SHOPIFY INC. Q2 FY2025 earnings

Shopify's fiscal 2025 second quarter delivered revenue of $2.68 billion, up 31.1% from the prior-year quarter. Gross profit rose 24.6% to $1.30 billion, while operating income increased 20.7% to $291 million. Net income reached $906 million, up 429.8%, and diluted EPS was $0.69, up $0.56. The profit line was heavily influenced by equity investment marks. Net income excluding the impact of equity investments was $338 million, after removing $568 million of equity investment gains, net of taxes. Gross margin fell 2.5 percentage points to 48.6%, and operating margin slipped 0.9 percentage points to 10.9%. Those margin moves reflect the growing weight of lower-margin merchant solutions in the revenue mix.

Operationally, the quarter was strong. GMV rose 31% to $87.8 billion, and on a constant currency basis GMV grew 29%. Europe stood out, with GMV up 42% on a constant currency basis. MRR reached $185 million, up 9% from a year earlier. Shopify Payments penetration was 64%, up from 61%, and the service facilitated $56.6 billion of GMV. For the six months ended June 30, 2025, platform GMV was $162.6 billion, up 27%. Merchant solutions continued to carry more weight than subscription solutions in the revenue mix. The company said growth accelerated in North America, Europe, and Asia Pacific on a quarter-over-quarter basis. Those figures show that Shopify is still adding volume faster than it adds subscription revenue, which is a familiar mix shift.

Cash generation remained solid. Operating cash flow was $428 million, up 25.9%, and capital expenditures were $6 million, down 14.3%. Free cash flow was $422 million with a 16% free cash flow margin, marking eight consecutive quarters of double-digit free cash flow margins. Deferred revenue was $421 million, down 10.0% from the prior-year quarter. On a year-to-date basis, revenue was $5.04 billion, up 29.0%, gross profit was $2.47 billion, up 23.4%, and operating income was $494 million, up 51.1%. Year-to-date net income was $224 million, a swing to a profit. Year-to-date diluted EPS was $0.17. Year-to-date operating cash flow was $795 million, up 37.5%.

Guidance for the third quarter of 2025 calls for revenue growth in the mid-to-high twenties percentage range, gross profit dollar growth in the low twenties, operating expenses at 38% to 39% of revenue, stock-based compensation of $130 million, and a free cash flow margin in the mid-to-high teens. Management continues to invest behind growth, so the outlook implies spending remains a focus. Risks include the shift toward lower-margin merchant solutions, which can keep pressuring gross margin, and seasonal swings in merchant solutions revenue around the fourth-quarter holiday period. Foreign currency movements and volatility in equity investments can also distort reported results. Other named risks include changes in economic conditions and consumer spending in the United States, Europe, and globally; measures affecting international trade, including tariffs; reliance on third-party cloud providers; a cyberattack or security breach; and serious errors or defects in software or hardware. The company said the outlook supersedes all prior financial outlook statements.

Shopify also faces a convertible note maturity on November 1, 2025, with a conversion window from August 1, 2025 to October 30, 2025. The company said it is not aware of litigation matters or loss contingencies that would be expected to have a material adverse effect. The quarter showed healthy top-line momentum and cash generation, but the mix shift, margin pressure, and investment plans are the main items to watch.