Shopify

Shopify sells the tools to run a store, and takes a share of the sales that run through them. A merchant pays for a plan and gets a hosted online store, a checkout, an admin for orders, inventory and customers, and connections to sell on Instagram, TikTok, Google, marketplaces, AI assistants and in person through Shopify POS. Buyers check out with Shop Pay, which remembers them across Shopify stores, and the merchant is paid through Shopify Payments. Around them Shopify sells shipping labels, lending (Shopify Capital), a business account (Shopify Balance) and advertising in the Shop app.

The technology is one large multi-tenant platform, built on Ruby on Rails; Shopify's founder, Tobias Lütke, was a member of the core team that built Rails. Every store runs the same, latest version of the software, so a feature shipped once reaches every merchant and nobody runs an old version. The platform is built to absorb sudden traffic, such as a product drop or Black Friday, without the merchant doing anything. Developers extend it through APIs, Shopify Functions and more than 21,000 apps in the App Store, and build custom storefronts with Hydrogen.

Merchants are millions of businesses in more than 175 countries, per the 10-K. Most are small and on the Basic and Grow plans; most of the volume comes from Shopify Plus and enterprise merchants such as SKIMS, Supreme and Aldo. Shopify never sells goods itself and does not compete with its merchants for their buyers, which is the main difference from Amazon.

Sidekick, an AI assistant inside the admin, and Agentic Storefronts, which put merchants' catalogues inside AI chat apps, are its newest products. Shopify reports one segment. Revenue was $11.6B in fiscal 2025.

A merchant who leaves Shopify rebuilds the store. Products, customers and orders can be exported, but the theme, the apps and the way they work together, the checkout, the payment setup, the POS hardware in the shop, the automations and the habits of the staff have to be rebuilt somewhere else, and search rankings and links can suffer in the move. For a store doing well, that is weeks of work and risk for an uncertain saving.

More holds merchants as they grow. A merchant who started on a Basic plan can move to Plus without changing platforms, and adds payments, POS, Shop Pay and Capital along the way, each one making the next move harder. Shop Pay is a reason in itself: buyers who already use it check out faster, and a store that drops it loses that.

The alternatives depend on the size of the merchant. Small ones move to WooCommerce to cut fees or take full control of the code, or to Squarespace or Wix for a simpler site. Large ones weigh Salesforce Commerce Cloud, Adobe Commerce, SAP or commercetools. Many merchants also sell on Amazon, Walmart, Etsy or TikTok Shop alongside their Shopify store rather than instead of it. The 10-K reports that revenue growth from merchants who stay has more than offset merchants who leave in each cohort, many of whom are small businesses that close.

Revenue was $11.6B in fiscal 2025, up 30.1%, after 25.8% in fiscal 2024 and 26.1% in fiscal 2023. Most of it is merchant solutions, which grow with what merchants sell, so Shopify's revenue rises with their sales.

The mix sets the margins. Subscriptions are software and earn high gross margins; payments pass much of each fee to card networks and processors and earn less. As payments grew faster, the gross margin moved from 50.4% in fiscal 2024 to 48.1% in fiscal 2025.

The operating margin swung from losses of 14.7% in fiscal 2022 and 20.1% in fiscal 2023 to a profit of 12.1% in fiscal 2024 and 12.7% in fiscal 2025, operating income of $1.47B. In 2023 Shopify sold its logistics business, which had needed warehouses and staff, and the loss that year includes the cost of leaving it; afterwards it went back to being a software platform with partners doing the physical work.

That platform needs little capital: capital spending was $26M in fiscal 2025, and free cash flow was $2.0B, 17.4% of revenue. Equity pay was $449M, 3.9% of revenue; after it, free cash flow was $1.6B. Net income was $1.2B, lower than fiscal 2024's $2.0B, which had been lifted by gains on Shopify's holdings in other companies. Shopify ended fiscal 2025 with $5.8B of cash and short-term investments and no debt.

Shopify's plan is to be the system merchants of every size run on, wherever buyers are. Three directions stand out.

Upmarket. More large brands and retailers move from Salesforce, Adobe and SAP to Shopify Plus and its enterprise offering, and more wholesale (B2B) and in-person sales run on the same platform. Shopify sells its checkout and other parts separately to retailers who keep their own systems.

Abroad. Markets outside North America, Europe above all, are where more merchants are adding Shopify and where Shopify Payments, local payment methods and tax tools are spreading.

AI commerce. Sidekick takes on more of the work of running a store, and Agentic Storefronts put merchants' products inside AI assistants such as ChatGPT, with Shopify's checkout completing the order. If shopping starts more often in a chat than in a search engine or a store, Shopify wants to be the catalogue and the checkout behind every merchant that appears there.

Around these, the financial products deepen: Shop Pay as a buyer's identity across stores, installment payments, Capital loans repaid from sales, and Balance accounts. Each grows with the volume merchants process.

• Payments depend on others. Shopify Payments runs on technology from Stripe and PayPal, per the 10-K, and its rates sit between the card networks' costs and what merchants will accept; large merchants push for lower rates as they grow.
• AI shopping could go around the store. If buyers shop inside assistants run by OpenAI, Google or Amazon, those companies decide how products appear and may own the checkout and the buyer relationship.
• Amazon. It competes for the same merchants' sales and offers its own logistics and Buy with Prime, while many Shopify merchants also depend on it for volume.
• Enterprise is harder to win than small merchants: longer sales, complex integrations, and rivals such as Salesforce and SAP with decades of relationships.
• Exposure to consumer spending. Revenue rises and falls with what merchants sell, and small merchants are the first to close when spending drops.