A highlights

    6

    How does the AI flywheel (product velocity, Sidekick uptake) play out for KPIs, and how does Shopify balance AI benefits against rising token costs?

    Harley highlighted Sidekick's role as a "co-founder" for merchants, with weekly active shops up 4x and 12,000 custom apps created in Q1. Jeff noted AI's pervasive internal use, driving efficiency across departments, and confirmed mindfulness of costs while seeing significant benefits.

    “AI now writes well over 50% of our code today, and that number is going up significantly, not down.”

    asked by Justin Patterson · answered by Harley Finkelstein

    2 min read6 chapters

    Detailed Narrative

    01

    AI as Shopify's Native Language

    Shopify has deeply embedded AI into its products, channels, and internal operations, viewing it as an "exoskeleton" for employees. This approach enables rapid experimentation and allows the company to absorb complexity, making it more valuable to merchants. AI now writes over 50% of Shopify's code, increasing engineering efficiency and output, and allowing engineers to operate at a higher level.

    02

    Compounding Data Advantage

    With 20 years of commerce data, Shopify possesses unique insights into purchase intent across millions of merchants and billions of products. This deep experience, applied at speed, allows Shopify to build products grounded in real behavior, creating a compounding advantage that is hard to replicate. Every capability added embeds merchants further into the platform, growing its value.

    03

    Demand Conversion Flywheel

    Shopify is evolving from merely converting demand to actively creating it. AI-driven traffic to Shopify stores grew 8x year-over-year, with orders from AI-powered searches increasing nearly 13x. New buyer orders from AI channels occur at nearly twice the rate of other channels, driven by Shopify's structured catalog of over 1 billion products, which converts 2x more than general AI searches.

    04

    Invisible Complexity and UCP

    Shopify thrives by handling the "invisible complexity" of commerce, making it appear simple for merchants. The company co-developed the Universal Commerce Protocol (UCP) with Google, an open standard for agentic commerce. Amazon, Meta, Microsoft, Salesforce, and Stripe have joined the UCP Tech Council, positioning Shopify at the center of how commerce gets done in the age of AI agents.

    05

    Enterprise Momentum

    The number of large merchants doing over $100 million in GMV on Shopify has nearly doubled in the last two years. Shopify's value proposition of better conversion, lower total cost of ownership, and a unified commerce system is attracting heritage retail brands like Orvis and fostering the growth of new billion-dollar brands, such as Groons, which was acquired by Unilever for over $1 billion.

    06

    Financial Services Expansion

    Shopify continues to expand its financial services offerings, including Capital and Balance, which are deeply embedded in the platform. The company is exploring further moves into financial services, such as money transfer licenses, to accelerate merchant growth and add value, leveraging its decade-long experience in products like Capital.

    AI-generated summary of the company’s earnings call. Not investment advice.