stockrowWhat it does
Shopify provides software and services that help merchants start, run and grow businesses. Founded in 2006 and headquartered in Ottawa, it operates a commerce platform that merchants use to sell online, in physical stores and through other channels, including social media and AI platforms.
A merchant can use Shopify to create an online storefront, manage inventory and transactions, and build relationships with buyers. The platform also offers tools for accepting payments, obtaining working capital and shipping orders. Merchants operate their own businesses and choose the channels through which they sell; Shopify supplies the underlying technology and services.
The company serves businesses at different stages, from entrepreneurs starting out to large companies selling directly to consumers or to other businesses. Its plans range from subscriptions used by most merchants to Shopify Plus and enterprise offerings with additional features and support. Shopify Plus includes tools for wholesale selling, customer acquisition and ecommerce automation.
Shopify’s platform is cloud-based, and merchants use the latest version of its software. Outside developers and other partners extend the platform through apps and services. Shopify also offers AI-enabled features, including Sidekick, a commerce assistant, and Agentic Storefronts, which supports product discovery and checkout across AI platforms.
How it makes money
Shopify earns revenue from two components: recurring subscription solutions and merchant solutions, which include fees tied to services merchants use. Total revenue was $11.6 billion in the year ended December 31, 2025.
Subscription revenue comes primarily from platform subscriptions, including variable platform fees. Shopify also sells subscriptions to its Point of Sale Pro offering, apps, themes and domain registrations. Most merchants subscribe to the Basic or Grow plans. Shopify Plus and enterprise offerings provide additional functionality and support at higher pricing; Shopify Plus starts at a rate several times that of the Advanced plan.
Platform subscriptions typically run for one month, although merchants can choose annual or multi-year commitments. Shopify Plus and enterprise customers initially commit for a year or longer. Subscriptions generally renew automatically unless the merchant gives notice of cancellation. Point of Sale Pro fees are charged monthly per location, with an annual option.
Merchant solutions revenue comes principally from payment-processing and currency-conversion fees on Shopify Payments. Other sources include lending and financial products, partner referral fees, shipping labels, point-of-sale hardware and advertising. Most merchant solutions revenue is directionally correlated with the value of orders processed through the platform.
In FY2025, merchant solutions generated $8.8 billion, or 76.2% of revenue; subscription solutions generated $2.8 billion, or 23.8%. Shopify’s gross merchandise volume is the value of orders facilitated through the platform, not revenue earned by Shopify. As of December 31, 2025, monthly recurring revenue was $205 million; that measure excludes variable platform fees.
| Product or service | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| Merchant solutions | $8.8 billion | 76.2% | 34.8% |
| Subscription solutions | $2.8 billion | 23.8% | 17.1% |
Customers and how it sells
Shopify serves merchants across retail categories and business sizes, including new entrepreneurs, established direct-to-consumer businesses and companies selling to other businesses. Named merchants include Aldo, BarkBox, Carrier, Meta, Vuori, SKIMS and Supreme. No single merchant has ever represented more than five percent of Shopify’s total revenue in a reporting period.
As of December 31, 2025, millions of merchants from more than 175 countries used the platform. Shopify reported that 44% were in the United States, 31% in Europe, the Middle East and Africa, 16% in Asia Pacific, Australia and China, 5% in Canada and 5% in Latin America.
Merchants can sell through online storefronts, physical retail locations, social media and AI platforms. Shopify offers localized pricing plans in selected countries, billing in local currency. Most merchants use the Basic or Grow subscription plans, while the majority of gross merchandise volume has come from merchants on Shopify Plus and enterprise offerings.
Shopify says that, over time, its historical groups of merchants have increased their sales, adopted more merchant solutions, upgraded plans and purchased additional apps. Revenue growth from merchants remaining on the platform has more than offset revenue declines from merchants leaving it.
Suppliers and costs
Shopify relies on third parties for key services, including cloud hosting and Shopify Payments. It uses Google Cloud for most platform operations. Its platform is a multi-tenant cloud system, meaning merchants share the underlying software infrastructure, and the company plans to keep investing in that infrastructure.
Shopify Payments carries third-party costs that make its gross profit margins typically lower than those of subscription solutions. Shopify says the payments service requires significantly less sales and marketing and research and development expense than its core subscription business. The growing share of merchant solutions has reduced the overall gross margin percentage in the past and may do so again.
Operating expenses include investment in personnel, sales and marketing, research and development, products and network infrastructure. Shopify had approximately 7,600 employees worldwide as of December 31, 2025 and operates a remote-first work environment. A significant portion of operating expenses is incurred in foreign currencies. The company uses foreign exchange forward contracts and options to help mitigate the effect of currency movements on future operating-expense cash flows.
- Revenue$11.6B
- Cost of revenue−$6.0B
- Research and development−$1.5B
- Selling, general and administrative−$2.1B
- Other operating costs−$417.0M
- Operating income$1.5B
Competitive position
Shopify operates in a fragmented commerce market and expects competition to increase. Merchants can choose integrated or standalone services from ecommerce software vendors, payment processors, point-of-sale providers, marketplaces, lenders and other providers. It was reported on 22 October 2026 that Shopify faces competition from Amazon, Wix.com and Commerce.com.
Shopify identifies ease of use, sales-channel integration, cost, functionality, security, the pace of innovation and the app ecosystem among the factors on which providers compete. As of December 31, 2025, more than 21,000 apps were available in the Shopify App Store. Developers and other partners add functionality to the platform, while merchants can combine storefronts with payments, shipping and other services.
Our reading: The app and partner ecosystem provides a competitive advantage by extending what merchants can do on Shopify, although the availability of alternative providers limits the evidence for how durable that advantage is.
Our reading: Integrating sales channels and merchant services gives Shopify another potential advantage because customers can use several tools on one platform; the evidence does not establish how difficult it is for merchants to switch. Shopify also protects intellectual property through legal and contractual rights and makes frequent platform enhancements.
| Competitor | Where they compete | Threat (our reading) |
|---|---|---|
| Amazon | Commerce platforms and merchant services | Medium |
| Wix.com | Commerce software and merchant services | Medium |
| Commerce.com | Commerce software and merchant services | Medium |
Growth opportunities
Shopify plans to grow by attracting more merchants, serving a wider range of businesses and helping existing merchants expand. Its strategy also includes developing its partner ecosystem and adding ways for merchants to market and sell their products. Marketing programs, trial experiences and efforts to make it easier to start or move a business onto Shopify are intended to expand the merchant base.
The company is investing in product development and expects to use data analytics, machine learning and AI in its products. Sidekick helps merchants with commerce tasks, while Agentic Storefronts supports agent-assisted product discovery and checkout across AI platforms. Shopify is also developing tools that help partners build on the platform and extend its functionality.
Geographic growth involves localizing features and offering pricing in local currencies in selected countries. Shopify also aims to retain merchants as they grow and adopt more features, while offering additional sales channels and services.
For the year ended December 31, 2025, the platform facilitated $378.4 billion in gross merchandise volume, up 29% from the prior year. Total revenue increased 30% over the same period. Shopify expects to continue investing to drive growth, including in its infrastructure and products. It also expects its business could become more seasonal as merchant solutions expand.
- $4.6BFY2021
- $5.6BFY2022
- $7.1BFY2023
- $8.9BFY2024
- $11.6BFY2025
Structural risks
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Merchant activity and retention: Growth depends on attracting new merchants, retaining existing ones and increasing sales to both groups. Merchant solutions revenue is directionally correlated with order volume, which can be affected by economic conditions and consumer spending.
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Third-party dependence and security: Shopify relies on outside providers for cloud hosting and payments. Cyberattacks may interrupt service or result in the loss or unauthorized disclosure of confidential information; Shopify has experienced such attacks in the past.
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Competition and technology: Shopify faces current and future competitors as well as changes in the technologies used by merchants and buyers. Its use of AI and machine learning also brings risks in a developing regulatory environment.
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Regulation and international operations: Changes in privacy, financial-services, consumer-protection and other laws could increase compliance obligations. International expansion also involves localization costs, trade restrictions, tariffs and potentially restrictive government actions.
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Margins and seasonality: Shopify Payments typically has lower gross margins than subscription solutions because of third-party costs. Holiday demand has historically raised fourth-quarter order volume and revenue, and Shopify believes its business may become more seasonal.
Bottom line
Our reading
Shopify combines recurring commerce software subscriptions with services whose revenue is linked to merchant activity, particularly payments. Our reading: Its breadth of tools and partner ecosystem support the business, while its reliance on merchant order volume, third-party services and lower-margin payments makes growth and margins sensitive to how merchants use the platform. Competition, security and regulation remain constraints on its expansion.