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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).<\/p>\n
GAAP Financials (all in $ USD)<\/strong><\/p>\n Shopify posted\u00a0Q3 revenue<\/strong>\u00a0of $ 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.<\/p>\n 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.<\/p>\n Total\u00a0cost of revenues<\/strong>\u00a0was $ 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.<\/p>\n Gross margin rate<\/strong>\u00a0was 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.<\/p>\n Gross profit<\/strong>\u00a0for the quarter was $ 1.391 billion, up + 24% year over year.<\/p>\n Operating expenses<\/strong>\u00a0were $ 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\u2019s payment business & it\u2019s capital business.<\/p>\n According to management, Shopify\u2019s operating expenses have dropped as a % of revenue over the last few years as follows: 2023 \u2013 45%, 2024 \u2013 39%, 2025 \u2013 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.<\/p>\n Income from operations<\/strong>\u00a0was $ 343 million, up + 21.2% over last year or 12.1% of revenue.<\/p>\n Net income<\/strong>\u00a0was $ 264 million or 9.3% of revenue, down \u2013 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.<\/p>\n Diluted EPS<\/strong>\u00a0for the quarter was .20 cents, down from .64 cents in Q3\/24.<\/p>\n CAPEX was $ 6 million in Q3.<\/p>\n 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.<\/p>\n Other Metrics<\/strong><\/p>\n 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.<\/p>\n Q3 monthly recurring revenue (MRR) grew by + 10% based on growth in Plus plans.<\/p>\n 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.<\/p>\n Management Commentary<\/strong><\/p>\n Finkelstein kicked off the call with several key points regarding:<\/p>\n He said that \u201cevery 26 seconds a new entrepreneur makes their 1st sale on Shopify.\u201d Finkelstein said that Shopify is \u201cnot just growing our piece of the pie, we are growing the pie.\u201d He indicated that Shopify is balancing growth with profitability.<\/p>\n AI<\/strong><\/p>\n The President says there are 3 ways he thinks about the evolution of AI:<\/p>\n Sell Everywhere<\/strong><\/p>\n Shopify discussed how Agentic commerce is being used from search to conversation.<\/p>\n On the last earnings call Finkelstein discussed the\u00a0Commerce for Agents<\/strong>\u00a0tool. He also discussed the\u00a0Universal Cart<\/strong>\u00a0& the\u00a0Checkout Kit\u00a0<\/strong>tool.<\/p>\n The objective for Shopify is to make it easier for AI agents to shop on a merchants store on a buyers behalf.<\/p>\n There are 3 layers to Agentic commerce from end to end:<\/p>\n The company discussed how it\u2019s 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 \u201claying the rails\u201d for Agentic AI or conversational commerce.<\/p>\n Different permutations will emerge as agentic commerce evolves. Shopify sees it\u2019s 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.<\/p>\n Finkelstein says \u201cwe are everywhere commerce is happening & we aim to get there first.\u201d<\/p>\n Merchants Using AI to Operate Smarter<\/strong><\/p>\n Sidekick is an example \u2013 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.<\/p>\n Build Better Products<\/strong><\/p>\n Shopify monitors \u201csignals\u201d & data within it\u2019s ecosystem to build & ship solutions for merchants. Then they scale quickly. An example of this monitoring is\u00a0Scout<\/strong>, 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.<\/p>\n Key Takeaway: AI is not just a feature at Shopify, it is central to Shopify\u2019s engine that powers everything the company builds.<\/p>\n Other Key Products & Growth Areas<\/strong><\/p>\n Shopify Payments \u2013 reaching 65% penetration of GMV<\/p>\n Shop Pay \u2013 had + 67% growth in Q3.<\/p>\n Shopify wants to own checkout which includes: taxes, shipping, inventory, payments in any currency, bundles, subscriptions & compliance with regulations.<\/p>\n These apps are \u201clike a well made watch\u201d says Finkelstein. They execute well at scale and keep it simple for partners.<\/p>\n The President said \u201cevery upgrade shipped in Q3 cut friction & put merchants in reach of new markets.\u201d<\/p>\n Merchants using Global-e can now offer Shop Pay as part of the payments process.<\/p>\n Shopify has a partnership with Klarna \u2013 the buy now, pay later company.<\/p>\n Shop Pay Installments has been launched in the UK after a successful launch in Canada earlier in 2025.<\/p>\n International<\/strong><\/p>\n Shopify sees a \u201csignificant\u201d 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% \u2013 2 years ago).<\/p>\n Shopify has lower adoption rates outside of North America. Europe in particular offers growth prospects.<\/p>\n Shopify point-of-sale (POS) system\u00a0Shopify Payments<\/strong>\u00a0launched in 3 new countries in Q3.<\/p>\n Shopify Tap to Pay\u00a0<\/strong>launched in 7 additional countries.<\/p>\n Shopify Capital<\/strong>\u00a0has doubled it\u2019s footprint since the beginning of the year & added Ireland and Spain in Q3.<\/p>\n The Shopping App<\/strong>\u00a0expanded in 16 countries.<\/p>\n Offline GMV grew + 31% in Q3 as new brands joined this part of Shopify\u2019s business.<\/p>\n B2B grew GMV + 98% in Q3.<\/p>\n Tariffs<\/strong><\/p>\n Shopify\u2019s cross border GMV is about 15% of it\u2019s total, with US inbound GMV about 7%. The company has seen price increases from merchants but they have started to slow since Q2\/25.<\/p>\n Management Guidance<\/strong><\/p>\n Q4<\/em><\/p>\n Share Price Dynamics<\/strong><\/p>\n On the\u00a0Nasdaq exchange<\/strong>, SHOP opened November 4th at $ 166.32. On November 5th shares opened at $ 158.34, down \u2013 4.8%. As of writing on November 7th, the stock is down about \u2013 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.<\/p>\n On the\u00a0XTSE exchange<\/strong>, SHOP opened November 4th at $ 236.19. On November 5th shares opened at $ 224.88, down \u2013 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.<\/p>\n My Commentary<\/strong><\/p>\n 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.<\/p>\n 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.<\/p>\n One risk could be Shopify\u2019s reliance on smaller sellers. If the economy softens, will consumers gravitate to large discounters that don\u2019t use Shopify as a provider? Also, will consumers simply buy less? Particularly with US tariffs increasing costs and inflation.<\/p>\n 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\u2019s business model with their new found place in the consumer purchase process?<\/p>\n More from Retail Insider:<\/p>\n<\/div>\n![\"Bruce](\"https:\/\/retailinsider.b-cdn.net\/wp-content\/uploads\/2025\/09\/Bruce-Winder.png\")
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