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SHOP Q3 Earnings Beat Estimates, Revenues Rise on Strong GMV
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Key Takeaways
SHOP's Q3 earnings rose 44.1% to 49 cents per share, while revenues jumped 31.6% to $3.74 billion.
Merchant Solutions revenues surged 35.5%, driven by higher GMV and payments penetration.
SHOP's AI-driven orders rose 3.3-fold, while Q4 revenue growth is projected at a low-30% rate.
Shopify (SHOP - Free Report) reported third-quarter 2026 adjusted earnings of 49 cents per share, beating the Zacks Consensus Estimate by 8.89%. The figure increased 44.1% year over year.
Revenues jumped 31.6% year over year to $3.74 billion and surpassed the consensus mark by 0.46%. The upside reflected broad-based Gross Merchandise Volume (GMV) growth and higher payments penetration. GMV increased 29.5% to $119.15 billion, supported by strength across merchant sizes, geographies and commerce channels.
Merchant Solutions revenues increased 35.5% year over year to $2.91 billion. Growth was primarily driven by higher GMV, increased Shopify Payments penetration, foreign exchange revenues and advertising services.
Shopify Payments penetration surpassed 68% of global GMV, expanding more than three percentage points year over year. Gross Payments Volume reached $81 billion, while Shop Pay GMV increased 50%. Merchant Solutions gross profit rose 37%, benefiting from improved payments economics and higher-margin services.
Shopify’s Subscription Business Maintains Growth
Subscription Solutions revenues increased 19.6% year over year to $836 million. Standard-plan subscriptions remained the primary growth driver, supported by Plus subscriptions and variable platform fees.
Monthly recurring revenue increased 19.2% year over year to $230 million. Plus accounted for 34% of MRR, growing 18%. Subscription Solutions gross margin was 79%, with higher Sidekick-related AI spending partly offset by operating efficiencies and support cost improvements.
SHOP’s Commerce Channels Expand Across Markets
International GMV increased 32% year over year. North America delivered 28% constant-currency GMV growth for the third consecutive quarter, while Europe recorded 33% growth. Shopify expanded localized payment offerings and introduced local-currency subscription billing in 10 additional countries.
Offline GMV increased 30% year over year, while B2B GMV surged 74%. The number of retail locations using Shopify grew 52%. Of merchants adopting point-of-sale solutions during the quarter, 55% were new to the platform, demonstrating its ability to attract retailers beyond its existing online merchant base.
Shopify also expanded relationships with major brands, including Lululemon, MAC Cosmetics, Canada Goose and The Body Shop. MAC launched 84 locations within 120 days of signing, highlighting the platform's ability to support large-scale retail deployments.
Shopify’s AI Commerce Tools Gain Traction
AI-driven traffic to merchant storefronts increased 2.6-fold year over year, while orders originating from AI searches rose 3.3-fold. AI-referred sessions converted 64% better than organic search traffic, and Shopify Catalog-powered searches delivered twice the conversion rate of general AI searches.
Sidekick adoption continued accelerating, with daily active merchants increasing 3.7-fold and daily sessions rising 4.2-fold year over year. Sidekick generated approximately two-thirds of Shopify Flows during the quarter.
The company also introduced Canvas, an AI-powered storefront builder that allows merchants to create customized stores through natural-language instructions. Early adoption helped merchants launch stores 20% faster, strengthening Shopify's efforts to simplify business creation and management.
SHOP’s Profitability Benefits From Operating Leverage
Gross profit increased 28% year over year to $1.78 billion. Gross margin declined to 47.6% from 48.9% a year earlier, reflecting changes in revenue mix and increased AI-related infrastructure costs.
Operating expenses increased 15.7% to $1.21 billion but declined to 32.4% of revenues from 36.8% a year ago. Research and development expenses rose to $497 million, while sales and marketing expenses reached $466 million. Transaction and loan losses declined to $120 million from $148 million.
Operating income surged 65.6% year over year to $568 million.
Shopify's Cash Flow Strength Supports Investments
Net cash provided by operating activities increased to $818 million from $513 million a year earlier. Free cash flow climbed to $816 million from $507 million, while free cash flow margin expanded to 22% from 18%.
Shopify ended September with $1.87 billion in cash and cash equivalents and $2.86 billion in marketable securities. Loans and merchant cash advances totaled $2.35 billion.
The company repurchased $562 million of common stock during the quarter.
SHOP's Q4 Outlook Signals Continued Expansion
For the fourth quarter of 2026, Shopify expects revenues to grow at a low-30% rate year over year, with foreign exchange presenting a headwind of less than one percentage point. Gross profit dollars are projected to increase at a high-20% rate.
Operating expenses are expected to represent 29-30% of revenues, incorporating increased marketing investments ahead of the holiday shopping season. Stock-based compensation is projected at $155 million.
Free cash flow margin is expected to remain consistent with the fourth quarter of 2025. Management anticipates higher tax payments and no meaningful benefit from the merchant cash advance accounting change during the upcoming quarter.
Forgent Power, Telos and NVIDIA are expected to report their quarterly results on Nov. 12, 9 and 17, respectively. Forgent Power shares have dropped 23.3% year to date (YTD). Telos shares have inched up 2.8% YTD, while NVIDIA shares have climbed 9% YTD.
View the Zacks #1 Rank List
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SHOP Q3 Earnings Beat Estimates, Revenues Rise on Strong GMV
Key Takeaways
Shopify (SHOP - Free Report) reported third-quarter 2026 adjusted earnings of 49 cents per share, beating the Zacks Consensus Estimate by 8.89%. The figure increased 44.1% year over year.
Revenues jumped 31.6% year over year to $3.74 billion and surpassed the consensus mark by 0.46%. The upside reflected broad-based Gross Merchandise Volume (GMV) growth and higher payments penetration. GMV increased 29.5% to $119.15 billion, supported by strength across merchant sizes, geographies and commerce channels.
Shopify Inc. Price, Consensus and EPS Surprise
Shopify Inc. price-consensus-eps-surprise-chart | Shopify Inc. Quote
SHOP’s Merchant Solutions Revenues Drive Growth
Merchant Solutions revenues increased 35.5% year over year to $2.91 billion. Growth was primarily driven by higher GMV, increased Shopify Payments penetration, foreign exchange revenues and advertising services.
Shopify Payments penetration surpassed 68% of global GMV, expanding more than three percentage points year over year. Gross Payments Volume reached $81 billion, while Shop Pay GMV increased 50%. Merchant Solutions gross profit rose 37%, benefiting from improved payments economics and higher-margin services.
Shopify’s Subscription Business Maintains Growth
Subscription Solutions revenues increased 19.6% year over year to $836 million. Standard-plan subscriptions remained the primary growth driver, supported by Plus subscriptions and variable platform fees.
Monthly recurring revenue increased 19.2% year over year to $230 million. Plus accounted for 34% of MRR, growing 18%. Subscription Solutions gross margin was 79%, with higher Sidekick-related AI spending partly offset by operating efficiencies and support cost improvements.
SHOP’s Commerce Channels Expand Across Markets
International GMV increased 32% year over year. North America delivered 28% constant-currency GMV growth for the third consecutive quarter, while Europe recorded 33% growth. Shopify expanded localized payment offerings and introduced local-currency subscription billing in 10 additional countries.
Offline GMV increased 30% year over year, while B2B GMV surged 74%. The number of retail locations using Shopify grew 52%. Of merchants adopting point-of-sale solutions during the quarter, 55% were new to the platform, demonstrating its ability to attract retailers beyond its existing online merchant base.
Shopify also expanded relationships with major brands, including Lululemon, MAC Cosmetics, Canada Goose and The Body Shop. MAC launched 84 locations within 120 days of signing, highlighting the platform's ability to support large-scale retail deployments.
Shopify’s AI Commerce Tools Gain Traction
AI-driven traffic to merchant storefronts increased 2.6-fold year over year, while orders originating from AI searches rose 3.3-fold. AI-referred sessions converted 64% better than organic search traffic, and Shopify Catalog-powered searches delivered twice the conversion rate of general AI searches.
Sidekick adoption continued accelerating, with daily active merchants increasing 3.7-fold and daily sessions rising 4.2-fold year over year. Sidekick generated approximately two-thirds of Shopify Flows during the quarter.
The company also introduced Canvas, an AI-powered storefront builder that allows merchants to create customized stores through natural-language instructions. Early adoption helped merchants launch stores 20% faster, strengthening Shopify's efforts to simplify business creation and management.
SHOP’s Profitability Benefits From Operating Leverage
Gross profit increased 28% year over year to $1.78 billion. Gross margin declined to 47.6% from 48.9% a year earlier, reflecting changes in revenue mix and increased AI-related infrastructure costs.
Operating expenses increased 15.7% to $1.21 billion but declined to 32.4% of revenues from 36.8% a year ago. Research and development expenses rose to $497 million, while sales and marketing expenses reached $466 million. Transaction and loan losses declined to $120 million from $148 million.
Operating income surged 65.6% year over year to $568 million.
Shopify's Cash Flow Strength Supports Investments
Net cash provided by operating activities increased to $818 million from $513 million a year earlier. Free cash flow climbed to $816 million from $507 million, while free cash flow margin expanded to 22% from 18%.
Shopify ended September with $1.87 billion in cash and cash equivalents and $2.86 billion in marketable securities. Loans and merchant cash advances totaled $2.35 billion.
The company repurchased $562 million of common stock during the quarter.
SHOP's Q4 Outlook Signals Continued Expansion
For the fourth quarter of 2026, Shopify expects revenues to grow at a low-30% rate year over year, with foreign exchange presenting a headwind of less than one percentage point. Gross profit dollars are projected to increase at a high-20% rate.
Operating expenses are expected to represent 29-30% of revenues, incorporating increased marketing investments ahead of the holiday shopping season. Stock-based compensation is projected at $155 million.
Free cash flow margin is expected to remain consistent with the fourth quarter of 2025. Management anticipates higher tax payments and no meaningful benefit from the merchant cash advance accounting change during the upcoming quarter.
Zacks Rank & Other Stocks to Consider
Shopify carries a Zacks Rank #2 (Buy).
Forgent Power Solutions (FPS - Free Report) , Telos (TLS - Free Report) and NVIDIA (NVDA - Free Report) are some other top-ranked stocks in the broader Zacks Computer and Technology sector. While Forgent Power and Telos sport a Zacks Rank #1 (Strong Buy) each at present, NVIDIA carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Forgent Power, Telos and NVIDIA are expected to report their quarterly results on Nov. 12, 9 and 17, respectively. Forgent Power shares have dropped 23.3% year to date (YTD). Telos shares have inched up 2.8% YTD, while NVIDIA shares have climbed 9% YTD.