Summary
Shopify's first quarter of fiscal 2026 delivered strong top-line growth and better operating leverage. Revenue rose 34.3% to $3.17 billion from $2.36 billion. Gross profit rose 32.2% to $1.546 billion from $1.169 billion. Operating income rose 88.2% to $382 million from $203 million. Operating margin expanded to 12.1% from 8.6%, up 3.4 percentage points. Gross margin slipped to 48.8% from 49.5%, down 0.8 percentage points. The GAAP bottom line stayed negative. Net loss narrowed to $581 million from $682 million. Diluted loss per share narrowed to $0.45 from $0.53. Deferred revenue fell 5.3% to $407 million from $430 million. Management has said deferred revenue is not a good indicator of future revenue and instead points to MRR as the better signal for subscription value.
The platform's scale metrics kept rising. GMV reached $100.7 billion in the quarter, up 35% from $74.8 billion a year earlier. On a constant currency basis, GMV growth was 30%, compared with 25% in the prior-year period. MRR was $212 million, up 16% from $182 million. Revenue growth was 34% in the quarter, compared with 27% in the prior-year quarter. Millions of businesses in 175+ countries use the platform, and no single merchant has ever represented more than five percent of total revenues in a single reporting period. Cash generation also improved. Operating cash flow rose 31.1% to $481 million from $367 million. Capital expenditures were $5 million, up 25.0% from $4 million. Free cash flow was $476 million, compared with $363 million, and free cash flow margin was 15% in both periods. The company frames the quarter as broad-based growth across geographies, merchant sizes, and channels.
For the second quarter of 2026, Shopify expects revenue to grow at a high-twenties percentage rate on a year-over-year basis. Gross profit dollars are expected to grow at a mid-twenties percentage rate. Operating expenses as a percentage of revenue are expected to be 35% to 36%. Stock-based compensation is expected to be $145 million. Free cash flow margin is expected to be in the mid-teens. The outlook is for the next quarter, not the full fiscal year. Management said the outlook supersedes all prior financial outlook statements and is based on assumptions that are subject to risks. Management also said the company has entered the AI era with a clear edge and expects that advantage to compound throughout 2026.
The filing names several risks. They include the ability to maintain expected growth and manage expenses, changes in economic conditions and consumer spending in key markets such as the United States, Europe, and globally, measures affecting international trade including tariffs, the adoption and impact of emerging technologies such as AI, reliance on third-party providers to deliver services, a cyberattack or security breach, and serious errors or defects in software or hardware. MD&A also flags foreign currency fluctuations, seasonality, and a revenue mix shift toward lower-margin merchant solutions as factors that can pressure gross margin. The company says merchant solutions carry lower gross margins than subscription solutions, so continued mix shift may weigh on overall gross margin.
The quarter's operating profile looked solid even with the GAAP net loss. Operating income and operating margin improved, and free cash flow was positive. Gross margin declined, but the drop was modest. Deferred revenue declined, though management directs investors to MRR. The net loss narrowed on a year-over-year basis, and the diluted loss per share also narrowed. For the next quarter, management expects high-twenties revenue growth and mid-teens free cash flow margins, while investing at 35% to 36% of revenue on operating expenses. The balance between growth and spending will be the key item to watch.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $3.17B | $3.67B | -13.7% | $2.36B | +34.3% |
| Gross profit | $1.55B | $1.69B | -8.7% | $1.17B | +32.2% |
| Gross margin | 48.8% | 46.1% | +2.7 pp | 49.5% | -0.8 pp |
| Research & development | $437.0M | $390.0M | +12.1% | $377.0M | +15.9% |
| Sales & marketing | $496.0M | $433.0M | +14.5% | $405.0M | +22.5% |
| General & administrative | $115.0M | $125.0M | -8.0% | $109.0M | +5.5% |
| Total operating expenses | $1.16B | $1.06B | +9.6% | $966.0M | +20.5% |
| Operating income (loss) | $382.0M | $631.0M | -39.5% | $203.0M | +88.2% |
| Operating margin | 12.1% | 17.2% | -5.1 pp | 8.6% | +3.5 pp |
| Net income (loss) | -$581.0M | $743.0M | -178.2% | -$682.0M | +14.8% |
| Net margin | -18.3% | 20.2% | -38.6 pp | -28.9% | +10.6 pp |
| Diluted EPS | -$0.45 | $0.57 | -$1.02 | -$0.53 | +$0.08 |
Risks
Continued growth of lower-margin merchant solutions is compressing profitability: gross margin fell 0.8 pp to 48.8% in FY2026 Q1 from 49.5% in FY2025 Q1, and management states the continued growth of merchant solutions has caused in the past, and may cause in the future, a decline in overall gross margin percentage.
GAAP net results are heavily driven by mark-to-market swings on the equity portfolio. FY2026 Q1 included a $1,082 million net loss on equity and equity method investments, largely a $1,009 million unrealized loss on investments with readily determinable fair values, producing a net loss of $581 million in the quarter. Management notes these changes may cause volatility to earnings and hurt comparability period to period.
Transaction and loan losses rose 55% to $116 million in FY2026 Q1 from $75 million in FY2025 Q1, including a $28 million increase in losses related to lending services driven by expansion of Shopify Capital offerings and programs relative to the prior-year period.
Canada amended regulations affecting merchant cash advance products, prompting Shopify to transition its Shopify Capital product in Canada from merchant cash advances under ASC 606 to loans under ASC 310 starting April 2026, and to reclassify merchant cash advance cash flows from operating to investing activities.
Subscription growth is decelerating: MRR totaled $212 million as of March 31, 2026, up 16% year over year, and management states the MRR growth rate for the period was lower than the same period in 2025 driven by the effects of the Shopify Plus subscription pricing increase in the second quarter of 2024.
Merchant solutions revenue is directionally correlated with merchant GMV, which peaks in the fourth-quarter holiday season. As merchant solutions grow, management expects the business may become more seasonal and warns that historical patterns may not be a reliable indicator of future performance.
AI related usage is adding to cost growth. Cost of subscription solutions rose on a $22 million increase in cloud and infrastructure costs which includes AI related usage, and research and development rose on increases of $37 million in employee-related costs and $25 million in computer hardware and software costs, which also includes AI related usage.
A significant portion of revenues and operating expenses are denominated in EUR, GBP and CAD, and Shopify expects a growing proportion of revenue and cost of sales transactions in foreign currencies as it expands Shopify Payments, Shopify Capital and other billings internationally. In FY2026 Q1, other income, net included a $9 million net loss on foreign exchange versus a $6 million net gain in the prior-year period.
SaaS KPIs
All quarters →Free Cash Flow
Free Cash Flow Margin
Gross Merchandise Volume (GMV)
Monthly Recurring Revenue (MRR)
Summary, forecast, risks and KPIs are extracted from SHOPIFY INC.'s SEC filings for Q1 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.