Shopify, Inc. Q1 FY2025 earnings call

Shopify is built for agility, and merchants on Shopify have outperformed the overall ecommerce market. In Q1, revenue growth and a 15% free cash flow margin were achieved. Key growth areas included offline, B2B, and international GMV. Shopify made progress in cross-border trade with enhancements like managed markets products, a buy local filter on the shop app, duties calculation at checkout, duty-inclusive pricing, TariffGuide.ai, and simplified international shipping. Shopify Payments expanded to 16 new markets, and multi-currency payouts were launched in 20 European countries. AI is integrated into internal operations and merchant-facing tools, with Sidekick showing growth in monthly average users. The platform is attracting global brands, with strong growth in offline business and various verticals.

In Q1 2025, revenue increased by 27%. Merchant solutions revenue grew 29%, driven by factors such as continued strength in GMV and increased penetration of Shopify payments, which reached 64% for the quarter. Subscription solutions revenue grew 21%. GMV in Q1 was $74.8 billion, up 23%. Offline GMV saw a 23% growth, B2B GMV was up 9%, international GMV grew 31%, and cross-border GMV held steady at 15% of total GMV. Shopify Payments was launched in 16 new markets, expanding the total number of supported countries to 39. Multi-currency payouts were introduced in 20 European countries.

Q2 revenue is expected to grow in the mid-twenties year over year. Q2 gross profit dollars are projected to grow in the high teens, driven by a mix shift from merchant solutions. Q2 operating expenses are expected to be 39% to 40% of revenues, representing a 200 to 300 basis points improvement from Q2 last year. Q2 free cash flow margin is expected to be in the mid-teens, similar to Q1 2025.

Uncertainty exists in the trade environment. The recent expiration of the de minimis exemption for goods from China is not expected to have a meaningful near-term impact on Shopify, but tariffs and economic factors may complicate cross-border trade, and there is potential impact on merchant sourcing and demand.

Q: Samad Samana asked about where merchants are sourcing inventory and tariff exposure.

A: Harley Finkelstein stated it's still early, the merchant base is diverse, and no meaningful impact on GMV has been seen yet.

Q: Martin Toner asked about China-specific merchants in early May.

A: Jeff Hoffmeister said it's still early, strength in GMV was seen in April and May, but no specific detail on China was provided.

Q: Rob Wildhack asked about new merchant acquisition.

A: Harley Finkelstein said SMB is strong, and larger merchants are moving to Shopify due to issues with legacy systems.

Q: Bhavin Shah asked about AI impact on expenses and marketing spend.

A: Harley Finkelstein said AI is integrated into the culture, and Jeff Hoffmeister said there is no change in views on free cash flow margins.

Q: Michael Morton asked about marketing spend targeting and AI traffic.

A: Jeff Hoffmeister said marketing spend is return-based, and Harley Finkelstein said Shopify will be where consumers search for products.

Q: Keith Weiss asked about gross margin durability.

A: Jeff Hoffmeister said subscription solutions gross margin is stable, and merchant solutions have some headwinds but also margin accretive products.

Q: Tim Chiodo asked about Shopify POS competitive differentiation and distribution.

A: Harley Finkelstein said POS has strong product velocity and an advantage in unified commerce.

Q: Dominic Ball asked about AI agents impact.

A: Harley Finkelstein said AI agents present an opportunity for Shopify.