I listened to the Shopify Inc. (NASDAQ & XTSE: SHOP) Q3 2025 earnings call on November 4th. The call was hosted by Harley Finkelstein (President) & Jeff Hoffmeister (CFO).
GAAP Financials (all in $ USD)
Shopify posted Q3 revenue of $ 2.84 billion, up + 32% from last year. Within this, subscription solutions revenue was $ 699 million, up + 14.6 % & merchant solution revenue which was $ 2.145 billion, up + 38% from last year.
Revenue growth was due to increased penetration of Shopify Payments by + 65% & increased adoption of payments around the world. Also contributing to growth was expanded partnerships with PayPal & Klarna, offset by lower payment adoption in Europe.
Total cost of revenues was $ 1.45 billion or 51%. This was made up of subscription solutions at $ 128 million or 18.3% of revenue & merchant solutions which was $ 1.325 billion or 61.8% of revenue.
Gross margin rate was 49% vs. 52% last year. This was due, in part, to a revenue mix change from subscription solutions to merchant solutions. It was also a result of an increase in payments as this business delivers lower initial margin.
Gross profit for the quarter was $ 1.391 billion, up + 24% year over year.
Operating expenses were $ 1.048 billion, up 26% vs. Q3/24. This was mainly due to increases in sales & marketing, R & D and much larger transaction and loan losses. In Q3 Shopify saw higher losses in it’s payment business & it’s capital business.
According to management, Shopify’s operating expenses have dropped as a % of revenue over the last few years as follows: 2023 – 45%, 2024 – 39%, 2025 – 37%. This was achieved mostly with disciplined headcount management as the overall number of employees has been flat to down. At the same time, productivity has increased through automation, AI, tools & more.
Income from operations was $ 343 million, up + 21.2% over last year or 12.1% of revenue.
Net income was $ 264 million or 9.3% of revenue, down – 68% from last year. This was mostly due to a net unrealized gain on equity and other investments of $ 512 million in Q3/24 vs a loss of -$ 62 million this year.
Diluted EPS for the quarter was .20 cents, down from .64 cents in Q3/24.
CAPEX was $ 6 million in Q3.
Total cash & cash equivalents at the end of Q3 was $ 2.414 billion. Net cash provided by operating activities was $ 513 million, up + 21.3 % over last year.
Other Metrics
Gross merchandise volume (GMV) was $ 92 billion & grew 32% in Q3. The company has grown GMV by + 20% or more for 9 consecutive quarters. The growth was driven primarily by North America.
Q3 monthly recurring revenue (MRR) grew by + 10% based on growth in Plus plans.
Free cash flow margin was $ 507 million or 18% of revenue in Q3. Shopify discussed how it has consistently achieved steady cash flow margin over the last few years.
Management Commentary
Finkelstein kicked off the call with several key points regarding:
- AI, Agentic AI & the Sidekick agent
- The evolution of commerce
- International expansion
- Offline B2B channels
He said that “every 26 seconds a new entrepreneur makes their 1st sale on Shopify.” Finkelstein said that Shopify is “not just growing our piece of the pie, we are growing the pie.” He indicated that Shopify is balancing growth with profitability.
AI
The President says there are 3 ways he thinks about the evolution of AI:
- How AI will help merchants sell everywhere
- How AI will help merchants operate smarter
- How Shopify as a company will use AI to build better
Sell Everywhere
Shopify discussed how Agentic commerce is being used from search to conversation.
On the last earnings call Finkelstein discussed the Commerce for Agents tool. He also discussed the Universal Cart & the Checkout Kit tool.
The objective for Shopify is to make it easier for AI agents to shop on a merchants store on a buyers behalf.
There are 3 layers to Agentic commerce from end to end:
- Product Discovery – ChatGPT partnerships, Perplexity & other partners. Shopify’s goal is to power discovery for all AI agents & set a new standard for the industry.
- Purchasing Experience – Universal Cart & Checkout Kit make shopping seamless. Used with ChatGPT & Microsoft Co-Pilot, making in-chat shopping flows possible.
- Post Purchase Journey – helps agents keep shoppers engaged & informed. Examples include: order status, returns, support & reorder prompts.
The company discussed how it’s integration with OpenAI has already begun & that traffic has increased 7x for merchants using AI. Shopify indicated that based on their research, 64% of respondents said they would use AI to shop. It is very early, but Shopify said that they are “laying the rails” for Agentic AI or conversational commerce.
Different permutations will emerge as agentic commerce evolves. Shopify sees it’s role as preparing merchants for whatever path wins. The company wants to get merchants ready for agentic commerce just as they are for online, physical stores, B2B or where ever commerce goes next.
Finkelstein says “we are everywhere commerce is happening & we aim to get there first.”
Merchants Using AI to Operate Smarter
Sidekick is an example – a purpose built agent. In Q3, 750,000 shops used Sidekick for the 1st time. The agent has had almost 100 million conversations with merchants relating to analytics, SEO and more.
Build Better Products
Shopify monitors “signals” & data within it’s ecosystem to build & ship solutions for merchants. Then they scale quickly. An example of this monitoring is Scout, a voice of the customer tool. This internal Shopify agent scans hundreds of millions of signals (examples of a signals include: support tickets, usage data, actions & prompts) & is used by management to answer questions in seconds, grounded in evidence, that used to take weeks.
Key Takeaway: AI is not just a feature at Shopify, it is central to Shopify’s engine that powers everything the company builds.
Other Key Products & Growth Areas
Shopify Payments – reaching 65% penetration of GMV
Shop Pay – had + 67% growth in Q3.
Shopify wants to own checkout which includes: taxes, shipping, inventory, payments in any currency, bundles, subscriptions & compliance with regulations.
These apps are “like a well made watch” says Finkelstein. They execute well at scale and keep it simple for partners.
The President said “every upgrade shipped in Q3 cut friction & put merchants in reach of new markets.”
Merchants using Global-e can now offer Shop Pay as part of the payments process.
Shopify has a partnership with Klarna – the buy now, pay later company.
Shop Pay Installments has been launched in the UK after a successful launch in Canada earlier in 2025.
International
Shopify sees a “significant” runway ahead, especially internationally. The international division saw GMV grow + 40% in Q3 & represented 21% of Shopify global revenue in the quarter (up from 18% – 2 years ago).
Shopify has lower adoption rates outside of North America. Europe in particular offers growth prospects.
Shopify point-of-sale (POS) system Shopify Payments launched in 3 new countries in Q3.
Shopify Tap to Pay launched in 7 additional countries.
Shopify Capital has doubled it’s footprint since the beginning of the year & added Ireland and Spain in Q3.
The Shopping App expanded in 16 countries.
Offline GMV grew + 31% in Q3 as new brands joined this part of Shopify’s business.
B2B grew GMV + 98% in Q3.
Tariffs
Shopify’s cross border GMV is about 15% of it’s total, with US inbound GMV about 7%. The company has seen price increases from merchants but they have started to slow since Q2/25.
Management Guidance
Q4
- Revenue growing mid-to-high 20% year over year
- Gross profit $ growing low-to-mid 20% year over year
- Operating expense to be between 30% to 31% of revenue
- Free cash flow slightly above Q3
Share Price Dynamics
On the Nasdaq exchange, SHOP opened November 4th at $ 166.32. On November 5th shares opened at $ 158.34, down – 4.8%. As of writing on November 7th, the stock is down about – 9.2 % over the last 30 days but up +73.8% over the last year. SHOP is up + 42.3 % over the last 5 years.
On the XTSE exchange, SHOP opened November 4th at $ 236.19. On November 5th shares opened at $ 224.88, down – 4.8%. As of writing on November 7th, the stock is down about -8.2% over the last 30 days but up + 77.3% over the last year. SHOP is up + 54.4% over the last 5 years.
My Commentary
Shopify continues to post strong growth and appears to be moving in the right direction from an innovation perspective, particularly as it relates to AI. The world is changing quick though and Shopify must continue to move with it.
Net income was down significantly due to an unrealized gain last year on equity & other investments which put a dark cloud on an otherwise solid quarter.
One risk could be Shopify’s reliance on smaller sellers. If the economy softens, will consumers gravitate to large discounters that don’t use Shopify as a provider? Also, will consumers simply buy less? Particularly with US tariffs increasing costs and inflation.
The other risk is that if Agentic commerce grows significantly, will Shopify and their merchants need to compensate agent providers for transactions? Or will these AI companies try and replicate Shopify’s business model with their new found place in the consumer purchase process?
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