Shopify Inc. (SHOP) shares jumped on Wednesday after the e-commerce software company delivered a second-quarter earnings report that blew past Wall Street's expectations and offered a rosier-than-expected outlook for the current quarter.
The company reported adjusted earnings of 42 cents per share, beating the analyst consensus of 40 cents. Revenue came in at $3.58 billion, up 34.3% year over year and ahead of the $3.45 billion analysts had penciled in.
The strong results helped ease investor worries about the company's AI-related spending and the intensifying competitive landscape.
Shopify's Key Numbers
Adjusted net income climbed to $439 million from $338 million in the same period last year.
Gross merchandise volume (GMV) rose 32% year over year to $115.57 billion, or 30% on a constant-currency basis. Merchant Solutions revenue grew 37% to $2.78 billion, while Subscription Solutions revenue increased 22% to $802 million.
Gross margin slipped to 47.67% from 48.58% a year earlier, but gross profit still grew 31% to $1.71 billion. The company generated $658 million in operating cash flow and $654 million in free cash flow, with the free cash flow margin expanding 200 basis points to 18%.
AI Is Driving Real Growth
Shopify highlighted that AI-powered commerce is gaining serious traction. AI-driven traffic and orders to merchant stores both tripled year over year during the quarter. Even more striking, new buyer orders coming through AI channels are arriving at nearly twice the rate of other sales channels, suggesting AI is becoming a powerful customer acquisition tool.
While AI-driven commerce still represents a small slice of Shopify's overall GMV, management said the trends are encouraging. AI search is delivering higher conversion rates and helping smaller merchants reach more buyers.
What Executives Are Saying
President Harley Finkelstein called it a strong quarter, noting that GMV, revenue, gross profit, and free cash flow each grew more than 30%. He said Shopify continues to support businesses of all sizes and is using AI to expand what merchants can do on the platform.
Chief Financial Officer Jeff Hoffmeister said GMV growth accelerated from an already strong prior-year comparison, driven by broad-based strength across merchant sizes, sales channels, and geographic regions. He also pointed to improved operating leverage, which helped push the free cash flow margin to 18%, and described the quarter as reflecting the company's focus on broad-based growth, consistency, compounding momentum, and financial discipline.
Bloomberg Intelligence analyst Anurag Rana noted that investors had braced for higher AI-related spending to squeeze margins, but second-quarter operating expenses rose just 21%, slightly below analyst expectations.
The upbeat report comes on the heels of a July downgrade from Rothschild & Co Redburn, which cut Shopify to Neutral over concerns that AI tools from Meta Platforms Inc. (META) could intensify competition for Shopify's small-business customer base.
Looking Ahead
Shopify expects third-quarter 2026 revenue to grow in the low-30% range year over year, which would mark a sixth consecutive quarter of revenue growth above 30%. That guidance implies revenue of roughly $3.73 billion to $3.78 billion, well above the analyst consensus of $3.59 billion.
The company also expects free cash flow margin to stay in the high-teens to low-20% range.
SHOP Price Action: Shopify shares were up 19.14% at $146.90 at the time of publication on Wednesday, according to market data.
