Shopify Inc.

Good morning, and thank you for joining Shopify's first quarter 2026 conference call. I am Terry Gillard, Director of Investment Relations, and joining us today are Harley Finkelstein, Shopify's President, and Jeff Hoffmeister, our CFO. After the prepared remarks, we will open it up for your questions. We will make forward-looking statements on our call today 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 U.S. and Canadian regulators. We'll also speak to adjusted financial measures, which are a non-GAAP and not a substitute for GAAP financial measures. Reconciliations between the two are provided in our press release. And finally, we report in U.S. dollars, so all amounts discussed today are in U.S. dollars, unless otherwise indicated. With that, I will turn the call over to Harley.

Thanks, Kerry, and thanks to everyone for joining us. We've got a lot to talk about today. Commerce is moving at lightning speed right now, and so is Shopify. So first, let's kick off with the headlines. Q1 GMV was $101 billion. That is up 35%. I'll say that again. Q1 GMV was $101 billion. That is the second consecutive quarter our merchants have done over $100 billion in sales. Now, that is commerce at a truly vast scale. Our revenue was $3.2 billion for the quarter. That is up 34%. And our free cash flow was $476 million, delivering a 15% free cash flow margin. That means we've now put up four straight quarters of 30% or more revenue and GMV growth, alongside mid- to high-teens free cash flow margins every single quarter. There are very few publicly traded companies today that are able to make that claim at anything like this scale. It is a very small club, and that is something we are very proud of. And the reason is actually very simple. We've never lost sight of our mission to help our merchants win. And that is why every day we are seeing new businesses light up with their very first sale. And in tandem, we're seeing more of the world's biggest brands migrating to us from all corners of commerce. In Q1, we signed the three legends of luxury, Mulberry, Balmain, and LVMH. And in fashion, we welcomed Rag & Bone, Luxury Outlets, The Outnet, and Rue Guilt Group, and the iconic Land's End. BevMo, one of the largest liquor store retailers in the U.S., has brought us into power all of their locations with Shopify point of sale. And Orvis, the outdoor brand that was founded in 1856, is moving to Shopify for a full unified commerce solution. Meanwhile, Q1 saw us go live with incredible brands like the Benetton Group, Victoria's Secrets, Body, Epic Shop by Vale Resorts, and Reitman's. And here's the best part. We're not just winning the retail legends of today. We're powering the retail legends of tomorrow. And it's happening really fast. We'll get into some real merchant stories later because the velocity we're creating is important to understand. Okay, let's step back for a second. There's a lot of noise around what AI will mean at an individual level, at a company level, and at a cultural level. Now, here's our perspective. First, we're not approaching a new era anymore. We are already in it. In 2026, AI is now Shopify's native language. We vet early on AI and forced its adoption. It's embedded in everything we do, the products we build, the channels we power, the way every single person on the team operates. AI has become an exoskeleton for everyone at Shopify, giving them a virtual team of agents. And that makes room for rapid experimentation. It allows them to pursue multiple ideas at the same time, and then double down on the winners. And here's what else we believe to be true. No group benefits more from AI than entrepreneurs. The logic is simple. AI is making entrepreneurship dramatically more accessible, and in fact, accelerated. That means we're going to see more entrepreneurs, and they're going to scale more easily. AI-powered shopping democratizes discovery. Reach is not just influenced by budget anymore. It is influenced by relevance, which benefits both merchant and buyer. And the right products find the right shopper at the right moment. And this has enormous potential for new and scaling merchants. And because we win when they win, it also has enormous potential for Shopify. So let's just say the thing. There's always going to be some market confusion when we see a significant shift like we're seeing right now with the rise of AI. We've seen it before. I'm sure we'll see it again. And every single time the world gets more complex, Shopify gets more valuable. We absorb more of that complexity into our systems and become more valuable to merchants. So when we look at this new era of commerce that we're in, there are really three core principles that Shopify is in such a strong position. That's what we're focused on, and that's what I'm going to talk about today. The first principle, Shopify has a huge advantage that it's about to compound. We have 20 years of commerce data. We have data on purchasing intent across millions of merchants, hundreds of millions of buyers, and billions of products. And in a world where real-time information is now table stakes, the edge is the insight beneath it. And that requires depth, not just access, but experience. We've seen merchants start, stall, pivot, and scale millions of times across every category and geography. It allows us to build on the real behavior of commerce and to keep shipping products grounded in insights only we have. Deep experience applied at speed. That is very hard to replicate and it compounds. Every capability we add embeds merchants further into the platform and grows the value of being on Shopify. And Sidekick is the perfect example of this. As a reminder, this is our intelligent assistant, which is trained on our knowledge base, paired with completely personalized intel it has about each merchant's particular business. Now, last quarter, we told you the numbers were encouraging. Well, that was just the beginning. The number of weekly active shops using Sidekick in Q1 was up 4x year over year. We saw over 12,000 custom apps created in Q1 alone using Sidekick. And nearly half of all Shopify flows generated in Q1 were built with Sidekick. And theme edits just from last quarter are in the multi-millions, growing over 1,000% in a single quarter. Every app built, every automation created, every task completed is a merchant getting more done with less and running a smarter and a more productive business on Shopify. In a world where discovery is changing faster than ever, where AI is reshaping how buyers find products and how information surfaces, these merchants are moving faster, using Sidekick to keep pace with where commerce is going. And then there's Pulse, Sidekick's smart suggestions feature, which proactively delivers personalized recommendations for merchants using market trends and data from their store, which Sidekick then executes on the merchant's behalf. And I'll give you a great example that I just saw the other day. It was an accessory brand, and Pulse noticed that this brand was getting attention in the right places. Its products were being endorsed by fashion publications and showing up on celebrities' Instagram profiles. So, it proactively suggested that the merchant create a social proof page on their website to build trust and validation. And once the merchant agreed, Psychic created that page on the merchant's behalf, and it was all ready, all within minutes. Now, just a few months ago, that process was done by multiple specialists, marketing, UX, design, copywriting, and often an incremental cost to the merchant, and likely several weeks from start to finish. And now it is happening autonomously, in minutes, at zero incremental cost to the merchant. And that is just one of the smart recommendations being served up to that merchant as part of their daily operations. This is our compounding advantage. Commerce intelligence powers smart tools that drives merchant success, which in turn powers more commerce intelligence. Now that leads nicely into the second principle, which is the demand conversion flywheel. It should be getting more obvious that every quarter that Shopify is no longer just the platform to convert demand, we are becoming the platform to create it to. And that end-to-end position is a major advantage for merchants. First and foremost, online G&V growth accelerated year over year. This is our DNA, the core of our business. The online store is not going anywhere. In fact, we believe that new and emerging AI channels, places like ChatGVT, Microsoft Copilot, Google AI Services, and Meta will be a tailwind to driving e-commerce growth and penetration over time. So let's talk about these channels. We are the only platform that enables discovery and selling inside ChatGVT, Copilot, and Google, all from one single system of record. And the early signals on AI channels are really compelling. And in the first quarter, AI-driven traffic to Shopify stores has grown 8x year over year, while orders from AI-powered searches have increased nearly 13 times. And within this, new buyer orders are occurring at nearly twice the rate of other channels. Okay, now let's talk about Shopify's catalog, because this really, really matters. To date, we've structured more than a billion products with clean attributes, real-time pricing, and accurate inventory, so AI agents can surface the most relevant products in seconds. And the results speak for themselves. Traffic from catalog-powered AI searches converts 2x more than traffic from general AI searches, where the agent is working from scraped or often outdated information from across the web. That is the value Shopify brings. Okay, I'll give you another example of driving demand. Campaigns, which is one of our ad products. Finding new customers is one of the hardest things when running a business. Paid marketing has historically been expensive, complex, and simply out of reach for smaller merchants who don't have the budget or the expertise to compete with larger brands. Well, campaigns is changing that. In Q1, the number of merchants with a live campaign was up 3x year over year. That is not a small signal. That is a product that is starting to have a true impact on our merchants. And what I love is the impact this is having on SMBs in particular, because a lot of them would not otherwise have had access to performance marketing at this level. For some of the smaller merchants, shop campaigns is contributing as much as a quarter of their total GMV. That is not a nice to have. That is a growth engine. Shopify is giving them economies of scale that were previously only available to the largest brands. And with new channels added in Q1, including ChatGVT, Pinterest, and Microsoft Monetize, we're bringing more services and more reach and more buyers into the ecosystem. Here's another example of driving demand. The shop app. Shop app had a strong Q1. GND was up 70% year-over-year, a clear signal that the buyer network is deepening and shop is becoming a meaningful commerce destination in its own right. Monthly active users grew over 40% year-over-year, and unique buyers purchasing directly on shop grew over 50% compared to Q1 of last year, meaning more new shoppers are discovering and buying through the shop app than ever before. And remember, the Shop app is just one facet of Shop, which is the buyer-facing side of Shopify. Sign in with Shop is our user verification tool, which recognizes buyers across devices, stores, and surfaces with no sign-in friction. And use this as growing steadily. We are up 3x year-over-year, and it has now enabled across nearly our entire merchant storefront base. In an agentic world, this really matters. Agents need to know who they're buying for and we are ready. This is the shop like flywheel. We're not just converting demand, we're also intelligently creating it by surfacing the right products, personalized to the right shoppers at exactly the right time. Our compounding advantage, the billions of data points we've collected over 20 years of commerce, powers our demand conversion flywheel, which is moving faster every quarter. These are not small things. These are the principles that will power the future of commerce. Okay, the third principle I'll leave you with is what I call invisible complexity. Here's the thing. The hardest parts of commerce are the parts that nobody sees. And this is where Shopify thrives. We saw it when the online DTC boom happened and everybody wanted to build their own stack. We saw it when social commerce started to take off and people predicted storefronts would migrate into their social feeds. And we've been seeing it again this year with some uncertainty around what AI will mean for commerce. But commerce is massively complex. We just spent two decades making it look easy. Merchants bring the product and we handle everything else. And every time the world gets more complex, that world becomes more valuable. And the industry agrees, as you may have seen with the latest news on the Universal Commerce Protocol, or UCP, which we co-developed with Google. UCP is an open protocol that makes agentic commerce work at scale. It enables the full commerce journey, product discovery, checkout, payment, post-purchase, across any platform with any payment processor. We co-developed UCP because we believed the future of commerce runs on open standards, not closed systems. And then we created the UCP Tech Council, the technical body that steers the protocol's direction to ensure it evolves to meet the needs of businesses, platforms, developers, and consumers. We are now seeing the biggest and most innovative companies across essentially the entire industry coming together around UCP to help push agenda commerce forward. And last month, Amazon, Meta, Microsoft, Salesforce, and Stripe all joined the council, committing their expertise in internet-scale transaction processing to build one universal protocol for commerce. The companies that power how the world shops are now building on one standard. And Shopify is at the center of how commerce gets done in the age of AI agents. And this is what it looks like in practice. Payments is another perfect example of invisible complexity. It's designed to feel simple, but under the hood, it's anything but. Fraud detection, tax calculation, compliance across dozens of markets, currency conversion, identity verification, payment authorization, all working together invisibly at lightning speed. Shopify Payments is built on top of all that comprehensive tooling designed to ensure merchants can sell easily across every channel, including agentic, without adding incremental complexity. And for small businesses especially, this matters enormously. Managing and reconciling multiple payment processors is a distraction no merchant needs. And we do not do this alone. We work with the best-in-class partners, Stripe, Affirm, Globally, PayPal, local payment methods all over the world, all integrated and all available and all managed in one place. Merchants get the breadth of the global payments ecosystem with the complexity of managing it themselves. This is the Shopify difference. In Q1, Shopify payments processed $67 billion of GMV, up 41% from last year, reaching 67% penetration. That number keeps moving up every quarter because merchants trust the full platform, not just the checkout moment. And then, of course, there's ShopPay, the Internet's favorite checkout, because we believe it is simply the easiest way to buy anything, anywhere. One tap, done. All the complexity of payments completely hidden. In Q1, ShopPay processed $35 billion of GMV, up 59% year over year. Outside the U.S., ShopPay GMV in Q1 grew over 70% as we continued to expand into more markets, supporting major local payment methods all over the world, making it not just the Internet's favorite checkout, but one that feels native to buyers wherever they are. In fact, international is another perfect example of massive but almost invisible complexity. Siouan delivered international GMV growth of 45%, with cross-border GMV representing 16% of total. We are consistently rolling out new updates and products to grow our international footprint. In Key1, we quietly shift updates that individually may not make headlines, but together are steadily making Shopify more native to more places. Things like merchant billing, which is now in seven new European currencies, or capital now available in France, or smart market and smart language recommendations, where merchants get relevant recommendations based on the market they sell into. Every quarter, we build more, and we remove more barriers for merchants all over the world to choose Shopify. Now let's talk enterprise, because there's perhaps nowhere that this idea of invisible complexity shows up more clearly. Custom stacks and legacy platforms were built for a world that no longer exists. They're slow to adapt, expensive to maintain, and increasingly unable to keep pace with how buyers shop today, let alone tomorrow. Our value proposition is straightforward. Better conversion, lower total cost of ownership, and a unified commerce system that actually works at a speed and a price point legacy platforms cannot match. You see this shift most clearly in heritage retail. Brands like Orvis, Mattel, and Hunter Douglas. These are companies that built their names over decades, or in some cases, centuries. They know retail. What they're grappling with is the technology underneath. Legacy systems that are costly, slow, and holding them back. And they're not just coming to Shopify for an online store. We're in the room for a much bigger conversation. Unified commerce, POS, payments, B2B, agentic services. The full picture. And once they join, they stay. More products, more services, more of their business running on Shopify. But enterprise growth is not just about brands choosing Shopify. It's also about brands growing up on Shopify. Grooves, for example, the gummy supplement brand that launched in Shopify in 2023, well, last month, they were acquired by Unilever for over a billion dollars. In just over two years, they scaled to hundreds of millions in revenue. So, the opportunity here is large and growing, and we're continuing to go after it. In just the last two years, the total number of large merchants doing $100 million or more in GMB on Shopify has nearly doubled. That is real growth. And it's coming from merchants that are scaling into that category as well as those that are already there and looking to modernize for what's next. And all of this puts us in an incredibly strong position to continue driving this part of the business. On our last call, I said we'll see more billion-dollar brands born in the next 10 years than the last 100. And a lot of people thought that was hyperbole. It was not. Grooms is a perfect example, and everything we're building is designed to make this happen faster. So, when I zoom out, this is what I see. Over two decades, we've collected deeper commerce knowledge than almost anyone else on the planet. We've used that knowledge to build a platform that makes it not just possible, but common for a single entrepreneur to become a massive business in a couple of years, if not less. And we're now moving into an era that will benefit entrepreneurs more than any other group. There's simply no job that will be more accelerated by AI than entrepreneurship. That means there are about to be a lot more entrepreneurs, and that means more people that need the Shopify platform. And in the meantime, we're continuing to deliver strong and durable growth, real operating leverage, fast product velocity, and a platform advantage that keeps compounding. And with that, I'll turn the call over to Jeff.

Thanks, Harley. Q1 reflects strength across all dimensions of our business, not just anyone in isolation. Our growth is broad-based across geographies, merchant sizes, and channels. International, enterprise, offline, and B2B are all scaling. Underneath all this, the cohort dynamics continue to compound. I believe that remains one of the most underappreciated characteristics of our business. Each quarter's results are an aggregation of successes over many years of merchant cohorts. Each new cohort stacks on top of the prior one, and our newer cohorts are larger than the ones before them, a reflection of the breadth of merchants we are attracting. But what's incredible is that the older cohorts, even the merchants who have been on Shopify for many years, are not plateauing. They continue to grow. As an example, in Q1, almost 90% of our revenue was from merchants who had been on the platform for more than a year. The driving force is our platform and product velocity. That's the structural advantage of Shopify. We give you everything you need by operating across the entire commerce stack. It's not the power of any one element of the platform. It's how they all work together to help merchants accelerate their success. It's the knowledge and expertise readily available through Sidekick. It's the speed, context, and simplified complexity behind checkout. It's the ability to sell across every channel, every surface, and every geography from day one. Internally, we are making every function faster, sharper, and more productive. And output per employee is improving through deliberate AI usage. The result is that we are building more, shipping more, and serving more merchants. The leverage we have and continue to deliver is what funds ongoing investment in AI infrastructure, global reach, and platform depth. That discipline is what we have demonstrated consistently. We will always lean into growth because as we grow, we invest more in driving success for our merchants and for Shopify. Now let's take a closer look at our GMV. Unless otherwise specified, all growth rates are presented on a year-over-year basis. Q1 GMV was $101 billion, marking our second quarter with GMV over $100 billion, representing growth of 35% or 30% on a constant currency basis. Diving deeper into different GMV perspectives, let's first look at merchant size. In recent quarterly calls, I've talked about three strata, merchants doing up to $2 million in GMV, those doing $2 to $25 million in GMV, and those doing more than $25 million. We saw strength across merchant GMV bands consistent with recent trends. The $2 to $25 million GMV band added the most incremental revenues year over year, but the other two segments were not far behind. and the greater than 25 million band merchants are growing the fastest. Further, when we look at just our merchants doing more than 100 million in annual GMV, we see a consistent and accelerating growth story. The share of our revenue coming from that segment has grown each year up over 200 basis points in the last two years. This is a multi-year view playing out exactly as we expected. Moving to regions. Europe maintained its momentum, with European GMB up 48% or 35% in constant currency. 2025 was an outstanding year in Europe, so delivering continued mid-30s growth in constant currency against that backdrop reflects years of deliberate investment in that market. North America accelerated from an already strong Q4, demonstrating the continued durability of our core market. That is, of course, on significantly higher GMB levels, demonstrating our ability to not only grow well in our largest market, but also further tap into the immense opportunity outside of the U.S. Regarding same-store growth and new merchant acquisition, the contribution from each was relatively balanced, a split that has remained consistent for multiple quarters now. Finally, turning to channels. Two channels to call out this quarter. Offline GMB was up 33%, accelerating from Q4. The fastest-growing slice within offline remained merchants operating more than 20 stores, which this quarter had location growth of 50% year-over-year. B2B GMB grew 80% in Q1, with broad growth across both new and established merchants. In Q1, we made several other features of our B2B offering available to most of our standard subscription plans, giving these merchants the ability to manage their wholesale and D2C needs side-by-side in one place. Now turning to revenues. Q1 revenue grew 34%, or 32%, on a constant currency basis, fueled by the GMV outperformance. North America grew 33%, Europe 42%, and Asia Pacific 30%. The pace of growth in Europe speaks to the opportunity that remains ahead, and while growth internationally continues to outpace North America, North America had its strongest quarterly growth rate in over four years. Merchant solutions revenue grew 39%. driven primarily by the strength in GMB and increased penetration of Shopify payments. $67 billion of GMB was processed on Shopify payments in Q1. That's 41% higher than the prior year and 67% of GMB, three points higher than Q1 of 2025. We see a clear path for the rate to continue moving higher, stemming from deeper penetration across all geographies, growing adoption in the 15 European countries and Mexico where we launched payments last year, expansion into new countries beyond the 39 where we are today, and continued shop pay momentum. Near-term, Europe will be a headwind to global payments penetration metrics, given the recent launches of payments in numerous countries last year, but that should prove to be a tailwind for us over time. Subscription solutions revenue grew 21%. the incremental year-over-year revenues were fairly balanced across four elements. Monthly subscriptions for our plus plans, monthly subscriptions for our standard plans, variable platform fees, and lastly, revenue from apps, themes, and domains. The growth in our plus and standard monthly subscriptions reflects two things working simultaneously. New merchants coming onto the platform and existing merchants upgrading as their businesses scale. Both are driving the growth. The growth in variable platform fees reflects two primary factors. The average VPF rate has increased and plus merchants this past quarter grew faster than our overall merchant base. The growth in our revenue from apps, themes, and domains reflects both the quality of our developer ecosystem with thousands of apps extending the capabilities of our platform and changes to our developer revenue share terms that created a favorable comparability dynamic which is largely normalized as we progress through the year. Q1 MRR grew 16% year-over-year, with continued growth across Standard, Plus, and Point of Sale. As a reminder, Q1 was the final quarter where our year-over-year growth rates in MRR are impacted by our rollout of three-month trials in our largest markets in Q1 2025. That headwind is behind us. Plus MRR represented 35% of MRR for the quarter. up from 34% a year ago. Q1 gross profit grew 32%, coming in slightly ahead of our expectations, driven by the outperformance in revenue. Our gross profit has now grown in a compounded annual growth rate of 29% over the past three years. Gross profit for subscription solutions grew 21%, with gross margin coming in at 80%, in line with Q1 2025. Economies of scale and efficiencies in support were partially offset by increased LLM costs, driven by growing merchant usage of our AI products, most notably Sidekick. We expect this dynamic to continue. The more merchants use these products, the more data we have, and the better the outcomes we can deliver. And the better the outcomes, the more deeply embedded they become in the platform. Additionally, changes to our developer revenue share terms I mentioned earlier also contributed a tailwind to gross profit dollars, with the biggest benefit expected in Q1, normalizing as we progressed through the year. Merchant Solutions' gross profit grew 40%, with gross margin coming in at 39%, essentially flat year over year. No specific items have called out, but similar dynamics played out as we have seen in prior quarters. Operating expenses were $1.2 billion for the first quarter, or 37% of revenue, a four-point improvement from Q1 last year. We continue to drive operating leverage through two key elements – growing gross profit dollars, and delivering continued headcount discipline. Both of these allow us to invest in further AI usage internally and our returns-based marketing, which in turn helps fuel more growth. R&D, sales and marketing, and G&A as a percentage of revenue each improved year over year. Transaction and loan losses came in at 3.7% of revenue, up from 3.2% in Q1 2025. As a reminder, the dollar amounts here tend to scale with volumes in our payments, capital, and credit products. Each of these products continues to grow well, so the goal, of course, is to keep loss rates low as we scale merchant adoption. Payments revenues continues to grow very nicely, as I mentioned earlier, and our loss rate in payments in Q1 was below Q1 of last year. Credit was the largest component of the year-over-year increase. Q1 free cash flow was $476 million, or 15% of revenues. in line with our outlook. As previewed on our last call, these results reflect a slightly higher effective tax rate. One item to note before turning to outlook. Beginning in the second quarter, we are adopting an accounting treatment for our merchant cash advances that will match the accounting for our capital loans. This transition was prompted by some regulatory changes in Canada and related subsequent changes to our merchant cash advances product in Canada. For Q2, relative to our current accounting, This change is expected to be a tailwind of approximately half a point for free cash flow margins. With that, let's move to our outlook for Q2. We expect Q2 revenue growth in the high 20s year over year. The expected sources of growth are consistent with the drivers that we saw in Q1, with the one key difference being that our Q2 revenue guidance assumes approximately a half point of FX tailwinds versus the more than two points of FX tailwinds that we saw in Q1. We expect our gross profit dollars to grow in the mid-20s. The differential in the revenue versus gross profit growth rates is driven by the continued mix shift between the growth rates of merchant solutions and subscription solutions, which is expected to narrow compared to 2025, and the continued strength of payments. We expect operating expenses in Q2 to be 35% to 36% of revenue. an improvement from the 37% we delivered in Q1, and a meaningful step forward from the 38% we delivered in Q2 of last year. Turning to free cash flow, for Q2, we expect free cash flow margins in the mid-teens. In summary, Q1 continued the momentum of an outstanding 2025. We delivered the highest quarterly revenue growth rate in over four years, both for the business as a whole as well as the U.S. specifically. Strength was broad across merchant sizes, channels, and geographies. Gross profit has compounded at 29% annually over the past three years, and our commitment to these free cash flow margins remains unwavering. The business is durable, our position is unique, and our conviction is that the investments that we are making today in AI infrastructure, in the merchant-facing services being built on top of it, and in the data advantage that comes from powering a meaningful share of global commerce will further strengthen our positions. As entrepreneurship enters a new era shaped by AI, we sit here today with the platform, the scale, and the momentum to be at the center of it. With that, I'm now turning the call back over to Carrie for your questions.

Thanks, Jeff. We will now take your questions before turning the call back to Harley for some final words. Please use the Raise Hands feature in Zoom to ask your question. If you are dialing in by phone, you will need to press star 9 to join the queue and star 6 to unmute yourself. We ask that you limit yourself to one question. so we can try to get to as many questions as possible. Our first question comes from Justin Patterson at QBank.

Great. Thank you very much, and good morning. It seems like there's a natural flywheel between AI supercharging product velocity and Sidekiq effectively driving uptake of new features. How do you think about that flywheel playing out and what it means for KPIs? And then just a quick one for Jeff. How do you balance the benefits of AI versus rising token costs? Thank you. Thanks, Justin.

Thanks for the call. Charlie, I'll start with the first part. Look, I mean, Psychic is really becoming a merchant's co-founder. It's becoming the new way merchants run their business. This is not a tool that, you know, they open occasionally, but this is this active presence that shows up every day. It now, with pulse, it proactively suggests ways to improve their business and then executes it on their behalf. And so, The numbers in Q1 were not just encouraging. I think they're remarkable. Weekly active shops are up 385% using Sidekiq. We saw 12,000 custom apps built in Q1, which is up like over 200%, quarter over quarter. And if you look at Shopify Flow, which is really used for business processes for our largest merchants, nearly half of all Shopify Flow is generated in Q1 were actually built with Sidekiq. So this is a huge compounding advantage. This allows us to not only leverage our 20 years of commerce insight and this incredible data set we understand about how businesses operate, but also to pair that with the specific needs and the specific use cases of what a merchant requires. So, you know, I think how merchants are using it is important. The early signals really matter here, and we're seeing these. you know, merchants that are just starting to play with it really become power users very, very quickly. So, you know, roughly half the conversations are about store setup, design, and game configurations. And then once it gets set up, it's about growing the business faster. So it is something that we knew would be well-received by merchants, but I think the efficacy and the efficiency of driving value is something even we are incredibly surprised by. It's amazing.

Yeah, and I'll pick up on that very point in terms of where Harley left it. The impact that we're seeing, not only in terms of how our merchants are using Sidekick, but how we're using it internally has been super impactful. Harley, in his comments, talked about the exoskeleton, which we give our, not only our engineers, but really everyone throughout the organization in terms of how they can do more with AI, and it's proven to be very, very impactful. So it's really not even a question of where are we using AI, but where aren't we using AI? Because it's been an extensive usage in pretty much all departments within the company. So we're, of course, mindful of the right tool for the right problem, and we're mindful of the cost, and we think through that. But this is something where we're seeing significant benefits in terms of how employees are deploying it and how – how merchants are getting value out of it.

Yeah, I think actually AI right now writes well over 50% of our code today, and that number is going up significantly, not down. But I think more than any other company, AI, Shopify is made of language.

Thank you for your question, Justin. Our next question comes from Bob and Shaw at Deutsche Bank.

Great. Thanks for taking my question. Harley, as you think about expanding your product capabilities and how you can better serve merchants, how do you approach building versus partnering more broadly? How might that differ from more software-like solutions versus some that are more fintech-related?

Yeah, look, I mean, Shopify's philosophy around partnership has, I think, been long studied, but we partner where we think we can get massive leverage and where we think there's a company out there that's doing a really great job we can plug into. And when we think there isn't something out there that is 10x better than Shopify, what we can do ourselves, we just build it. And that's always been the case, particularly when it comes to even the app ecosystem. You're seeing at the same time more merchants using Sidekick to build these custom features for their shop, but at the same time you're seeing more app developers build for Shopify's ecosystem than ever before. In fact, we've now put the app approval process on Rails using incredible AI testing so that we can get more apps into the apps more faster. And if you talk to partners and particularly app developers that are building for commerce or retail, For the most part, Shopify and our app stores become their default go-to-market. It is the place where they build for. So that will continue. And just in terms of, you know, how we think about generally these larger scale, you know, partnerships, obviously there are – There are these amazing new surface areas. We obviously talk about Agenda quite a bit, whereby it should be incredibly clear that Shopify is at the epicenter right now of this AI era. And so we are currently the only platform on the planet powering selling inside of ChatGPT, Copilot, and Google, all from one system of record. So when we see these opportunities to work with other companies, we show up with a catalog, we show up with all the functionality and the right APIs so that they can move faster too. And I think that's the reason why Shopify has been uniquely positioned as one of the best companies to partner with in all of tech.

Thank you. Our next question comes from Dominic Ball at Redburn Atlantic.

Hey, guys. Hey, Jeff, Harley, Carrie. Thanks for the question. So two questions on AI. As AI is lowering the barriers to entrepreneurship, are you seeing acceleration in S&B merchant signups and Second question is, with integrations with Claude, ChatGPT, does AI risk pushing Shopify to the back from a merchant UX perspective? Thank you.

Yeah, I'll take the second part, and then Jeff can talk about the first part of that question. Look, agents do not bypass Shopify, just the opposite. In fact, they write right into Shopify. I mean, I think you saw in sort of recent headlines that merchant storefronts really matter. You saw ChatGBT move to in-app browsers for their checkouts. It's literally the Shopify storefront within the chat. And again, when a buyer is shopping in ChatGPT, they're browsing Shopify's incredible catalog. So the momentum on Agentsic has been amazing. We're always trying to find new ways for merchants to have an easier time to build their businesses better, faster. We have more integrations even announced yesterday where Shopify now makes store building and management as easy as having a conversation where you can sort of effortlessly connect your existing store right to your favorite ChatApp, Agentsic application. simply chat to add products or just inventory across locations. But this idea of combining Shopify's incredible platform and the product with the way that we think more entrepreneurs are looking to build, we think puts Shopify in pole position when it comes to this agentic, you know, entrepreneurial evolution. And I think, you know, Jeff will talk a bit about ads, but I think there is no – let me say this actually in the most simple terms – I think there is no job that is more AI safe than entrepreneurship. And I think there's also no place that you're going to see more acceleration with AI than maybe entrepreneurship in general. And I think, you know, Shopify is the entrepreneurship company. I think it's going to be great for entrepreneurship in general. It's also going to be great for Shopify.

Yeah, I think that's the perfect launch point to your first question, Dominic, just in terms of what we're seeing in merchant additions and kind of whether this is going to accelerate some of the things we're seeing, especially on the SMB side. Harley alluded to it. We do think there will be tailwinds here. I think from our vantage point, you see this in the growth numbers, right? The growth that we delivered in Q1 was exceptional. One of the points I made in my comments was it essentially evenly split between same-store sales growth and new merchant acquisitions. And so you can see that in terms of what we're doing at the top of the funnel. Merchant ads more broadly is true across geographies. You see this in some of the data. There was some U.S. Census Bureau data in terms of the number of startups that you see on a monthly basis. So, we're seeing some signs of it. It's early to say, hey, AI was a thing that was a specific spur of additional activity in terms of startups, but the pipeline looks as healthy and as strong as we've ever seen it.

Thanks, Dominic. Our next question comes from Nick Jones at BNP.

Good morning. Thanks for taking the question. You put up some really great kind of statistics or growth rates for Pulse and Sidekick. As we think about AI investments from here and maybe how it translates to margin expansion, how are the AI investments in terms of kind of creating structural advantages versus maybe keeping up with cable stakes that we're hearing across maybe other platforms? to make SMDs lives easier, more efficient. That makes sense, I guess, kind of what is kind of a structural advantage and what is increasingly maybe table stakes that folks are looking for as, you know, businesses deploy AI across their platforms. Thanks.

I mentioned earlier that I think Shopify is internal. AI is now Shopify's native language. What I mean by that is that we bet really early and we force its adoption across our company. And I think AI has given this exoskeleton to everyone at Shopify where effectively every single person on the team has this virtual team of agents that creates incredible opportunity for these, like, rapid experimentation. It allows them to pursue multiple uses at the same time and then double down on what's winning. And I think, you know, I mentioned in the previous answer that, you know, AI now writes well over 50% of our code and that number is going up. But what that actually means is that our best engineers aren't writing a few lines of code or doing less. It means they're operating at this much higher level. They're directing, reviewing, and making calls that, you know, that we're able to provide, we're able to do because of 20 years of context. So, you know, AI handles the execution and they handle the judgment. And I think the output proves that. We shipped over 300. new products and features last year alone. We kept our flat headcount, which we're very proud of, and that's only possible because something has changed fundamentally. I know Toby has been talking about River, which is a perfect example of it, but it's this AI coding partner built right into Slack for the entire team where they can pull into any thread, any conversation, and do, frankly, a remarkable amount of the engineering work. And we built it because we needed it, and now it's deeply embedded in how we operate. So I think more than any other company, Shopify is very much leveraging AI in an incredible way.

All right. Our next question comes from Michael Morton at Moffitt Nathanson.

Good morning. Thank you for the question. Harley, you've had a lot of success with the enterprise over the last two years. I wondered if you could talk a bit about your learnings with your go-to-market strategy, if you see any opportunities for tweaks, or if you're really happy with the product market fit and it's just more of an execution game. And then quickly one for Jeff, just on OpEx growth, you've been really tight with headcount management and any additional color on the destination and duration of the investments you're making in OpEx lines would be really helpful. Thank you.

If we're an enterprise and Jeff could jump into OpEx. I mentioned this in a call, but I'm going to repeat it because I think it's important. The number of merchants doing over $100 million in GMV on Shopify has nearly doubled in the last two years. I think... we have now earned the right to be in every serious enterprise conversation, and that's the shift. Our go-to-market engine sort of runs two tracks in parallel. Obviously, SMB is all about velocity, and the enterprise is really more about depth. And we've built this dedicated team and professional services that embeds into that enterprise motion. Product is unequivocally a major driver. When we show up, we show outcomes. We show speed, we show cost, we show conversion, we show simplicity. And I think more and more with these very large brands that are coming on, brands that I've mentioned on this call, they're looking for this unified commerce platform. They're looking for... basically the last migration they're ever going to have to do. And so when Shopify shows up with this global scale, this unified platform, but also allowing them to sell right away across ChatGPT and Copilot, our differentiation is frankly quite structural. And I think at our scale, that compounds. I think that advantage will grow over time. And we can also move it at this incredible pace, which works well. So I think generally the strategy is working really well. We're focused now on just faster execution. We've also learned that I think the enterprise is human executive trust. unequivocally moves deals. This is an area I'm personally spending a lot of time in myself. And I think our installed base on the enterprise is a flywheel. I think growth begets more growth. And if you look across every vertical or product category, the fact that we now have and are adding the top merchants and top brands across every vertical That means that flywheel is speeding up. And there are places where we are improving, you know, pricing clarity, making the ROI way more obvious. There are some edge cases that we're already closing the gaps where, you know, potentially deals take longer than they should. But the strategy is really, really working in a way that I think you're, I mean, you're seeing the results now. So now it's about execution and consistency. And I think now it's about turning more consideration into more winning when it comes to the enterprise. And that's where I'm spending a great deal of my time. And I'm incredibly optimistic about that.

Yeah, and Michael, to your question on OpEx and where that's going, overall, things remain exactly as we've been talking about in terms of the discipline we're delivering on free cash flow margins. You saw this in the significant growth that we had in Q1. That, of course, drops more gross profit dollars down, and that gives us the opportunity to continue to invest like we have been and find the areas where we can continue to drive that top line itself. You referenced headcount. We've obviously been disciplined for three years now. We're, on any given year, we're in fact slightly down from the year before. I don't see that changing. We've talked a few times in terms of already on this call in terms of how we're using AI internally and the efficiency, the acceleration that's giving us, and we expect that to continue. And As we spend, as you can tell from some of the marketing efforts that we've done, marketing, and I mentioned this on the call, that sales and marketing as a percentage of revenue is down year over year, as was G&A, as was R&D. So we can continue to drive those down as percentages. But marketing dollars themselves will be up year over year. But we're just getting better and better and better on the marketing spend. And I mentioned on the last call that roughly 40% of our marketing dollars was in Europe in the performance marketing side. We continue to see success in Europe on this piece. One of the things we've actually seen on the marketing spend in Europe is we spent a little bit more. The granularity we get has been meaningfully increased. The signal value we get has allowed us to be much more effective in Europe than even though we've been historically on the marketing spend. And we've increased the percentage of marketing spend, which is performance. So the pieces which were not core, excuse me, core, hardcore performance, marketing we've reduced. So we're really in a spot where we can do some really interesting things on OpEx. The only difference, and I talked about this a little bit on the last call, the only difference really between last year and this year is going to be a little bit on the taxes in terms of what we're seeing on the effective tax rate. But we're at a spot now where that should level off. So from our vantage point, we feel really good about driving the gross profit dollars growth, which allows us to do everything we need to. And obviously, we have the dollars left to do the share repurchase, among other things.

All right, thank you for your question. Our next question comes from Rob Wildhack at Economist.

Morning, guys. Harley, I wanted to ask about the demand creation principle you highlighted in the prepared remarks. We hear you loud and clear on the products and tools that Shopify offers merchants to create demand, but I was wondering if you could compare that to what a non-Shopify merchant can do or is doing to get themselves discovered by LLMs? Like, what are the table stakes there? What do some of the savvier non-Shopify merchants do? Because I think that would be really interesting context for the Shopify agentic toolkit. Thanks.

Yeah, I mean, as I mentioned on sort of demand creation, I think we're making a lot of progress on the sort of customer acquisition piece. I think there's now sort of one way. Now there's multiple ways for buyers to discover our merchants, shop campaigns, shop app, and obviously some of the agentic discovery. But in terms of some of the stuff we're doing with the agentic plan, for example, again, that rolled out early March. That means that any brand on any platform can now sell across AI channels via Shopify catalog. and no Shopify service required. It's remarkable. Everyone, pretty much every merchant, every brand retailer in the board meetings are talking about how they get it discovered. And so what we're seeing now is that ultimately it is, you know, obviously we have a way to help them with that. And, you know, I think we've now made it clear that Shopify is sort of at the center of all this. Again, I mentioned earlier, but I'll say it again, we're the only platform powering someone inside of ChatGVT, inside of Copilot, and inside of Google, all from one system. And what we're seeing already in terms of You know, the proof points is that orders from AI searches are up nearly 13x. AI-driven traffic to Shopify stores is growing 8x year over year. And new buyer orders from AI searches are actually occurring at nearly twice the rate of traditional organic search. The big thing, though, with catalog is that I think a lot of, you know, non-Shopify merchants are seeing that, you know, catalog is actually doing a much better job of organizing and syndicating their products across every genetic surface versus sort of the old scraping thing that was happening prior to catalogs. So it's doing two things. One, it is unequivocally getting Shopify connected with a lot more non-Shopify merchants, per se, and beginning those conversations, which, again, may lead to them joining the agentic plan or ultimately may lead them to come to Shopify for their entire migration, which obviously is our plan and our hope. But even if they just want to be part of catalog and just be part of the agentic plan on its own, that already is a massive lift to them relative to to everything else. I mean, Shopify catalog is now the authoritative source for AI product discovery. There's now a billion products across millions of merchants. The data is structured. The pricing is accurate. There's real-time inventory, clean attributes. And, you know, OpenAI and Microsoft are already using the catalog to power discovery. But so I think generally this plan, this agentic idea, agentic plan idea is working really well for us. And I think the retail industry has certainly taken notice.

Our next question comes from Samad Samana at Jefferies.

Hi, good morning. Thanks for taking my questions. So I wanted to blow the agentic commerce thread. I think Stripe Sessions was last week, and they're obviously a very close and successful partner of Shopify's. And they rolled out several kind of new updates that allow whether that's agents to buy directly with the product catalog that someone's using and or made a checkout inside of Facebook by partnering with Meta. I'm just curious, as you see the surface area of commerce expanding, can you just help us understand that if a Shopify merchant has these alternative channels where they're checking out how the monetization still works and if the economics change. Because obviously you guys sit at the center of all this and are partnering with everybody. But I think investors are just trying to understand how monetization economics look as the surface area expands. Thank you so much.

Let me start on your first question. So, you know, I feel like I need to say this very clearly, but Stripe and Shopify are really incredible, long-standing partners. And I think we've been building the future of commerce together. We've partnered with them now for over a decade across payments and financial products. And I think what you're seeing is both companies are very serious infrastructure companies that are working together. I think the key to this is the partnership is actually deepening. Stripe recently joined our UCP tech council alongside Amazon, Meta, Microsoft, and Salesforce, who were the founding member. And just to kind of be clear about this, UCP is now becoming the industry standard, and Shopify built it. It is the only standard that covers the full commerce journey end-to-end, and UCP does all the work from discovery to transaction to fulfillment. We now have about 20 retailers and platforms that are part of UCP. Stripe has now joined the UCP governing council with us and Google, which is the overarching governance body for the protocol. But this is what it looks like when an open standard wins. Now, in terms of, you know, agentic generally, and just to kind of be very clear about kind of checkout and how that all operates, I think it's really important. So I said this earlier. I'll say it again. As you saw recently, merchant storefronts really matter. So when you saw ChatGP move to an in-app browser in their checkout, that is literally the Shopify storefront right within the chat here. And so it functions the exact same way from an economic perspective as it would if any consumer is buying on a Shopify store. It's just a new surface area. Back to my point earlier that I'll repeat because I think it's important is that Every merchant obviously wants to have recurring customers. They pay for the customer. They want to see more of that. But the idea that now some of these services are now introducing new consumers, like net new consumers to Shopify merchant services, we think is an incredible thing because it allows our merchants to you know, expand their total addressable market and therefore, you know, Shopify's as well. So generally, it's going really well, but we're really, really happy where we land with UCP. The relationship with Stripe is fantastic. We presented at Stripe sessions as well, to your point here. But, you know, we compete where two serious companies naturally would, but we also partner where our merchants need us to. And every time a new frontier opens, whether it's stable coins or digital commerce or financial products, we really do build alongside each other. And that's been true for over a decade.

Our next question comes from Colin Sebastian at Baird.

Yeah, good morning, and thanks for taking my question. I guess, Harley, I mean, at a high level, I mean, just the rapid market share gains we're seeing here on the same sort of GMB basis, I know there's a lot of focus on ultimately what the impact will be from agentic commerce, but when you're assuming or if we're assuming e-commerce growth accelerates, do you envision Shopify taking even more share or sharing a faster rate going forward? And then a quick follow-up, I'm curious on how you're thinking about the role of the app store, especially with all the activity in Sidekick. Is there as much utility from the external app store? Is there an opportunity maybe to allow merchants to extend what they're building out to the broader community? Thank you.

Actually, it's a great question. Merchants that have built, especially some of the larger merchants, the mid-size and enterprise merchants that have built custom apps on Shopify, we've actually seen them at some point decide to, you know, shift from just being a merchant to being a merchant and also an app developer. Some of them have actually discovered this incredible tooling they're building for their own business and then put into the app store as well. But in terms of what Sidekick is doing, like Sidekick actually we see as a real supplement to the app store, not a replacement. In fact, You probably have noticed that we're spending a lot more time with app developers than ever before. I hosted a town hall a couple weeks ago with thousands of our biggest app developers. We have additions.dev happening in Toronto this summer, which is in person with our app developer community, which is already sold out. So actually, we think there's never been a better time to build on the Child Play app store. The applications that are being built by Sidekick are really very specific, nuanced feature sets for particular merchant businesses. And so for most of them, it really is just for the individual merchant. We see them everywhere. We see the opportunity for the app developers just to continue. That being said, though, what is happening that is super interesting is that now merchants who may have had to spend weeks or even months building a feature, either internally or hiring an agency to do so, they're able to do so much more work themselves using Sidekiq. And that means they're able to go much faster. So the first part of your question is sort of around e-commerce in general. Remember that e-commerce in the U.S. is still sub-20% of total retail. And what we're seeing is, and part of the reason why the stat around this kind of proof point where new buyer orders from AI searches are occurring at nearly twice the rate of traditional organic search. The reason that is so important is because what we're seeing is that these merchants are now discovering new buyers on these agentic services that they may not otherwise have seen. So we do think it's going to pull more consumers into e-com who may have been laggards. We also see that it may introduce new non-agentic non-ecom native shoppers to start doing so on a more regular basis. Net-net, though, we think that's going to mean more GMV for merchants, and certainly our business model is predicated on the more money our merchants make, the better Shopify does.

Yeah, and, Colin, the only other point I'd add is just think about, again, the quarter we just posted in terms of what that means to the momentum of this business. Like the strongest growth rate we've had in the U.S. in four years, the strongest growth rate we've had in our business overall in four years, we're believers in what's happening here.

And our last question will come from Richard Sue at National Bank.

Yes, thank you. There were some recent reports that you guys are considering moving deeper into financial services. Like, I'm wondering if you could maybe comment on that and then potentially how that would impact some of your existing partnerships.

Yeah, I mean, I would say, as you know, Richard, we've had – if you think about financial services, the first product we really had was capital, and that product is roughly 10 years old. That's something that we've had for a while, has worked really well. There's other suites of products that we provide in kind of financial services more broadly. This is one of the areas where we have seen merchants, and this is one of the things which is classic core Shopify, which is help merchants in situations which they either face complexity or they face – opportunities where we can help them do that. And that's one of the things we found in our capital business where we've been really thoughtful in terms of how we do lending to help them accelerate their business. So that capital business has continued to grow. Some of the things you've had on balance and credit have continued to grow. And so that's something that we want to support. And that's one of Harley and I have been, just as we've talked about the growth levers of this business and all the things that are going to provide durable growth over the years, this is one of the things that we've talked about. There has been, to your point, there's been some stories out there in terms of some of the money transfer licenses and some of the flexibility that would give us to help us accelerate the growth for merchants. And that's one of the things we're going to continue to do. We're going to go to where we think we can have the most valued merchants. And this is one of those segments. And you look at capital.

I mean, capital needs to expand more markets, smarter offers, better pricing. Look at balance. Balance is now deepening its utility for merchants in their dated operations. I think financial services is just becoming more embedded in a more valuable part. of the Shopify platform and it's not a standalone product. It's embedded in the platform that merchants already trust and we think there's a lot more to do there. Maybe before we just hang up here, a couple sort of final things before we close the call that I think might be helpful. I just want to start with this. I just want to say how proud I am of this team and the current execution in the words of this company. I'm coming up to over 16 years at Shopify, and I think this is Shopify operating at its best. It's important to remind everyone that the numbers that we're putting up this quarter, they are not an accident. They are the result of a very, very clear strategy that is being executed exceptionally well. We're almost halfway through 2026. I think AI is certainly Shopify's native language. We bet early on it, and we forced its adoption, and now it is as reflexive inside our company as any company. It's embedded in everything we do, in the products we build, in the channels we power, the way every single person on the team operates. And I think it's become this incredible exoskeleton for this company. Finally, I'm going to say this again because it's important. The AI era is not coming. It is absolutely here. And we think there is simply no job that will be more accelerated by AI than entrepreneurship. In fact, it may be the most AI-safe job out there. And what that means going forward is that there will be more entrepreneurs. And we think that means there's going to be way more demand for the Shopify platform. We think tomorrow's billion-dollar brands are being born today. They're being born on Shopify. And I'm just incredibly proud of the team. This is Shopify at its best.

With that, this concludes our first quarter 2026 conference call. Thank you for joining us. Goodbye.