Shopify ties durable growth to three AI opportunities

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 2:16

   Gross merchandise volume also up 32%, $92 billion. Let's just start with your headline takeaways on this most recent quarter for Shopify? Yeah, you know, I've been doing these earnings calls for over 10 years now since the IPO. I think this is an earnings call number 42, maybe 43 at this point. GMB, obviously, you know, $92 billion is super important because it's a proxy for how well merchants are doing on Shopify.

2. 2:44

   That's up 32%. What I don't think was well understood was that that is our ninth consecutive quarter of GMB above 20%. So that I was really excited about. On the revenue side, $2.8 billion, up 32% as well. That's our 10th consecutive quarter of 25% for greater top-line growth. And free cash flow was 18% of revenue, or about $507 million. So that's 12%. Consecutive quarters of positive free cash flow and nine consecutive quarters of double-digit free cash flow margin. Why does this matter? One of the things that we've been trying to articulate, and I hope I've done a good job of this, is this idea of durable, consistent growth. Shopify will do what we say we're going to do. I talked about, on our last call, that we're going to be doing something in agenda commerce. Obviously, I was able to announce a couple, two weeks ago, that we're doing this incredible work with OpenAI, but also with perplexity.

3. 3:35

   So ultimately, while the numbers themselves, I think, are incredibly impressive and we're balancing kind of top line and bottom line, what matters to me is Shopify is a well-trusted, publicly traded company. And I think the way you do that is just to do what you say you're going to do. From my understanding, Shopify is investing pretty significantly into AI. R&D spend up this quarter. You recently announced this integration with OpenAI.

4. 3:59

   Like, what does AI have to do with Shopify? How does it help the business? Where does it fit in? Yeah. So there's two buckets. The first is, well, maybe three buckets. The first is, the first bucket is how we use Shopify reflexively inside the company. And obviously, you know, there's now, I think, a leaked email out there somewhere that Toby wrote to the entire company talking about that Shopify has to be a reflex, has to be AI reflexive, meaning every person that works here thinks about how they can use it to make their job better.

5. 4:28

   In fact, you know, before you ask to hire someone, a new person, you have to first substantiate why AI cannot help you do it. That is embedded in the culture of the company. And so, you know, a good example is our support organization, our frontline support organization, where now they're able to have much more of these high-quality conversations, like helping merchants grow their business, and less of the low-quality conversations like, you know, password reset or domain or CNAME configurations.

6. 4:52

   So that is important. the second bucket is probably how merchants we give these tools to merchants and that's really where sidekick plays a role this idea that you know i mentioned on the call but you know so far since since we launched it 750 000 of our merchants are using sidekick to effectively as a core part of running their business whether it's running reports or analytics or figuring out which you know which products are selling better where to launch campaigns things like product photography or product descriptions or merchandising this idea of giving merchants these like superpowers through Sidekick, which knows everything about your business and knows everything about Shopify.

7. 5:27

   And maybe the third bucket is really on the sygentic side that we believe there may be a new surface area that will be an important surface area beyond just... the online service and offline service and social services whereby merchants can actually find new customers. And so our objective and our model there is really to make sure that we're not only like we want to be the launch partners there. We want to build the best permutations of what could be. We don't know exactly what a Gentic is going to look like, but whatever the permutation might be, Shopify and our merchants are deeply embedded to it. And, you know, Gentic obviously is getting a lot of attention now. The OpenAI announcement did, but we're also working with Microsoft co-pilot who's already adopted our checkout kit or work with perplexity. And so again, if we do

8. 6:10

   see a shift in consumer behavior, whereby more searches and more discovery happens on using an agent in chat, we've now built a set of tools with checkout kit, with Shopify catalog. So we can deliver these things kind of on a silver platter to these agentic applications and they can ingest it. And now our merchants have a brand new place to engage with the consumers.