Shopify Q2 2026: revenue up 34%, gross margin down to 47.7%

Shopify’s second-quarter 2026 revenue was $3,583 million, up 34%, on $115.6 billion of gross merchandise volume (GMV), up 32%, and the quarter did better than every quantified line of the outlook the company itself gave in May: it had guided revenue growth at a “high-twenties percentage rate” and gross profit growth at “a mid-twenties percentage rate,” and delivered 34% and 31%, per its August 5 filing. Free cash flow was $654 million, an 18% margin, against a guided mid-teens margin, and diluted EPS was $1.16, up from $0.69 a year earlier.

The line worth reading twice is gross margin. It fell to 47.7% from 48.6% a year earlier (our arithmetic), because the faster-growing half of the business, Merchant Solutions, keeps a much smaller share of each dollar than the subscription half, and the Q3 outlook implies that will happen again. Shopify (NASDAQ: SHOP) defines GMV as the dollar value of orders processed through its platform; revenue is what Shopify keeps from them.

Shopify Q2 2026 results at a glance

	Q2 2026	Q1 2026	Q2 2025
GMV	$115,567M	$100,743M	$87,837M
Revenue	$3,583M	$3,170M	$2,680M
Subscription Solutions revenue	$802M	$750M	$656M
Merchant Solutions revenue	$2,781M	$2,420M	$2,024M
Gross profit	$1,708M	$1,546M	$1,302M
Operating income	$488M	$382M	$291M
Net income (loss)	$1,502M	$(581)M	$906M
Diluted EPS	$1.16	$(0.45)	$0.69
Free cash flow	$654M	$476M	$422M
Free cash flow margin	18%	15%	16%
MRR	$221M	$212M	$185M

MRR, monthly recurring revenue, is the value of all subscription plans in effect at quarter end, which Shopify uses as a directional indicator of subscription revenue. Free cash flow is operating cash flow less capital expenditures; Shopify reports it as a non-GAAP measure.

In constant currency, revenue grew 33% and GMV 30%. Revenue grew faster than GMV, so the share of merchant volume Shopify turned into revenue rose to about 3.10% from about 3.05% a year earlier (our arithmetic, revenue divided by GMV).

Did Shopify beat its own guidance in Q2 2026?

Yes, on every quantified line: growth and margins came in above their ranges, and the expense lines below theirs, which is the favorable direction. The May 5 release (Exhibit 99.1 to that day’s 8-K) set the Q2 outlook, and the August 5 release reports against it:

Q2 2026 line	Outlook given May 5	Reported
Revenue growth, YoY	high-twenties %	34%
Gross profit dollar growth, YoY	mid-twenties %	31%
Operating expenses as % of revenue	35% to 36%	34.0% (our arithmetic: $1,220M / $3,583M)
Stock-based compensation	$145 million	$128 million
Free cash flow margin	mid-teens	18%

The context makes the gap more notable: Q1 revenue had also grown 34%, so the May outlook assumed a deceleration of several points that did not happen. Operating income rose 68%, because operating expenses grew 21% (our arithmetic, $1,220 million against $1,011 million) while gross profit grew 31%.

Why did Shopify’s gross margin fall?

Mix, and on our arithmetic almost nothing else. The two segments have very different economics:

Segment	Q2 2026 revenue	Growth	Q2 2026 gross margin	Q2 2025 gross margin
Subscription Solutions	$802M	22%	79.7%	81.6%
Merchant Solutions	$2,781M	37%	38.4%	37.9%

Segment gross margins are our arithmetic from the release’s revenue and cost-of-revenue lines. Merchant Solutions, mostly payment processing and currency-conversion fees from Shopify Payments plus lending, shipping labels, POS hardware and advertising, rose to 78% of revenue from 76% a year earlier (our arithmetic). Applying last year’s segment margins to this year’s revenue mix gives a blended gross margin of about 47.7%, the figure Shopify actually reported, so the shift in mix accounts for essentially all of the 0.9-point decline (our arithmetic). Merchant Solutions’ own margin edged up; Subscription Solutions’ slipped.

The Q3 outlook keeps the same shape. Shopify expects revenue to grow at “a low-thirties percentage rate” and gross profit dollars at “a mid-to-high twenties percentage rate,” so gross profit is again guided to grow slower than revenue, which implies a further year-over-year decline in gross margin percentage (our inference from the two ranges, not a company figure).

What is driving Merchant Solutions?

Shopify Payments, by the 10-Q’s account. The largest part of the Merchant Solutions increase was $624 million more Shopify Payments revenue. 68% of GMV ran through Shopify Payments in the quarter, against 64% a year earlier, so payments GMV rose to $78.1 billion from $56.6 billion, growth of 38%.

The cost side of that business is visible in one line. Transaction and loan losses rose to $141 million from $80 million, up 76% (our arithmetic). The 10-Q attributes $41 million of the increase to lending, “driven by an expansion of our offerings and programs,” and $19 million to Shopify Payments, from higher GMV processed. Loans and merchant cash advances on the balance sheet grew to $2,184 million from $1,784 million at year-end.

On the subscription side, the 10-Q attributes a $129 million increase in subscription fees to MRR growth, from more merchants and a larger share on higher-priced plans such as Plus. MRR grew 19%, to $221 million.

How much cash did Shopify generate, and where did it go?

Operating cash flow was $658 million and free cash flow $654 million, up 55% from $422 million (our arithmetic). One presentation change flatters the comparison slightly: from April 2026, merchant cash advance cash flows moved from operating to investing activities, which put a net $37 million of cash use in investing rather than operating activities this quarter.

Shopify spent $1,420 million buying back its own shares in the quarter. Over the first half, it repurchased 16.9 million Class A shares for $1,933 million, an average of $114.63 a share, and in the second quarter the board added $3 billion to the program, taking the total authorization to $5 billion, with $3,067 million remaining at June 30. Cash, cash equivalents and marketable securities were $4,947 million (our arithmetic: $1,656 million plus $3,291 million), down from $5,778 million at year-end.

Why is net income so much larger than operating income?

Equity investments. Net income of $1,502 million included $1,063 million of after-tax gains on equity investments marked to market; excluding them, the release’s “net income excluding the impact of equity investments” was $439 million, up 30% from $338 million (our arithmetic). The 10-Q’s broader non-GAAP net income, which also adds back stock-based compensation and other operating adjustments, was $549 million against $455 million, or $0.42 a diluted share against $0.35. In Q1 the same equity-investment line was a loss of $941 million after tax, which pushed Shopify to a total net loss of $581 million and is why diluted EPS swung from $(0.45) to $1.16 in one quarter. Operating income, not EPS, is the steadier read on the business here.

What to watch in Q3

• Gross profit growth against the mid-to-high-twenties outlook, and the gap to revenue growth. A wider gap means the mix shift is speeding up.
• Gross margin against 47.7%. The cleanest single read on the mix.
• Shopify Payments penetration against 68%. It is the main engine of Merchant Solutions revenue and of the margin mix.
• Transaction and loan losses against $141 million, as lending grows.
• Operating expenses against the 33% to 34% of revenue outlook, and free cash flow against the high-teens to low-twenties margin outlook.

Quick answers

What were Shopify’s Q2 2026 earnings?

Revenue was $3.58 billion, up 34%, GMV $115.6 billion, up 32%, operating income $488 million and diluted EPS $1.16, against $0.69 a year earlier. Free cash flow was $654 million, an 18% margin.

Did Shopify beat its Q2 2026 guidance?

Yes, it did better than every quantified line. In May it guided revenue growth in the high twenties, gross profit growth in the mid twenties and a mid-teens free cash flow margin; it reported 34%, 31% and 18%. Operating expenses (34.0% of revenue against 35% to 36%) and stock-based compensation ($128 million against $145 million) came in below their guides.

What is Shopify’s Q3 2026 outlook?

Revenue growth at a low-thirties percentage rate, gross profit dollar growth in the mid-to-high twenties, operating expenses at 33% to 34% of revenue, stock-based compensation of $150 million and a free cash flow margin in the high teens to low twenties.

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Sources and method. Company figures — GMV, MRR, revenue by segment, cost of revenues, gross profit, operating expenses, operating income, net income and the equity-investment adjustment, free cash flow and its margin, the balance sheet and cash flow statement, the constant-currency growth rates and the Q3 2026 outlook — are Shopify’s own disclosures in Exhibit 99.1 (press release) to the Form 8-K filed 2026-08-05 (accession 0001594805-26-000046) for the quarter ended 2026-06-30, read directly from SEC EDGAR and linked above. Diluted EPS, non-GAAP net income and non-GAAP diluted EPS from the quarterly results tables, MRR growth, Shopify Payments penetration and GMV, the drivers of segment revenue and of transaction and loan losses, and the repurchase detail come from the Form 10-Q filed the same day (accession 0001594805-26-000047). The Q2 2026 outlook and the Q1 2026 column come from Exhibit 99.1 to the Form 8-K filed 2026-05-05 (accession 0001594805-26-000018). The 8-K was accepted by EDGAR at 07:01 ET on August 5, before the open. The President and CFO quotations in the release are not used.

No consensus estimate is included, so this piece makes no claim that the quarter beat or missed expectations; the only comparison is with the company’s own guidance and the year-ago quarter. This piece makes no claim about the share-price reaction.

Our arithmetic, labelled as such: gross margins of 47.7% and 48.6% (gross profit divided by revenue); the segment gross margins of 79.7%, 81.6%, 38.4% and 37.9%; Merchant Solutions’ 78% and 76% shares of revenue; the ~47.7% blended margin at last year’s segment margins; the ~3.10% and ~3.05% revenue-to-GMV ratios; operating expenses at 34.0% of revenue and their 21% growth; the 76% growth in transaction and loan losses; the 55% free cash flow growth; the 30% growth in net income excluding the impact of equity investments; and the $4,947 million and $5,778 million cash and marketable securities totals. These are computed from the disclosed figures, not reported numbers. The reading that the gross-margin decline is a mix effect, and that the Q3 ranges imply further margin compression, is our analysis, not a company statement, and is not a forecast.

Related: AppLovin Q2 2026, Duolingo Q2 2026, Uber Q2 2026, Spotify Q2 2026 and Sezzle Q2 2026, reported the same week. For a gross-margin mix question in semiconductors, see AMD Q2 2026.

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