Shopify Inc-3Q25 Results – Delivering Against a High Bar

Summary of Shopify Inc 3Q25 Earnings Call Company Overview - Company: Shopify Inc (SHOP.O) - Industry: Software / E-commerce - Market Cap: $219.133 billion - Price Target: Increased from $165.00 to $192.00 Key Financial Metrics - GMV (Gross Merchandise Volume): $92.0 billion, grew 32% YoY, exceeding consensus of $89.2 billion (+28%) [9] - Total Revenue: $2.844 billion, grew 31.5% YoY, above consensus of $2.758 billion (+27.5%) [9] - Merchant Solutions Revenue: $2.145 billion, +38% YoY, ahead of consensus of $2.060 billion (+33%) [9] - Free Cash Flow (FCF): $507 million, in line with consensus [12] - Operating Margin: Implied Q4 operating margin of ~20%, consistent with consensus [12] Growth Drivers - Diverse Growth Vectors: - Merchant Size: Growth across all tiers, especially among merchants generating over $25 million in GMV [3] - Merchant Cohorts: 2025 cohort outperformed prior years [3] - Geographical Expansion: Europe GMV up 49% YoY (42% in constant currency), with half of total GMV growth from outside North America [3] - Channel Growth: Offline GMV grew 31% YoY, B2B GMV grew 98% YoY [9] Strategic Initiatives - AI Integration: Traffic to Shopify stores attributed to AI increased ~7x since January, with orders via AI search up ~11x [3] - Agentic Commerce: Shopify's strategy aligns with the shift towards agentic channels, enhancing merchant success [7] Financial Guidance and Revisions - Revenue Guidance for Q4: Expected to grow in the "mid-to-high 20s" YoY, ahead of consensus [12] - GMV Estimates: Raised by 2.5%/3.5%/4.7% for FY25/FY26/FY27, supporting revenue revisions of 1.8%/2.4%/3.3% [8] - FCF Margin Guidance: Q4 FCF margin expected to be slightly above Q3, implying 18-20% [12] Risks and Concerns - Free Cash Flow Margin: Q3 FCF margin of 17.8% was below consensus of 18.4% [12] - Monthly Recurring Revenue (MRR): MRR of $193 million, +10% YoY, missed consensus of $194 million [12] - Gross Margins: Q3 gross margins of 48.9% were below consensus of 49.4% due to increased costs [12] - Payments Loss Rates: Transaction and loan losses represented 5% of revenue, above normal trendlines [12] Conclusion - Shopify continues to demonstrate strong growth across various metrics, with a solid outlook for future revenue and GMV growth. The company is well-positioned to capitalize on e-commerce trends and innovations, despite some concerns regarding margins and cash flow. The increased price target reflects confidence in Shopify's long-term growth trajectory and market positioning [8][22].