Shopify(SHOP) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Results Overview Shopify's Q2 2025 achieved strong revenue growth and consistent free cash flow margins, fueled by strategic investments and accelerated regional performance Executive Summary & Key Highlights Shopify reported an exceptional Q2 2025, achieving 31% revenue growth and a 16% free cash flow margin, marking eight consecutive quarters of double-digit free cash flow margins. Management attributed this success to strategic investments and noted accelerating GMV and revenue growth across key regions, particularly Europe Overall Performance & Management Commentary Shopify delivered strong Q2 2025 results with significant revenue growth and consistent free cash flow margins. Management emphasized the payoff from past strategic investments and highlighted accelerating growth in GMV and revenue across North America, Europe, and Asia Pacific, with Europe showing particular strength - Shopify achieved 31% revenue growth and 16% free cash flow margin, marking eight consecutive quarters of double-digit free cash flow margins[1] - GMV and revenue growth rates accelerated in North America, Europe, and Asia Pacific, quarter over quarter. Europe was a particular source of strength, where GMV grew 42% on a constant currency basis[2] Selected Business Performance Information Key financial metrics for Q2 2025 demonstrated robust year-over-year growth across GMV, MRR, Revenue, Gross Profit, Operating Income, and Free Cash Flow, with revenue growth rate increasing by 10 percentage points Selected Business Performance (Q2 2025 vs. Q2 2024) | Metric | June 30, 2025 (US $ millions) | June 30, 2024 (US $ millions) | YoY Growth | | :--- | :--- | :--- | :--- | | GMV | 87,837 | 67,245 | 30.6% | | MRR | 185 | 169 | 9.5% | | Revenue | 2,680 | 2,045 | 31.0% | | Gross profit | 1,302 | 1,045 | 24.6% | | Operating income | 291 | 241 | 20.7% | | Free cash flow | 422 | 333 | 26.7% | | YoY revenue growth rate | 31% | 21% | +10 p.p. | | Free cash flow margin | 16% | 16% | 0 p.p. | Company Information This section details Shopify as a leading global commerce company, highlighting its platform and extensive merchant reach across 175+ countries About Shopify Shopify is a leading global commerce company that provides essential internet infrastructure, offering tools for businesses of all sizes to start, scale, market, and run their retail operations. Its platform is engineered for speed, customization, reliability, and security, serving millions of businesses in over 175 countries - Shopify is a leading global commerce company providing essential internet infrastructure for commerce, offering trusted tools to start, scale, market, and run a retail business of any size[8] - Shopify powers millions of businesses in more than 175 countries and is trusted by numerous global brands[8] Financial Outlook This section outlines Shopify's Q3 2025 financial outlook and includes disclaimers regarding forward-looking statements and associated risks Q3 2025 Outlook For Q3 2025, Shopify expects revenue growth in the mid-to-high twenties percentage range year-over-year, with gross profit dollars growing at a low-twenties percentage rate. Operating expenses are projected to be 38% to 39% of revenue, stock-based compensation at $130 million, and free cash flow margin in the mid-to-high teens Q3 2025 Financial Outlook | Metric | Q3 2025 Outlook | | :--- | :--- | | Revenue growth (YoY) | Mid-to-high twenties percentage rate | | Gross profit dollars growth (YoY) | Low-twenties percentage rate | | Operating expense as % of revenue | 38% to 39% | | Stock-based compensation | $130 million | | Free cash flow margin | Mid-to-high teens | Forward-Looking Statements This section contains a standard disclaimer regarding forward-looking statements, highlighting that actual results may differ materially from projections due to various known and unknown risks. These risks include economic conditions, consumer spending, international trade impacts, reliance on third-party cloud providers, cybersecurity threats, and software defects. Investors are cautioned against undue reliance on these statements - Forward-looking statements, including financial outlook for the next fiscal quarter, are based on current projections and expectations but are subject to known and unknown risks[20] - Risks that may cause actual results to differ materially include economic conditions, consumer spending, international trade, reliance on third-party cloud providers, cyberattacks, and software defects[20] Condensed Consolidated Financial Statements This section presents Shopify's unaudited condensed consolidated financial statements, including operations, balance sheets, and cash flows for Q2 2025 Condensed Consolidated Statement of Operations Shopify's Q2 2025 Statement of Operations shows total revenues of $2,680 million, a 31% increase year-over-year, driven primarily by merchant solutions. Gross profit rose to $1,302 million, and net income significantly increased to $906 million, largely due to a positive net other income (expense) including taxes Condensed Consolidated Statement of Operations (Q2 2025 vs. Q2 2024) | Metric (US $ millions) | June 30, 2025 | June 30, 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Revenues | | | | | Subscription solutions | 656 | 563 | +16.5% | | Merchant solutions | 2,024 | 1,482 | +36.6% | | Total Revenues | 2,680 | 2,045 | +31.0% | | Cost of revenues | 1,378 | 1,000 | +37.8% | | Gross profit | 1,302 | 1,045 | +24.6% | | Total operating expenses | 1,011 | 804 | +25.7% | | Operating income | 291 | 241 | +20.7% | | Net other income (expense), including taxes | 615 | (70) | N/A | | Net income | 906 | 171 | +430% | | Net income excluding the impact of equity investments | 338 | 291 | +16.2% | - Net other income (expense), including taxes, significantly contributed to the net income increase, encompassing interest income, gains/losses on equity investments and other investments, foreign exchange, and income taxes[11] Condensed Consolidated Balance Sheets As of June 30, 2025, Shopify's total assets increased to $14,561 million from $13,924 million at December 31, 2024, driven by growth in current assets, particularly marketable securities and loans. Total shareholders' equity also grew to $12,124 million Condensed Consolidated Balance Sheets (June 30, 2025 vs. December 31, 2024) | Metric (US $ millions) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | 14,561 | 13,924 | +637 | | Current assets | 8,001 | 7,254 | +747 | | Long-term assets | 6,560 | 6,670 | -110 | | Total Liabilities | 2,437 | 2,366 | +71 | | Current liabilities | 2,078 | 1,956 | +122 | | Long-term liabilities | 359 | 410 | -51 | | Total Shareholders' Equity | 12,124 | 11,558 | +566 | - Cash and cash equivalents increased to $1,542 million from $1,498 million, while marketable securities grew to $4,278 million from $3,981 million[13] Condensed Consolidated Statements of Cash Flows Shopify's Q2 2025 cash flow statement shows net cash provided by operating activities increased to $428 million. Investing activities resulted in a reduced net cash outflow of $252 million, and financing activities provided $44 million. Overall, cash, cash equivalents, and restricted cash increased by $233 million, ending the period at $1,542 million Condensed Consolidated Statements of Cash Flows (Q2 2025 vs. Q2 2024) | Metric (US $ millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | 428 | 340 | | Net cash used in investing activities | (252) | (424) | | Net cash provided by financing activities | 44 | 3 | | Effect of foreign exchange on cash | 13 | (1) | | Net increase (decrease) in cash, cash equivalents and restricted cash | 233 | (82) | | Cash, cash equivalents and restricted cash – end of period | 1,542 | 1,541 | - A significant net gain on equity investments and other investments ($-682 million) in Q2 2025, compared to a loss ($76 million) in Q2 2024, impacted operating cash flow adjustments[14] Non-GAAP Financial Measures & Analysis This section details Shopify's non-GAAP financial measures, including free cash flow, net income excluding equity investments, and constant currency analysis Free Cash Flow Reconciliation Shopify's free cash flow for Q2 2025 increased to $422 million from $333 million in Q2 2024, maintaining a consistent 16% free cash flow margin. This non-GAAP measure is calculated by subtracting capital expenditures from net cash provided by operating activities Free Cash Flow Reconciliation (Q2 2025 vs. Q2 2024) | Metric (US $ millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | 428 | 340 | | Less: capital expenditures | (6) | (7) | | Free cash flow | 422 | 333 | | Revenue | 2,680 | 2,045 | | Free cash flow margin | 16% | 16% | - Free cash flow and free cash flow margin are non-GAAP financial measures provided to help investors understand operating results and business performance in the same manner as management[23] Net Income Excluding Equity Investments Reconciliation Net income excluding the impact of equity investments, a non-GAAP measure, was $338 million for Q2 2025, up from $291 million in Q2 2024. This adjustment removes the volatile gains or losses from equity investments, which management deems irrelevant to core operational results Net Income Excluding Equity Investments Reconciliation (Q2 2025 vs. Q2 2024) | Metric (US $ millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :--- | :--- | :--- | | Net income | 906 | 171 | | Less: equity investments, marked to market, net of taxes | 568 | (120) | | Net income excluding the impact of equity investments | 338 | 291 | - The impact of gains or losses on equity investments is excluded as it is not considered relevant to the fundamentals of Shopify's business, given that valuations are outside of management's control[11] Financial Performance Constant Currency Analysis Shopify provides a constant currency analysis to offer a clearer comparison of period-to-period operating results by removing the impact of foreign exchange rate fluctuations. On a constant currency basis, GMV grew 29%, revenue grew 30%, and gross profit grew 24% year-over-year for Q2 2025 Financial Performance Constant Currency Analysis (Q2 2025 vs. Q2 2024) | Metric | 2025 as reported | 2024 as reported | Percentage change YoY | Constant currency impact | Percentage change YoY constant currency | | :--- | :--- | :--- | :--- | :--- | :--- | | GMV | 87,837 | 67,245 | 31% | 1,042 | 29% | | Revenue | 2,680 | 2,045 | 31% | 17 | 30% | | Subscription solutions revenue | 656 | 563 | 17% | 3 | 16% | | Merchant solutions revenue | 2,024 | 1,482 | 37% | 14 | 36% | | Gross profit | 1,302 | 1,045 | 25% | 9 | 24% | | Operating income | 291 | 241 | 21% | 8 | 17% | - This analysis helps investors understand financial and operating performance by isolating the effects of foreign exchange rate fluctuations[18] Additional Information This section provides supplementary information, including quarterly conference call details, regulatory filings, and definitions of key financial metrics Quarterly Conference Call & Filings Shopify's Q2 2025 results were discussed in a conference call on August 6, 2025, with a webcast available on their investor relations website. The company's Form 10-Q for the quarter ended June 30, 2025, including unaudited financial statements, is available on Shopify's website and filed with US and Canadian securities regulators - A conference call to discuss Q2 results was held on August 6, 2025, with an archived webcast available on Shopify's investor relations website[6] - Shopify's Form 10-Q for Q2 2025, including financial statements and MD&A, is available on www.shopify.com and filed on EDGAR and SEDAR+[7] Endnotes & Key Metric Definitions This section provides definitions for key financial and operational metrics used in the report, including Gross Merchandise Volume (GMV), Monthly Recurring Revenue (MRR), and Free Cash Flow (FCF), clarifying their calculation and significance - Gross Merchandise Volume (GMV) represents the total dollar value of orders facilitated through the Shopify platform, net of refunds, and inclusive of shipping, handling, duty, and taxes[21] - Monthly Recurring Revenue (MRR) is the aggregate value of all subscription plans in effect on the last day of the period, used as a directional indicator for subscription solutions revenue[22] - Free cash flow is a non-GAAP financial measure calculated as cash flow from operations less capital expenditures, providing insight into operating results and business performance[23]