SHOP Shopify 10-Q 2026-09-30 section summaries

Shopify — Q3 and nine months ended September 30, 2026

Shopify reported strong revenue and earnings growth, led by merchant solutions. Merchant lending also expanded rapidly, while higher credit costs and volatile investment valuations affected results. The company repurchased substantial stock and continued to hold significant market-sensitive equity investments.

Consolidated results

Revenue grew 31.6% in Q3 and 33.1% in 9M. Cost of revenues grew faster than gross profit in both periods. Q3 other expense included a $127 million unrealized investment loss, versus a $62 million loss in Q3 2025. For 9M, other income included a $58 million unrealized investment gain, compared with a $402 million loss in 9M 2025. Interest income declined to $65 million from $81 million in Q3 and to $206 million from $252 million in 9M. Q3 tax provision included a $63 million discrete benefit from releasing part of the U.S. deferred-tax-asset valuation allowance.

Revenue categories and geography

Merchant solutions remained the larger and faster-growing category. Shopify reports one operating and reportable segment. External revenue by merchant location was:

Europe revenue was $2,140 million in 9M 2026, versus $1,585 million in 9M 2025; its growth accelerated to about 35% for 9M from about 29% in Q3.

Cash flow and balance sheet

Beginning in April 2026, merchant cash advance cash flows were classified in investing activities alongside loan cash flows, affecting comparability of cash-flow classifications.

Equity less goodwill and intangible assets implies tangible common equity of $12,129 million at September 30, 2026. Cash purchases of intangible assets were $99 million in both Q3 and 9M.

Lending, investments and credit exposure

Loan and merchant cash advance purchases increased to $1.5 billion in Q3 from $1.0 billion, and to $4.3 billion in 9M from $2.8 billion. Loan interest and fee revenue (outside ASC 606) rose to $96 million from $66 million in Q3 and to $271 million from $185 million in 9M. Credit-loss provision increased to $63 million from $49 million in Q3 and to $217 million from $137 million in 9M; net charge-offs were $59 million versus $41 million in Q3 and $166 million versus $101 million in 9M. The allowance on loans and advances rose to $246 million from $195 million. At September 30, 6.0% ($157 million) of gross loans and advances were 180+ days past due, compared with 5.7% ($112 million) at year-end; the current share fell to 91.1% from 92.0%.

Equity and other investments totaled $4.911 billion, including $3.205 billion identified as carried at fair value. Readily determinable investments were $2.596 billion, down from $2.986 billion; Q3 net unrealized losses were $126 million, versus $28 million of gains, and 9M losses were $404 million, versus $400 million of gains. Private investments without readily determinable fair values had a $1.706 billion carrying value, including $1.380 billion remeasured using Level 3 inputs. Observable price changes generated a $511 million 9M unrealized gain on these investments. Shopify highlights valuation and market-price sensitivity and concentration in a small number of investments; publicly determinable holdings included Affirm ($1.405 billion), Global-E ($879 million) and Klaviyo ($292 million).

Capital returns, shares and other risks

Shopify repurchased 21.145824 million Class A shares in 9M for $2.476 billion, at an average $117.09 per share. The authorization was increased to $5 billion, with $2.524 billion remaining. Shares outstanding were 1,289,206,588 at the start of Q3 and 1,286,382,911 at quarter-end; for 9M, they declined from 1,303,904,301 to 1,286,382,911. Stock-based compensation was $140 million in Q3 versus $107 million and $400 million in 9M versus $334 million. At quarter-end, 11.822 million options and 4.345 million RSUs were outstanding.

The CRA proposed reassessing $24 million of additional 2020 income taxes, plus interest, relating to transfer pricing. Shopify disputes the assessment, has recorded no liability, and notes that tax years 2021–2026 remain open. Its $100 million revolving facility was undrawn, with a 7.50% effective rate. Deferred revenue was $414 million versus $410 million a year earlier, comprising $345 million current and $69 million long-term.

Shopify — MD&A, Q3 and nine months ended September 30, 2026

Consolidated results

Revenue grew 32% in Q3 and 33% for 9M. Gross profit grew more slowly than revenue, as the expanding merchant-solutions business carries lower margins than subscription solutions, primarily because of third-party payment-processing costs. Shopify says merchant solutions require significantly less sales and marketing and R&D investment than subscription solutions.

Revenue categories

Subscription revenue growth reflects a larger merchant base, a higher mix of premium plans such as Plus, and increased variable fees tied to GMV. Merchant-solutions growth was led by Shopify Payments processing and currency-conversion revenue. For 9M, subscription revenue was $2.388B versus $1.975B, and merchant-solutions revenue was $8.107B versus $5.909B. Merchant solutions represented 78% of Q3 revenue (75% in Q3 2025) and 77% for 9M (75% in 9M 2025).

Operating metrics

Constant-currency GMV growth was 30% in both Q3 and 9M (versus 30% and 28%, respectively, in the prior-year periods). MRR rose 19%; Q3 growth was consistent with the prior-year quarter, while 9M growth benefited partly from comparison with prior-year extended paid trials. Payments processed an additional $21.3B of GMV in Q3 (up 35%) and $62.2B for 9M (up 38%).

Operating expenses and earnings drivers

Q3 sales and marketing increases included $26M more marketing-program spending and $21M more affiliate payouts. R&D rose with employee-related costs and computer hardware/software costs, including AI usage; infrastructure costs, including cloud hosting, software and LLM usage, increased $40M in Q3 and $99M for 9M. Transaction and loan losses declined in Q3 as Shopify Payments losses fell $41M on lower realized losses, partly offset by $14M higher lending losses. For 9M, transaction and loan losses rose to $377M from $303M, including $83M higher lending losses as offerings and programs expanded.

Stock-based compensation and related payroll taxes were $147M in Q3 versus $116M and $418M for 9M versus $359M. Weighted-average diluted shares were 1,290.727M in Q3 versus 1,312.873M, and 1,298.618M for 9M versus 1,310.029M. Diluted GAAP EPS was $0.36 versus $0.20; non-GAAP net income was $638M versus $441M and non-GAAP diluted EPS was $0.49 versus $0.34.

Investment marks created substantial earnings volatility. Q3 included a $138M net loss on equity and equity-method investments versus $112M; this comprised a $126M unrealized loss on investments with readily determinable fair values and a $21M equity-method loss. For 9M, the line was an $8M gain versus a $498M loss: a $530M gross unrealized gain from an observable price change in a private investment was offset by $404M of unrealized losses on readily determinable investments, a $65M investment-option loss and a $64M equity-method loss. The quarter-to-quarter swings included a $1.228B investment gain in Q2 and a $1.082B loss in Q1. Shopify also released $63M of U.S. federal and state deferred-tax valuation allowance in Q3, mainly based on sustained U.S. profits and projected taxable income, while retaining an allowance on U.S. capital-nature deferred tax assets.

Liquidity and cash flows

Cash, cash equivalents and marketable securities totaled $4.727B at September 30, 2026, down $1.1B from $5.8B at December 31, 2025, and below $6.349B at September 30, 2025. The nine-month combined balance declined $1.051B, compared with an $870M increase in 2025. The balance-sheet total includes short-dated investments; separately, $524M of marketable securities ($676M in 2025) was classified as long-term and excluded from the financing cash-flow figure. Working capital, excluding current deferred revenue, was $6.5B. Management said available liquidity and operating cash generation should cover obligations for the next 12 months and the foreseeable future.

Operating cash generation reflected operating income adjusted for non-cash items and working-capital changes. Investing inflows included $1.9B from marketable-security maturities, net of purchases. Investing outflows included $702M for loans and merchant cash advances, net of repayments and sales; $217M for equity and other investments; $99M for intangible-asset purchases; and $11M for property and equipment. Financing cash use was primarily $2.5B of Class A share repurchases, partly offset by $24M from option exercises.

The board authorized up to $5B of repurchases in 2026. Shopify repurchased $543M in Q3, with $2.5B remaining under the authorization at quarter-end. Repurchases and lending activity were major uses of cash. Following Canadian regulatory changes, Shopify transitioned Canadian Shopify Capital merchant cash advances to loans accounted for under ASC 310 beginning in April 2026; from then, related cash flows were classified as investing activities. Q3 activity resulted in a net $30M investing cash use after repayments, purchases and originations.

Outlook, strategy and risks

Shopify’s priorities include merchant acquisition and retention, adoption of higher-priced plans and additional solutions, international localization, broader sales channels and partnerships, and emerging technologies including AI. Management expects to continue investing in growth and retention. Holiday-quarter GMV typically lifts merchant-solutions revenue, with first-quarter seasonality following holiday spending; increasing merchant-solutions mix may make results more seasonal and pressure gross margin. International expansion exposes revenue and expenses to currency movements; the company uses foreign-exchange forwards and options to hedge certain operating-expense cash flows. No merchant represented more than 5% of revenue in a reporting period. Payments and lending growth also exposes the company to processing, credit and loan losses. The company reported no significant changes in principal commitments from its 2025 Form 10-K and no known litigation or loss contingencies expected to materially adversely affect its financial condition or performance.

Market risks

Shopify’s principal market risks are foreign-exchange movements, volatility in equity and other investments, interest rates, credit concentration, and inflation. A significant portion of revenue and operating expenses is denominated in EUR, GBP, CAD, and AUD, though most amounts are in USD. Shopify uses foreign-exchange derivatives to hedge some future operating-expense cash flows.

Foreign exchange

The following table compares reported results with estimated results using prior-year exchange rates. Amounts are in USD millions.

FX increased Q3 2026 revenue by $4 million and operating income by $2 million compared with prior-year rates. For 9M 2026, FX reduced revenue by $66 million and operating income by $34 million; the cost-of-revenue and operating-expense effects partly offset the revenue headwind.

The sensitivity below is hypothetical, not a forecast. It assumes a 10% currency movement against the USD, excluding hedging and changes in demand. A 10% weakening would have equal and opposite effects.

Equity and other investments

At September 30, 2026, Shopify disclosed $5.4B of equity and other investments, exposing it to market-valuation changes, impairment judgments, and potential earnings volatility. Disclosed holdings included $2.6B of publicly traded or readily determinable fair-value equity investments; $1.7B of private-company equity investments measured using the measurement alternative; a $538M equity-method investment in Flexport; $599M of private-company convertible notes carried at fair value; a $10M derivative for a Klaviyo Series B share-purchase option; and $524M of held-to-maturity marketable securities with maturities over one year and under three years, carried at carrying value. The listed amounts total approximately $5.97B, above the stated $5.4B total; the filing does not explain the difference.

Private-company investments may be difficult to value, particularly holdings in early-stage businesses without established operating histories. Convertible-note valuations partly depend on underlying-company valuations and interest rates, and changes in fair value flow through net income. Fair-value changes in held-to-maturity securities generally are not recognized unless the securities are sold or deemed other-than-temporarily impaired.

Interest-rate, credit, and inflation risks

Cash, cash equivalents, and marketable securities in Shopify’s cash-management program totaled $4.7B at September 30, 2026. The program emphasizes capital preservation rather than trading. Rising rates can reduce the value of fixed-rate securities, lower future investment income, or result in principal losses if securities must be sold before maturity.

Cash and securities also carry counterparty risk. Shopify manages exposure through creditworthy financial institutions, exposure limits, investment-rating requirements, and maturity limits. No individual merchant accounted for 10% or more of revenue or receivables; Shopify cited its diversified merchant base as limiting concentration risk in receivables, loans, and merchant cash advances.

Inflation may raise operating costs that cannot be fully offset by price increases. It may also weaken merchants’ financial condition and businesses, affecting GMV and Shopify’s results, particularly if economic growth slows across its markets.

Controls and Procedures

Management, including the CEO and CFO, evaluated Shopify’s disclosure controls and procedures and concluded they were effective as of September 30, 2026. No changes during the quarter materially affected, or were reasonably likely to materially affect, internal control over financial reporting. The filing cautions that control systems have inherent limitations and provide reasonable, not absolute, assurance.

Shopify reported no material changes to the risk factors disclosed in its 2025 Form 10-K. It cautioned that current global economic and geopolitical conditions may amplify existing risks, and that risks not currently known or considered material could also adversely affect its business, results of operations, or financial condition.