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    SHOP
    Earnings call· Jun 2025(Q2 FY25)

    SHOPIFY Q2 FY25 earnings call SHOP

    Aug 6, 2025 Source

    Executive summary

    Shopify Q2 FY25 — Strong GMV Growth and AI Innovation

    Shopify delivered robust Q2 FY25 results, showcasing accelerated GMV growth and strong profitability driven by strategic investments in product and international expansion. The company is actively leading innovation in agentic commerce and expanding its merchant base across diverse verticals, reinforcing its position as a durable commerce platform.

    Highlights

    5

    • Revenue of $2.7 billion, up 31% year-over-year, exceeding expectations.

    • Free cash flow margin of 16%, marking 11 consecutive quarters of positive free cash flow.

    • GMV up 31% year-over-year (29% on a constant currency basis), accelerating from Q1.

    • International GMV up 42% year-over-year, with Europe GMV up 49% (42% CC).

    • Shop Pay GMV increased by 65% to $27 billion, demonstrating strong adoption.

    Concerns

    3

    • Gross profit growth of 25% trailed revenue growth of 31% due to payments mix and changes to paid trial lengths.

    • Subscription Solutions gross margin declined year-over-year to 81.6% due to higher hosting costs and the impact of 3-month paid trials.

    • Merchant Solutions gross margin decreased to 37.9% from 39.1% in Q2 2024, impacted by the expanded PayPal partnership and lower noncash revenues.

    Guidance & targets

    6
    CategoryTargetConfidence
    Revenue growth
    mid- to high 20s year-over-year
    high materiality
    High
    Gross profit dollars growth
    low 20s
    medium materiality
    Medium
    Operating expenses as % of revenue
    38% to 39%
    medium materiality
    Medium
    Stock-based compensation
    $130 million
    medium materiality
    High
    Free cash flow margin
    mid- to high teens
    high materiality
    High
    Convertible note principal settlement
    $920 million in cash
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    North America
    Delivered standout results with strength among Plus merchants and broad-based growth across all major verticals and merchant segments.
    GMV: accelerated in Q2 vs Q1
    		—accelerated in Q2 vs Q1——
    Europe
    Led international growth, accelerated from Q1, driven by new and existing merchants, underscoring effectiveness of strategic investments.
    GMV: up 49% YoY (42% CC)GMV growth outpacing overall e-commerce market by 4-5x
    		—49%——
    International
    Accelerating from Q1, becoming a vital part of Shopify's mission to support entrepreneurs worldwide.
    GMV: up 42% YoY
    		—42%——
    Offline
    Driven primarily by larger retailers joining the platform, with a newly redesigned POS app enhancing in-store and online connections.
    GMV: up 29% YoY
    		—29%——

    Operational metrics

    21
    Revenue growth
    31%YoY
    Q2 FY25

    Total revenue for the quarter was $2.7 billion.

    Merchant Solutions revenue growth
    37%YoY
    Q2 FY25

    Driven by GMV strength and increased penetration of Shopify Payments.

    Shopify Payments penetration
    64%up from 61% last year
    Q2 FY25

    Powered by continued adoption, expanded partnerships with PayPal and Klarna, and availability in more countries.

    Subscription Solutions revenue growth
    17%YoY
    Q2 FY25

    Primarily driven by a larger percentage of subscriptions from higher-priced plans and higher variable platform fees.

    Gross profit growth
    25%
    Q2 FY25

    Came in ahead of expectations, driven by outperformance in revenue.

    Non-GAAP gross margin
    48.6%vs 51.1% in Q2 2024
    Q2 FY25

    Overall Q2 gross margin.

    Non-GAAP gross margin
    81.6%declined YoY
    Q2 FY25

    Impacted by higher hosting costs and the change back to 3-month paid trials.

    Non-GAAP gross margin
    37.9%vs 39.1% in Q2 2024
    Q2 FY25

    Decrease primarily driven by expanded PayPal partnership and lower noncash revenues from certain high gross margin partnerships.

    Operating expenses as % of revenue
    38%down from 39% in Q2 last year (or 42% excluding legal accrual)
    Q2 FY25

    Demonstrates continued efforts to drive operational efficiencies while supporting top-line revenue growth.

    Transaction loans and losses as % of revenues
    3%YoY increase
    Q2 FY25

    Year-over-year increase stems from higher volumes in payments and capital businesses; loss rates remained consistent.

    Non-GAAP operating margin
    11%vs 9% last year
    Q2 FY25

    Operating income for the quarter was $291 million, yielding a 56% YoY growth rate when excluding the impact of last year's legal accrual.

    Stock-based compensation
    $120M
    Q2 FY25

    Total stock-based compensation for the quarter.

    Capital expenditures
    $6M
    Q2 FY25

    Total capital expenditures for the quarter.

    Free cash flow margin
    16%
    Q2 FY25

    Achieved through operating discipline, marking 11 consecutive quarters of positive free cash flow.

    Cross-border GMV as % of total GMV
    15%remained consistent
    Q2 FY25

    Consistent with prior periods, showing strength in enabling merchants to sell seamlessly across borders.

    Shop Pay GMV
    $27Bincreased by 65%
    Q2 FY25

    Momentum driven by more buyers and merchants making it their go-to checkout.

    Shop App native GMV growth
    140%YoY
    Q2 FY25

    Fueled by high-impact shopping events, including Shop Week.

    Shop Pay Installment GMV growth
    38%
    Q2 FY25

    Contributed to by the launch of Shop Pay Installments into Canada.

    Sign-ins through Shop growth
    46%
    Q2 FY25

    Thanks to improved availability and a smoother user experience.

    De minimis exemptions GMV
    4%
    Q2 FY25

    Approximately 4% of global GMV is currently shipped under de minimis exemptions; no significant changes seen from China rule changes.

    Convertible note principal settlement
    $920M
    Q3 FY25

    Expected to settle the $920 million principal in cash, with any excess value above par also settled in cash, demonstrating financial strength and mindfulness of shareholder dilution.

    Industry KPIs

    3
    MetricValueDetails
    GMV take rate payments$88BUSD
    Software recurring arr9%%
    Ai agentic channel product adoptionMicrosoft Copilot using Checkout Kit

    Product announcements

    11
    ProductTypeDetails
    Cataloglaunch
    Universal Cartlaunch
    Checkout Kitupdate
    Sidekickupdate
    AI store builderlaunch
    Shopify Paymentsexpansion
    Multi-entity support in Shopify Paymentslaunch
    USDC stablecoin optionlaunch
    Shopify Capitalexpansion
    Shop Pay Installmentsexpansion
    POS appupdate

    Deals & partnerships

    15
    StarbucksSigned as a new iconic global brand on the platform.

    One of the iconic global brands signed this quarter, reflecting the platform's flexibility and strategic advantage.

    Canada GooseMigrating online business and physical stores to Shopify.

    Iconic Canadian brand making the switch to Shopify to power both their online business and about 50 physical stores beginning in 2026. Deal closed on Canada Day.

    Burton SnowboardsSigned as a new iconic global brand on the platform.

    One of the iconic global brands signed this quarter, reflecting the platform's flexibility and strategic advantage.

    Unilever (luxury skincare company)Signed as a new large merchant.

    Luxury skincare company owned by Unilever signed on, part of the upmarket strategy delivering results.

    TataSigned as a new large merchant.

    Signed on as part of the upmarket strategy delivering results.

    MieleSigned as a new large merchant.

    High-end home appliance manufacturer signed on, part of the upmarket strategy delivering results.

    WootSigned as a new large merchant.

    Amazon's Daily Deal site signed on, part of the upmarket strategy delivering results.

    BeachbodySigned as a new large merchant.

    Leading fitness and nutrition brand signed on, part of the upmarket strategy delivering results.

    Signet JewelersSigned as a new large merchant.

    One of the world's largest diamond retailers signed on, part of the upmarket strategy delivering results.

    Boart LongyearSigned as a new merchant in the mining/drilling services vertical.

    Global leader in mining/drilling services signed on, expanding Shopify's reach into new industries and verticals, primarily on the B2B side.

    Fiskars GroupMigrating multiple e-commerce businesses to Shopify.

    One of Europe's oldest companies and owner of brands like Wedgwood and Waterford, chose Shopify to migrate 5 distinct e-commerce businesses from multiple brands into a single one on Shopify.

    PayPalExpanded partnership contributing to Shopify Payments penetration.

    Expanded partnership contributed to higher GPV penetration for Shopify Payments.

    KlarnaExpanded partnership contributing to Shopify Payments penetration.

    Expanded partnership contributed to higher GPV penetration for Shopify Payments.

    CoinbasePartnered to bring core commerce features to crypto payments.

    Partnered to introduce a USDC stablecoin option, enabling features like authorized capture, void, and refunds for crypto payments.

    Microsoft CopilotUsing Shopify's new Checkout Kit.

    A huge player in the AI space, already using Shopify's new and improved Checkout Kit to embed merchant checkouts in their agent.

    Risks & headwinds

    4
    Tariff impacts on demandQ2 FY25 and ongoing

    Approximately 4% of global GMV shipped under de minimis exemptions.

    Mitigation: Management factored potential impacts into guidance; no significant changes seen from China de minimis rule changes; monitoring trends closely and supporting merchants.

    Headwinds from extended paid trialsQ2 FY25 and near-term

    Impacted Subscription Solutions growth rates and gross margin.

    Mitigation: While impacting growth rates and gross margin, management believes 3-month trials are working well by increasing likelihood of merchant success and long-term retention.

    Accounting impact from PayPal partnershipQ2 FY25, persisting through Q3

    Lowered Merchant Solutions gross margin to 37.9% from 39.1% in Q2 2024.

    Mitigation: The year-over-year comparison differential will persist through Q3; part of broader strategy to increase Shopify Payments penetration and merchant success.

    Higher hosting costsQ2 FY25 and near-term

    Impacted Subscription Solutions gross margin.

    Mitigation: Costs needed to support higher volumes and geographic expansion; Subscription Solutions gross margin remained above 5-year historical median.

    What to watch in Q3 FY25

    5

    Q3 Revenue Growth

    Q3 FY25
    Current31% YoY in Q2 FY25
    Targetmid- to high 20s year-over-year

    Why it matters

    Verifies the company's ability to sustain strong top-line momentum and meet its guidance amidst macroeconomic conditions.

    We expect Q3 revenue growth in the mid- to high 20s year-over-year, driven by the same factors that supported our strong results in the first half, led by continued growth in Merchant Solutions.

    Q&A highlights

    5

    Did Shopify observe any pull-forward of consumer demand due to potential tariff increases, and how is the overall demand environment?

    Management stated there was no pull-forward of demand, with consistent strength observed in Q2 and into July. U.S. demand accelerated, cross-border GMV remained stable, and no significant changes were seen from tariff rule changes.

    “We have not seen any real pull forward of demand. I think you can see some of that when you look at the results that we delivered in Q2, you compare that to the guidance and see that consistency of performance.”

    asked by Brian Peterson · answered by Jeff Hoffmeister

    2 min read5 chapters

    Detailed Narrative

    01

    Agentic Commerce and AI Innovation

    Shopify is actively building infrastructure to power agentic commerce, enabling seamless shopping experiences within AI platforms. Key launches include Catalog in Q2, providing AI partners real-time access to millions of products, and Universal Cart (in early access) for consolidating items from multiple stores. The new Checkout Kit, already adopted by Microsoft Copilot, allows partners to embed merchant checkouts directly into their agents. For merchants, Sidekick, an AI assistant, offers data analysis for inventory optimization, churn identification, and campaign improvements, while a new AI store builder can create custom online stores from a single phrase in seconds.

    02

    Payments Expansion and Shop Pay Momentum

    Shopify Payments expanded its reach to 16 new countries this year, nearly doubling its accessibility and achieving 64% penetration in Q2. The company rolled out multi-entity support for global merchants and introduced a USDC stablecoin option for international payments, partnering with Coinbase for core commerce features. Shop Pay continues its strong momentum, with GMV increasing by 65% to $27 billion in Q2, attracting leading brands like Michael Kors and becoming a standard for fast, secure payments.

    03

    Shop App and Advertising Initiatives

    The Shop App demonstrated significant growth, with native GMV up 140% year-over-year, boosted by events like Shop Week. AI-powered enhancements to Shop search and the home feed are driving higher engagement and conversion. Shopify Campaigns is scaling risk-free advertising across its own platform, Meta, and Google, providing merchants with efficient access to new audiences. Early results are promising, with brands like Caraway and Liquid I.V. seeing real impact, and the company plans to share more on future calls.

    04

    Point of Sale and Offline Growth

    Shopify's Point of Sale (POS) business had a strong quarter, with offline GMV increasing by 29% year-over-year. A newly redesigned POS app was launched, offering faster, simpler experiences for in-store staff and enhancing online-offline connections with features like cash rounding and granular staff permissions. Shopify POS was recognized as a leader in Retail Point of Sale software by IDC. Notably, Canada Goose has chosen Shopify to power both its online business and approximately 50 physical stores starting in 2026, signaling strong enterprise adoption.

    05

    International and Enterprise Expansion

    International expansion remains a key growth driver, with international GMV up 42% year-over-year, accelerating from Q1, primarily led by strong outperformance in Europe (49% GMV growth). Shopify Capital expanded to Germany and the Netherlands, and Shop Pay Installments launched in Canada. The company continues to win larger merchants, signing iconic global brands such as Starbucks, Burton Snowboards, Miele, and Signet Jewelers. Shopify also expanded into new verticals, exemplified by signing Boart Longyear, a global leader in mining/drilling services, demonstrating increased TAM and platform flexibility.

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