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.