Shopify Inc. Class A subordinate voting shares 2026 Q2 Earnings Call

Good morning, and thank you for joining Shopify's second quarter 2026 conference call. I'm Shane Kleinstein, 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. Today's call will include certain forward-looking statements 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 these 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 and other non-GAAP measures, which are not a substitute for GAAP financial measures.

Reconciliations between the two are provided in our press release. 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.

Good morning, and thanks, everyone, for joining us today. We've got another exceptional quarter to talk about here at Shopify. Here's what that looks like in the numbers. GMV was up 32% to $116 billion, with broad growth across our merchant sizes, geographies, and sales channels. Our revenue was up 34% to $3.6 billion, and our free cash flow margin was 18%. That's a growth rate of 30% or more across every metric. This marks our fifth straight quarter of GMV growth above 30%. Of all the numbers, our GMV is the one worth repeating. Our merchants processed $116 billion this quarter. This is commerce at an extraordinary scale flowing through the platform. It also tells us that our merchants are thriving. Since day one, our operating principle has been simple and consistent.

Shopify creates what most merchants need most of the time, and for everything else, we empower our incredible ecosystem of partners. I know you've all heard that before, but here's why it matters now. The principle that got us here also explains why we're able to deliver durable growth quarter after quarter, and it perfectly captures how we are building to win in this new era of commerce. Let me explain. First, our addressable market of most merchants is now a very large pool. Because we made it easier to start, there are now simply more merchants to serve, and the breadth of our capabilities has expanded so that merchants of all sizes now run on Shopify. Second, the range of those most of the time merchant needs is expanding quickly. They need access to new and emerging surface areas.

They need best-in-class tools that will allow them to keep pace with the rate of change in commerce. They need it all in one place. Added complexity only reinforces the demand for a simple, unified platform that they can rely on, that is Shopify. Here's the third critical piece. Our open ecosystem model is uniquely well-suited to this agentic era. We have always focused on most merchant needs while making the platform extensible for everything else. We build the primitives, we open them up, and we let the best developers and the best companies in the world build on top of us. In the last year, we kicked that model into a whole new gear. Some of the largest technology companies in the world, like OpenAI, Google, Meta, and Microsoft, have chosen to partner with us to open more front doors for commerce.

Every new surface area they build is another place our merchants can sell, all because they're on Shopify. On top of this, thousands of developers all over the world are embedding commerce into their own applications using the same primitives we built. Thousands of new front doors, all built on one unified foundation, the Shopify platform. As commerce continues to fragment, Shopify becomes an even more critical partner because we provide consistent and reliable infrastructure that makes every shopping experience feel seamless. Whether commerce is handled by humans or agents, whether stores are built by people or AI, Shopify runs underneath it all. For 20 years, we've built the commerce operating system that takes merchants from first sale to full scale by using our partner ecosystem as an extension of our platform. That is our muscle memory.

This model will continue to service even better in this new agentic era of commerce. Let's talk more about Shopify's infrastructure, specifically what we've been building and why it matters so much. We have a very strong conviction that commerce experiences will soon be built into everywhere people are spending their time, that is why our latest product drop was called the Everywhere Edition. We are building now so our merchants are ready for the future. Let's talk about that infrastructure that unlocks commerce everywhere. First, our Catalog, which you can think of as the authoritative source of truth for AI product discovery of the world's best products and best brands. For nearly two years, we've been investing in the search index, ensuring over a billion products and 20 years of commerce experience is distilled for agents.

It structures merchants' product data so every and any AI partner can access it directly, giving agents the ability to discover, understand, and recommend our merchants' products. Let me say this, Catalog will be one of Shopify's most important assets for years to come, here's why. We're seeing that AI searches powered by Catalog converted twice the rate of those using scraped data. That is because with Catalog, merchants' products show up complete, accurate, and with the right context when someone is ready to buy. Put simply, Catalog is the discovery engine for the future, Shopify built it and owns it. Next, let's talk about the Universal Commerce Protocol, or UCP. We introduced UCP at the start of 2026, already industry players across the commerce stack and beyond are converging on this unified protocol with dozens of retailers and platforms adopting it to date.

Because we co-built the protocol, partners look to us to make sure it evolves in ways that represent the full diversity of commerce. First, we built the infrastructure to unlock commerce everywhere, and then we opened it up for everyone. Every Shopify merchant is UCP-ready. Agents and builders can access their product data, create carts, and even check out using the protocol. Everything flows through Shopify, so their checkout logic and fulfillment rules are perfectly preserved. Their products are also automatically listed in Catalog. Every builder can now access UCP and the Catalog API across millions of merchants, so they can build commerce experiences with the same infrastructure as our major AI partners. We built our catalog the way only Shopify could, integrated with shop sign-in so agents can recognize returning buyers and surface personalized recommendations based on their purchase history.

No other Catalog API can do this. We're not just putting merchants in AI channels, we're also showing them how to win in them. In May of this year, we rolled out our new agentic section in the admin, the first cross-channel attribution for agentic selling. Merchants can manage AI channels, they can track performance, and they can get specific recommendations on what to improve, all from a single interface. While the volume from agentic commerce is still small relative to our massive GMV, the growth trends are impressive. Both AI-driven traffic and also orders to Shopify stores tripled year-over-year in the second quarter. New buyer orders are coming in at nearly twice the rate of other channels. This is not just AI taking share of search.

Search remains one of our largest sources of buyer traffic to our merchants, and it's still growing. Traditional search sessions are up 1.3x over the past two years, holding roughly a third of all storefront sessions. That is AI as a complement to search rather than a substitute for it. Okay. Let's talk about agentic building. AI is not just opening up new surface areas for discovery, it is also democratizing code and software development, lowering the barriers to starting a business even further. The way entrepreneurs are pursuing new ideas, the way developers are building software, the way merchants are running their businesses, they're all being rewritten. Naturally, the tools we're arming our merchants with are also evolving at an incredible pace. Sidekick is the prime example of this.

In the second quarter, daily active merchants using Sidekick were up 3.6x year-on-year, and daily sessions were up 4.8x. It handled nearly 34 million conversations, and it was used to create more than 36,000 custom apps, up from 12,000 in Q1. More merchants are using Sidekick, and they're using it far more often. That's because it's driving real value. Getting new merchants to their first sale faster and helping established merchants run smarter. Sidekick's personalized guidance for new merchants during onboarding led to an 8% increase in merchants reaching five orders within 15 days. It's getting more intelligent all the time. It can now access data and take action through extensions to third-party apps like Klaviyo without the merchant ever leaving Sidekick. Adoption is widespread across merchants of all sizes, but what's really interesting is how the value evolves as merchants grow.

In a merchant's first 30 days, roughly half of their conversations with Sidekick are about store setup, design, and theme configuration. For merchants five years in, that drops to about 8%, while analytics and reporting climbs past 40% as they use Sidekick as their intelligence layer to interrogate their own data and make better decisions. Same product, different job. At the same time, we've built connectors to agents including Claude, ChatGPT, Perplexity, Manus, Replit, and Vercel with our AI Toolkit. Our merchants can build on Shopify however they choose. These are just a couple of examples. Our integrations across vibe coding platforms like Lovable, AI chat agents, and CLI IDEs show Shopify's commitment to meeting builders where they are, however they choose to get there. These tools are a real competitive advantage, and they're exclusively and seamlessly available to Shopify merchants.

Interface layers are changing in the agent-first world, Shopify is still the core commerce infrastructure underneath it all. One where every step of commerce, from buying to building, from starting to scaling, moves faster and is within reach for more people. Beyond what we as Shopify are doing to move the needle for our merchants, there are early structural changes we are seeing in the market that also strengthen our position even further. Let's look at the type of merchants benefiting from these AI shifts. Early indications show that AI search has been particularly helpful to some of the smaller brands that form the long tail of commerce. These are brands that also happen to make up the majority of Shopify's merchant base, smaller businesses with specialized products built for a particular customer.