Prepared remarks
Good morning, and thank you for joining Shopify's Second Quarter 2026 Conference Call. I'm Shane Kleinstein, Director of Investor Relations. And joining us today are Harley Finkelstein, Shopify's President; and Jeff Hoffmeister, our CFO. After their prepared remarks, we will open it up for your questions. Today's call will include certain forward-looking statements 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 the U.S. and Canadian regulators. We'll also speak to adjusted financial measures and other non-GAAP measures, which are 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'll turn the call over to Harley.
Good morning, and thanks, everyone, for joining us today. We've got another exceptional quarter to talk about here at Shopify. Here's what that looks like in the numbers. GMV was up 32% to $116 billion with broad growth across our merchant sizes, geographies and sales channels. Our revenue was up 34% to $3.6 billion, and our free cash flow margin was 18%. That's a growth rate of 30% or more across every metric. And this marks our fifth straight quarter of GMV growth above 30%. Now, of all the numbers, our GMV is the one worth repeating. Our merchants processed $116 billion this quarter. This is commerce at an extraordinary scale flowing through the platform, and it also tells us that our merchants are thriving. Okay. Now for the story behind those numbers. Since day one, our operating principle has been simple and consistent. Shopify creates what most merchants need most of the time. And for everything else, we empower our incredible ecosystem of partners. Now I know you've all heard that before, but here's why it matters now. The principle that got us here also explains why we're able to deliver durable growth quarter after quarter. And it perfectly captures how we are building to win in this new agentic era of commerce. Let me explain. First, our addressable market of most merchants is now a very large pool. Because we made it easier to start, there are now simply more merchants to serve, and the breadth of our capabilities has expanded so that merchants of all sizes now run on Shopify. Second, the range of those most-of-the-time merchant needs is expanding quickly. They need access to new and emerging surface areas. They need best-in-class tools that will allow them to keep pace with the rate of change in commerce. And they need it all in one place. Added complexity only reinforces the demand for a simple, unified platform that they can rely on, and that is Shopify. And here's the third critical piece. Our open ecosystem model is uniquely well suited to this agentic era. We have always focused on most merchant needs while making the platform extensible for everything else. We build the primitives, we open them up, and we let the best developers and the best companies in the world build on top of us. In the last year, we kicked that model into a whole new gear. Some of the largest technology companies in the world like OpenAI, Google, Meta, and Microsoft, have chosen to partner with us to open more front doors for commerce. Every new surface area they build is another place our merchants can sell, all because they're on Shopify. And on top of this, the thousands of developers all over the world are embedding commerce into their own applications using the same primitives we built. Thousands of new front doors, all built on one unified foundation, the Shopify platform. Now as commerce continues to fragment, Shopify becomes an even more critical partner because we provide consistent and reliable infrastructure that makes every shopping experience feel seamless. Now whether commerce is handled by humans or agents, whether stores are built by people or AI, Shopify runs underneath it all. For 20 years, we've built a commerce operating system that takes merchants from first sale to full scale by using our partner ecosystem as an extension of our platform. That is our muscle memory. And this model will continue to service even better in this new agentic era of commerce. So let's talk more about Shopify's infrastructure, specifically what we've been building and why it matters so much. We have a very strong conviction that commerce experiences will soon be built into everywhere people are spending their time. That is why our latest product drop was called the Everywhere Edition. We are building now so our merchants are ready for the future. So let's talk about that infrastructure that unlocks commerce everywhere. First, our Catalog, which you can think of as the authoritative source of truth for AI product discovery of the world's best products and best brands. For nearly two years, we've been investing in the search index, ensuring over 1 billion products and 20 years of commerce experience is distilled for agents. It structures merchants' product data, so any AI partner can access it directly, giving agents the ability to discover, understand and recommend our merchants' products. And let me say this, Catalog will be one of Shopify's most important assets for years to come. And here's why. We're seeing that AI searches powered by Catalog converted twice the rate of those using scraped data. That is because with Catalog, merchants' products show up complete, accurate, and with the right context when someone is ready to buy. Put simply, Catalog is the discovery engine for the future and Shopify built it and owns it. Next, let's talk about the Universal Commerce Protocol or UCP. We introduced UCP at the start of 2026, and already industry players across the commerce stack and beyond are converging on this unified protocol with dozens of retailers and platforms adopting it to date. And because we co-built the protocol, partners look to us to make sure it evolves in ways that represent the full diversity of commerce. So first, we built the infrastructure to unlock commerce everywhere. And then we opened it up for everyone. Every Shopify merchant is UCP-ready. Agents and builders can access the product data, create carts, and even check out using the protocol. Everything flows through Shopify. So their checkout logic and fulfilling rules are perfectly preserved. Their products are also automatically listed in Catalog. And every builder can now access UCP and the Catalog API across millions of merchants so they can build commerce experiences with the same infrastructure as our major AI partners. Plus, we built our catalog the way only Shopify could, integrated with shop sign-in so agents can recognize returning buyers and surface personalized recommendations based on their purchase history. No other Catalog API can do this. And we're not just putting merchants in AI channels, we're also showing them how to win in them. In May of this year, we rolled out our new agentic section in the admin, the first cross-channel attribution for agentic selling. Merchants can manage AI channels, they can track performance, and they can get specific recommendations on what to improve, all from a single interface. Now, while the volume from agentic commerce is still small relative to our massive GMV, the growth trends are impressive, both AI-driven traffic and also orders to Shopify stores tripled year-over-year in the second quarter. New buyer orders are coming in at nearly twice the rate of other channels. And this is not just AI taking share of search. In fact, search remains one of our largest sources of buyer traffic to our merchants, and it's still growing. Traditional search sessions are up 1.3x over the past two years, holding roughly one third of all storefront sessions. That is AI as a complement to search rather than a substitute for it. Okay. Now let's talk about agentic building. AI is not just opening up new surface areas for discovery, it is also democratizing code and software development, lowering the barriers to starting a business even further. The way entrepreneurs are pursuing new ideas, the way developers are building software, the way merchants are running their businesses, they're all being rewritten. So naturally, the tools we're arming our merchants with are also evolving at an incredible pace. And Sidekick is the prime example of this. In the second quarter, daily active merchants using Sidekick were up 3.6x year-over-year and daily sessions were up 4.8x. It handled nearly 34 million conversations, and it was used to create more than 36,000 custom apps, up from 12,000 in Q1. More merchants are using Sidekick, and they're using it far more often. That's because it's driving real value, getting new merchants to their first sale faster and helping established merchants run smarter. Sidekick's personalized guidance for new merchants during onboarding led to an 8% increase in merchants reaching five orders within 15 days, and it's getting more intelligent all the time. It can now access data and take action through extensions to third-party apps like Klaviyo without the merchant ever leaving Sidekick. Now adoption is widespread across merchants of all sizes. But what's really interesting is how the value evolves as merchants grow. In a merchant's first 30 days, roughly half of their conversations with Sidekick are about store setup, design and theme configuration. For merchants five years in, that drops to about 8%, while analytics and reporting pass 40% as they use Sidekick as their intelligence layer to interrogate their own data and make better decisions. Same product, different job. At the same time, we built connectors to agents, including Claude, ChatGPT, Perplexity, Manus, Replit, and Vercel with our AI Toolkit. So our merchants can build on Shopify however they choose. And these are just a couple of examples. Our integrations across coding platforms, AI chat agents, and CLI IDEs show Shopify's commitment to meeting builders where they are, however they choose to get there. These tools are a real competitive advantage, and they're exclusively and seamlessly available to Shopify merchants. Interface layers are changing in the agent-first world, but Shopify is still the core commerce infrastructure underneath it all. One where every step of commerce from buying to building, from starting to scaling, moves faster and is within reach for more people. Beyond what we at Shopify are doing to move the needle for our merchants, there are early structural changes we are seeing in the market that also strengthen our position even further. First, let's look at the type of merchants benefiting from these AI shifts. Early indications show that AI search has been particularly helpful to some of the smaller brands that form the long tail of commerce. These are brands that also happen to make up the majority of Shopify's merchant base, smaller businesses with specialized products built for a particular customer. We saw that AI search was starting to disproportionately benefit the long tail in 2025. And that trend has continued, with 75% of AI-attributed orders in the second quarter coming from outside our top 100 categories in Q2. And the explanation is simple. While search engines rank by popularity against a handful of keywords, AI agents make multiple calls into Shopify's Catalog working with richer structured data to match products with the buyer's specific intent rather than just keywords. So when a buyer asks an AI assistant for the best car seat that fits three across the sedan, traditional search focuses on the keyword car seat. An agent, however, understands the actual need, the dimensions, the vehicle type, and the fact that they need three. It searches across all of those constraints at once to find the product that actually works not just the one that ranks highest. And in this world, relevancy reigns. So specific products made for a specific buyer do particularly well. Same for things like reef-safe sunscreen that doesn't leave a white cast or even the best dog harness for a French bulldog. These are real Shopify products that have benefited from the specificity of AI search in the last quarter. And this specificity is leading to better conversion for merchants. Buyer shopping journeys are being compressed as half of all AI-referred sessions are landing directly on a product description page. That is 2.5x more than what we see with traditional search. All of this is a serious tailwind for our merchants and in turn for us at Shopify. Second, as AI makes commerce more fragmented, the value of a best-in-class checkout that can sit underneath any commerce experiences grows exponentially. Our checkout is intentionally designed to look simple. One click, done. But in reality, it is anything but simple. From taxes to discounts, pre-orders to bundles, fulfillment, inventory, validation logic, payments — there is a world of complexity that neither the merchant nor the buyer ever has to think about. But if it breaks, everything breaks with it. And every seemingly simple transaction inside of Shopify checkout is made up of countless customized logic flows. The ability to handle that complexity is what Shopify is world-class at. And the stakes only get higher as commerce expands to more surface areas and as agents start having a role in the transaction. So the agentic landscape favors Shopify's core merchant base, and it makes our checkout even more valuable. It also significantly increases the importance of trust and identity. An agent acting on a buyer's behalf needs to know who they are, how they want to pay and what rules they've set. And through Shop, we've built a buyer network of hundreds of millions of people with identity, preferences and payments working as one system. Shop app's native GMV grew over 70% in Q2. And one of my favorite features, Cart Sync, represented over 30% of Shop app GMV in this quarter. That is the value of known buyers. And Shop Pay is where that trust and identity show up in conversion. In June, Shop Pay surpassed $400 billion in lifetime accelerated GMV. And as new surfaces grow, Shop Pay remains the trusted payment layer that travels with the buyer. So when you zoom out, here's what you see. A new powerful surface area for discovery that disproportionately benefits our core merchant base, a fragmented environment that needs a reliable checkout sitting underneath it all to power it, a world where humans must be able to trust that an agent acting on their behalf knows them and follows the rules they have set, and a greater need all the time for a unified operating system that makes commerce everywhere, not just possible but easy. And this is what Shopify was built for. Now before I hand it over to Jeff, let me give a couple of quick highlights from across the business that fueled our growth in Q2. First, international. International GMV grew 37% in the quarter, and we launched Shopify's first local payment method offering in Mexico, and we expanded managed markets beyond the U.S. merchants for the first time, making it available to merchants in Canada and the U.K. Now let's talk about offline. Shopify point-of-sale GMV grew 32% year-over-year in Q2. And we continue to widen the gap on what sets Shopify apart, delivering our fastest-ever point-of-sale experience and deeper unified commerce capabilities. Merchants can now fulfill orders across locations, move inventories more efficiently between stores, complete returns, exchanges and new purchases within a single checkout. We're seeing particularly strong momentum with large complex retailers who are our fastest-growing segment. And this quarter, we welcomed the iconic Canadian retailer, Holt Renfrew. We powered the rollout of multiple Canada Goose locations and we expanded our relationship with the furniture retailer, Arhaus, to include their offline business. In B2B, we expanded native B2B capabilities beyond Plus for the first time, giving more merchants the ability to manage wholesale and DTC from the same Shopify admin. That means fewer separate tools, fewer custom workflows, and more of their business running through one unified system. Finally, let's talk about our growth with larger brands. Some of the biggest and some of the most important names in commerce and retail continue to move to Shopify to modernize their next chapter. This quarter alone, brands like Guess, Fred Segal, an Aritzia Company, and Avon, all chose Shopify. And e.l.f. Cosmetics, Claire's, Burton, and Suitsupply, are all now live on our platform. As I mentioned earlier, we expanded our work with Arhaus, and this is a perfect example of the power of our unified commerce offering. Arhaus started with us online, and now they're expanding into offline, B2B, and Shopify Payments. Different customer groups, different channels, different pricing models and one back end to run it all. Now here's what else really matters. Once merchants come to Shopify, they stay. Our merchant retention is something we are very, very proud of. Put simply, Shopify is a platform for brands at any stage of their life cycle. And each channel they add makes the others more powerful, embedding merchants deeper in our platform and driving more profitable growth for our company. So let me bring this back to where I started today. Shopify built what most merchants need most of the time. For everything else, we leverage our ecosystem of partners to build with us. Twenty years ago, most merchants meant a much smaller group with a much smaller set of needs. But today, we power every size and every shape of commerce business. And as the merchant base has expanded, our focus has remained the same. Absorb that complexity on behalf of merchants, so they can continue to focus on what matters most to them, their products and their customers. Every time commerce gets more complex, the value of the Shopify platform increases. Today, an entrepreneur can have an idea in the morning and their first sale by the end of the day. With Shopify's AI tools helping them build their storefront, with Catalog servicing their products to buyers and Sidekick already guiding them to the next step. This is an entirely different velocity of entrepreneurship, and it's only going to continue to accelerate. It doesn't matter whether commerce is built by a person or an agent. It doesn't matter whether a transaction starts on a store, in an app, a chat or an interface that hasn't even been invented yet. The underlying needs of merchants do not change. Products need to be discovered, inventory needs to be accurate. Checkout needs to work seamlessly and payments need to move. And the infrastructure underneath it all needs to be fast, reliable and infinitely scalable. And that's what we do at Shopify. And with that, I'll turn the call over to Jeff.
Thanks, Harley. It was an incredible quarter. Q2 represented a continuation of what we've seen for several quarters now, broad-based growth across the business. Strength in GMV flowed through all of our financial results. We achieved greater than 30% growth in each of GMV, revenue, gross profit, operating income, and free cash flow. Q2 marks the fifth consecutive quarter with constant currency GMV growth of 29% to 30%. A tight band, and importantly, even as our scale has grown and the year-over-year comps have gotten tougher, we have consistently delivered these growth rates. The durability of our growth is driven by one of the most powerful dynamics of our model, our cohorts. Newer cohorts continue to outperform, while older ones keep growing. That strength compounds over time as our older cohorts generate multiples of their first year GMV. For example, our Q1 2015 cohort now has a quarterly GMV that's 5x its initial size, implying a compound annual growth rate 3x that of the overall commerce markets growth rate over the same period. This is the mission of Shopify. We make it easy for anyone with an idea and the courage to start the business. It's why we cast a wide net in bringing merchants to the platform. This approach is a feature, not a bug. Through that wide aperture, we find, nurture and build for merchants, many of whom go to do millions and then hundreds of millions in GMV. And the ones that scale, stay. Over the last five years, merchants who reach $1 million in annual GMV had a 92% retention. That jumps to 97% at a $10 million annual GMV. A lot of entrepreneurs are serial entrepreneurs. So even if their first business doesn't make it, Shopify still supports the next one. Merchants who build a second shop on Shopify, on average earn more than twice the sales per shop compared to first-time founders. That is how our cohort strategy works. We give every entrepreneur a shot, arm them with tools to build and watch the winners compound their success. But it's not as simple as just offering tools. We offer a breadth of products in an integrated platform to simplify the complex backdrop of commerce. And every piece of that solution makes the others more powerful. GMV drives payments revenue but also informs our capital offers. Checkout fuels buyer identity, and that identity benefits advertising precision. And every transaction sharpens the data underneath all of it. Last year, we surpassed $1 trillion in Q1 of GMV facilitated by our platform. Then this past quarter, we also passed that threshold for gross payments volume through Shopify Payments. That is a data foundation underneath everything I just described. It's less about any single capability, but rather how they lead together and inform and enhance each other. This is a magic of combining the bravery and vision of entrepreneurs with the power and capabilities of the Shopify platform. And when merchants win, so do we. Now let's take a closer look at our second quarter results. Q2 GMV was $116 billion, representing year-over-year growth of 32%. On a constant currency basis, GMV grew over 30%, accelerating on top of a very strong 29% prior year comp, diving deeper into GMV from a few different angles, first by merchant size. Consistent with trends for several quarters, we've had broad-based growth across merchant sizes. The $25 million and greater band is the fastest-growing, albeit off of a smaller base. The $2 million to $25 million cohort continues to contribute the most incremental GMV and we are still growing the space with the majority of the growth coming from existing shops graduating up into this band. Moving to regions, North America GMV grew 28%, and Europe grew 34% on a constant currency basis. The contribution to GMV growth from new merchants and same-store sales remain relatively balanced and in line with multi-quarter trends. Finally, turning to channels. Offline GMV was up 32%. B2B GMV grew 76%, all a continuation of prior quarter strong trends. Now looking at revenue. Q2 revenue grew 34% or 33% on a constant currency basis, clearly surpassing expectations. Merchant Solutions revenue grew 37%, driven primarily by the strength in GMV and increased payments penetration, which grew three points year-over-year, reaching 68% of our global GMV. We see clear runway on payments penetration, both domestically and abroad. This past quarter, we launched Shopify Payments in the UAE, bringing to 40 the number of countries where we have payments available. Penetration in Europe increased by more than 350 basis points year-over-year, even as many of the countries we serve launched only last year. We also continue to add more and more local and regional payment methods, including, for example, our additions this past quarter in Mexico. As of Q2, we also now dynamically surface the most relevant payment methods for buyers. Doing this helps eliminate reasons for buyers to ever abandon their checkout, creating better conversion. Shop Pay GMV grew 53% year-over-year. In Q2, we made more local payment methods available to consumers within Shop Pay. This continues our two-part strategy of adding more local payment methods to Shopify Payments and then making more of those available within Shop Pay. More choice and payment method availability means fewer drop-offs to guest checkout, and helps drive Shop Pay usage. Shop Pay also allows buyers to choose to finance their purchases and Shop Pay installments continues to gain share. Each of these make Shop Pay a better consumer experience and a more complete wallet with additional ways to pay, helping drive consumer adoption. Subscription Solutions revenue grew 22%, the largest contributor to the growth was monthly subscriptions for our standard plans, as we saw a strong quarter of merchant net adds in Standard. We also saw relatively equivalent-sized dollar growth in Plus subscriptions and variable platform fees, which were driven by the higher GMV. Q2 MRR grew 19% year-over-year, with continued growth across each of Standard, Plus and point-of-sale plans. Plus MRR represented 34% of MRR, also growing 19% year-over-year. Bringing these all together, our revenue beat in the second quarter stemmed from three key areas where we outperformed, broad-based GMV outperformance, higher-than-expected payments penetration and strength in other Merchant Solutions, primarily from our partner revenue shares and financial services. Now turning to our profitability. Merchant Solutions gross profit grew 39%, with gross margin up slightly from last year. Margin pressure from increased payments volume was more than offset by growth in higher-margin revenue streams. Also, to my earlier comments regarding local payment methods, our payments gross margins are generally higher in international markets due to the greater prevalence of debit transactions and lower interchange fees. Subscription Solutions gross profit grew 19% with gross margins just under 80%, in line with our Subscription Solutions gross margins in Q1. As a reminder, the vast majority of AI costs related to merchant use of Sidekick appear in Subscription Solutions gross profit. We were able to hold gross margins at a relatively consistent level quarter-over-quarter while Sidekick usage scaled, which reflects some cost efficiencies and support as well as our ability to continue providing merchants unique AI solutions like Sidekick, while diligently managing cost. We are big believers in Sidekick and the value that it can deliver to merchants. We believe these types of investments in our platform will translate into more merchants joining the platform, and those merchants have an even greater success. That translates to more gross profit for us, but more importantly, it is helping our merchants accelerate their businesses. Now looking at operating expenses, which were 34% of revenue, a nearly 4-point improvement from Q2 last year. This reflects continued leverage as we grew gross profit dollars faster than our expenses, primarily by maintaining our discipline in headcount, sales and marketing, R&D, and G&A as a percentage of revenue each improved year-over-year. This operating leverage provides the financial flexibility to continue to invest in our platform, including in our internal AI capabilities. We've moved from a place of just reflexive use of AI to a place of AI leverage. Our AI philosophy is straightforward. Maximum leverage paired with thoughtful cost management. We use the best model for the job, frontier intelligence where it matters, less expensive models where it doesn't. We believe widespread adoption of AI tooling already is and will continue to yield benefits in the quality of our output. Looking more closely at our OpEx. Sales and marketing in Q2 was less than 14% of revenue, approximately a 160-basis point improvement year-over-year, even as we funded additional dollars into our merchant acquisition efforts. On R&D, the majority of our internal AI spend is allocated here. So you've seen a modest uptick in year-over-year growth. Overall, we've driven substantial leverage in R&D as a percentage of total revenue, and we'll continue to be disciplined in managing the spend. Transaction loans and losses came in at 3.9% of revenue. It will scale with volumes in our payments, capital, and credit products. Capital was a larger driver this quarter, while loss rates in payments and credit are both at normalized levels. Each of these products continues to grow well, and we are constantly improving our measurement and forecasting to keep loss rates low as adoption grows. And finally, our Q2 free cash flow margin was just over 18%, exceeding our outlook. This represents roughly 1.5 points of year-over-year margin expansion after excluding the benefit of the accounting change in merchant cash advances that we mentioned last quarter. This free cash flow margin expansion was primarily the flow-through of our operating margin expansion, partially offset by about 1 point of increased taxes compared to last year. With that, let's move to our Q3 outlook. We expect Q3 revenue growth in the low 30s year-over-year. The expected sources of growth are consistent with the drivers that we saw in Q2, broad-based across geographies, merchant sizes and channels. We do not expect any significant FX impact. We expect our gross profit dollars to grow in the mid- to high 20s. The differential in the revenue versus gross profit growth rates is driven by the same factors as the second quarter. The continued mix shift between the growth rates of merchant solutions and subscription solutions, and the continued strength of payments. We expect operating expenses in Q3 to be 33% to 34% of revenue, reflecting continued leverage and meaningful improvement compared to the 37% we delivered in Q3 of last year. We expect our Q3 free cash flow margin to be in the high teens to low 20s, inclusive of less than 1 point of tailwind from the accounting change in merchant cash advances. Bringing it all together, when I look ahead, our runway is long. Even though Shopify represents over 14% of the U.S. e-commerce market, our margins take a disproportionate share of the growth. According to eMarketer, since the start of 2025, Shopify merchants have captured nearly half of all incremental e-commerce dollars in the U.S. Early results internationally near that trajectory albeit earlier in their maturation. That's headroom in both the U.S. and globally. Absent any other growth drivers, these are already strong, structural and persistent tailwinds in the base case. And as we enter this agentic era, any acceleration in e-commerce growth or disproportionate value to the long tail of commerce is upside to our underlying growth story. With that, I'll turn the call back over to Shane for your questions.
Thanks, Jeff. We'll now take your questions before turning the call back to Harley for some final words. Operator instructions were provided. Our first question will come from Ken Wong from Oppenheimer.
Questions and answers
Harley, you touched on a lot of key points in terms of AI driving the commerce platform forward clearly providing a ton of value to your customers. How are you thinking about potentially harvesting some of that value back to Shopify? Or is the intent still to kind of open the doors as wide as possible to bring in as many merchants as you can?
Thanks for the question, Ken. When it comes to monetization, the focus is very simple here. We unlock more places for our merchants to sell. And when we earn on those sales the way we always have — agentic transactions carry the exact economics as an online store transaction. There's no new fees. There's no separate pricing. But more agentic GMV means more Shopify revenue, and that's the model and it's been working really well for almost two decades. We are seeing incremental dollars flow through agentic. I know there were some questions on the last call about whether or not it was taken away from search, but search is growing incredibly well. Agentic has really taken off now. The other important point is where this is happening: 75% of AI-attributed purchases in Q2 were from outside the top 100 categories, meaning specialized products discovered because an AI agent understood what the buyer actually needed. That's a structural advantage for these small specialized independent businesses. That's our base. So we think these trends suggest that merchants on Shopify will disproportionately benefit from this new surface area. And as they grow, we grow with them.
We'll take our next question from Bryan Smilek at JPMorgan.
Great. Harley, I'll steal your words, a great monster guide of 30% revenue growth. Definitely wanted to dig in more on the enterprise side. Can you just talk about the ability to onboard new enterprises quicker and truncate that selling cycle? And I guess what's next on the product roadmap here where you can lift and shift that GMV target from $100 million-plus to north of $200 million over time?
I'll tell you something in almost real time. I woke up this morning to an email from Balmain, one of the most iconic luxury retailers in Europe, saying that they migrated to Shopify in a matter of weeks. Balmain.com is now fully launched. Shopify merchants are simply better positioned than those that are not. That is true of businesses of all sizes. Larger merchants are now choosing Shopify at a higher clip. They see that there is enormous and often invisible complexity. Speed to market, an all-in-one platform, velocity of innovation, and our pole position on agentic commerce — no custom stack or legacy platform can match that. These larger brands want a future-proofed commerce partner. They don't want to have to think about ever migrating again. The olden days of enterprise e-commerce, where every couple of years you had to migrate to a new platform, that's not the case with Shopify. They refer to this as their final migration, and that road leads directly to Shopify. We're also seeing less modern, more iconic brands like Barnes & Noble, Claire's, Suitsupply, Guess and Avon coming to Shopify. The best part about our enterprise motion is once they come to us, they stay. We've seen brands that started on Shopify or migrated early, like Alo, Vuori, or FIGS, continue to stay. Arhaus is a good example: they started online and now are expanding into offline, B2B, and Shopify Payments. We have built our team and our sales function around getting large merchants to launch much faster than almost anyone else. That will continue to drive more large merchants onto Shopify faster, and once they come to Shopify, they stay.
We will now take a question from Mike Morton at MoffettNathanson.
If we could maybe follow up on those comments, Harley. The question we get a lot is, for your total addressable market, what is serviceable? And we'd love to know, is there an upper bound on GMV per merchant? Or is there maybe a business model, like marketplaces that you don't think are a right fit for Shopify over the long term? Would love to know how much of the TAM you think is serviceable.
That's part of the magic sauce to Shopify. We want anyone starting a business at their mom's kitchen table to use Shopify. We know not all will succeed, but over 20 years, the ones that do stay with us indefinitely, and over time take more of our solutions. At the same time, getting large established retailers like Burton, Wilson, Salomon and others onto Shopify suggests there is no obvious upper bound. There are some merchants where a full migration to Shopify may not make sense just yet, and there are times where a specific business model might be better served initially by a component of Shopify. For those, we can offer components like Shop Pay so they can get conversion uplift with a better checkout experience, and then evaluate cross-sell opportunities over time. In terms of an upper bound, I don't think it's a GMV issue. We have merchants doing billions of dollars with very small teams. Complexity is where we've gotten really good. There's something for everyone now, whether that's headless or a commerce component. We start early with merchants, prove value in a single component, and in many cases they expand to more Shopify services over time. On the international side, we're underpenetrated. We've captured less than 1% of global retail sales. In our core geographies the opportunity is massive and we can do a lot more internationally.
Thanks, Mike. We'll take our next question from Terry Tillman at Truist Securities.
Harley, Jeff and Shane, can you all hear me okay?
Yes.
So it's a multi-part question. On Shopify Catalog, how often is this actually being a primary driver of demand generation and actually getting the new merchant? And the second part of this is, Harley, let's go back a couple of years to COVID. There was a lot of folks that said, 'I want to take my own destiny in my own hands, I'm an entrepreneur, I'm a builder.' This feels like we're having another moment here. How does this compare to that moment in terms of this kind of builder economy around AI?
In terms of Catalog, this is real. Conversion of Shopify Catalog versus general scraped data is 2x. Conversion from AI search runs nearly 80% higher than traditional organic search as well. Catalog has very high fidelity and is being enhanced with taste-driven attributes, things like whether an item is formal enough for a wedding, breathability of fabric, wrinkle tendency, or suitability for an endurance run. These attributes are only possible with Catalog. Traffic on agentic channels is up 3x year-over-year and orders are up 3x. New buyer orders from AI channels are about twice the rate of other channels. So even though agentic volume is small relative to total GMV, we are seeing it expand discovery of products and drive conversion. On the merchant side, every major retailer executive is thinking about their agentic strategy. By coming to Shopify, we take that strategy off their plate and position them well. On the second piece, yes, the COVID era saw entrepreneurship explode. Right now, Sidekick is performing remarkably well and is helping merchants reach early milestones faster and make smarter decisions. Sidekick drove an 8% increase in new merchants reaching five orders within 15 days. If merchants get more orders earlier on, they tend to stay longer and be more successful. Sidekick and our other tools are making entrepreneurship more accessible.
We'll take our next question from Adam Wood at Morgan Stanley.
I have a question about Sidekick, coming back to that. So again, some very, very strong data in the quarter. Could you just go into a little bit more detail? You started there talking around the benefits to merchant outcomes. But could we see how retention is happening? How GMV growth is happening? How product attach is happening where merchants using Sidekick as well as the traditional Shopify offerings? And over time, do you see that indirect monetization as the main driver? Or could those premium AI capabilities become a more direct pricing opportunity for you?
We reserve the right to wake up smarter every single day. In terms of monetization, the business model is predicated on merchants doing well — the better merchants do, the better Shopify does and Sidekick helps with that. Sidekick understands the merchant's products, customers, transactions, storefront and history, which allows us to give advice grounded in the practical realities of their business and take action. That advantage strengthens as Sidekick becomes connected to more of the work merchants do. Daily active merchants using Sidekick grew 3x year-over-year and daily sessions are up 4.8x. Merchants had nearly 34 million conversations with Sidekick in Q2, and they built 36,000 custom apps in Q2, up from 12,000 in Q1. For new merchants, Sidekick accelerates getting to that first sale; onboarding guidance helped an 8% increase in merchants reaching five orders within 15 days. As businesses grow, Sidekick's role grows with them. In the first 30 days, 50% of conversations are about setup and design; five years in, setup is about 8% while analytics and reporting are over 40%. Sidekick becomes an intelligence layer to spot opportunities and make better decisions. Power users are pushing it into advanced design, content, SEO, and product creation. The product attach and retention dynamics are favorable because it helps merchants succeed across stages, which drives indirect monetization through higher GMV and more platform usage. We continue to evaluate options, but the core is that Sidekick helps merchants grow, and that growth drives Shopify's monetization.
Great. We'll take our next question from Deepak Mathivanan from Cantor.
Right. Harley, AI model capabilities continue to expand at a pretty accelerated pace and Shopify has always been at the forefront of building on these cutting-edge capabilities. Can you talk about a few areas where the recent advancements that we've seen with the Fable and GPT 5.6 series are enabling pretty good product improvements or perhaps improvements in operational capabilities for Shopify?
AI is baked into how Shopify operates. Every decision, every experiment, every merchant interaction AI is helping us get smarter. Over the past year we've moved from experimenting with AI to rebuilding teams and work around what it can do. We use the best model for the job: frontier intelligence where it matters and less expensive models where it doesn't. Everything runs through an internal proxy, which gives us visibility, control and security. As tasks become repeatable, we move them to more efficient models. We also create distilled models where a teacher frontier model teaches a smaller model a specific use case, often resulting in faster, less costly, and sometimes better performance for the narrow task. Shopify is highly AI-enabled and our approach to using models and building internal tooling is a differentiator. Credit to leadership for making AI a reflexive part of how we build.
Great. We'll now go to Todd Coupland with CIBC.
Great. I wanted to ask about free cash flow margins. Is roughly 20% the new normal? And how should we think about the levers around that?
Thanks for the question. I apologize for my voice. I'm fighting a cold. Nothing's changed in terms of how we look at free cash flow and the levers we have at our disposal. If you look at what we delivered in Q2, it was roughly 150 basis points above where we were last year, ignoring the change on the merchant cash advances. I wouldn't say we've defined a new normal; focus on the guidance we gave for Q3. We continue to drive more and more leverage through the system and we'll manage gross margin pressures with OpEx discipline.
We'll take our next question from Gabriela Borges from Goldman.
Harley, I wanted to ask you a little bit about headless, because you mentioned some of the tooling that your customers are building around the Shopify platform, for example, on Vercel. Could you talk to us a little bit about what you think is working well with the headless strategy? And the second derivative implications for your model longer term as you become more entrenched in some of this third-party tooling.
Shopify offers a composable architecture that merchants can use in many ways. Some merchants use Shopify out of the box; many enterprise merchants want headless approaches like Hydrogen or platforms like Vercel for highly customized web experiences. Our job is to provide many on-ramps into Shopify so merchants can build however they want while keeping Shopify as the commerce backbone. The commerce operating system — inventory, transactions, customer data, analytics, taxes, shipping — sits underneath any interface. That unified back office is where the value accrues. Components like the Shop Pay commerce component are effective entry points: easy to adopt, demonstrate value, and open a path to deeper engagement. We partner with many best-in-class tools and let merchants choose their stack while Shopify remains the core commerce system.
We will now take our last question from Arjun Bhatia.
Harley, I'm curious, it sounds like some of the agentic traction is starting to increase, still very early. But I'm curious if there's any surfaces that are worth calling out where you're seeing an uptick in transactions or usage initially? And as a follow-up to that, how do you view the Shop app playing a role in this agentic commerce area? It seems like there might be a lot more room there.
Agentic traction is early and small relative to $116 billion GMV, but trends are exciting. Traffic is up 3x, orders are up 3x, new buyers from AI channels are 2x versus other channels, and conversion from Catalog is 2x more than general AI search. The most exciting structural trend is that 75% of AI-attributed purchases in Q2 were from outside the top 100 categories, disproportionately benefiting the long tail of specialized products. A quick example: looking for a screen-less phone for a child led me to discover Tin Can Phone, a Shopify merchant product I wouldn't have otherwise found. In terms of Shop, it's becoming a daily destination for high-intent discovery. Native GMV was up 70% year-over-year and Cart Sync represented over 30% of Shop app GMV. Cart Sync allows shoppers to move between a merchant's store and the Shop app without losing their cart, creating an integrated experience. Both agentic channels and the Shop app are major legs of our strategy for the future. I'll take a moment to close the call. I said last quarter that AI is going to accelerate entrepreneurship more than any other tool. Tobi mentioned that about a year ago, and I'm seeing it. Catalog is driving higher conversion, Sidekick helps merchants reach their first sale faster. Zooming out, the true value of Shopify is bigger than any single product or feature, even any quarterly result. The value comes from the compounding power of everything we've built over 20 years, all working together. Every new product helps our merchants succeed and drives more transactions. Every transaction gives us more signal, making our products smarter. Smarter products then drive wider adoption. As our merchants scale, Shopify becomes even more valuable to them. That is a powerful flywheel, powered by a durable operating model and a world-class team. Two weeks ago we held our annual company-wide summit in Toronto. The energy inside the company is the highest I've felt in a very long time. I've never been more proud of this team. We are the world's commerce infrastructure, and whether it's the first-time founder making their first sale, or the largest retailers and brands in the world, these exceptional results are not the product of one quarter. They are the result of 20 years of focused, disciplined, hard work. We are still just getting started. Thank you for tuning into the call, and we will talk to you all next quarter.
Great. Thanks, Harley, and thanks, Jeff. This wraps our second quarter 2026 conference call. Thanks to everyone for joining us, and we look forward to speaking with you all soon. Goodbye.