SHOP (Trans): Under the e-com Agent model, the company still monetizes primarily through payments

Below is Dolphin Research's Trans of the $Shopify (SHOP.US) FY25 Q4 earnings call. For our detailed take, see 'Shopify: solid print but a plunge — is the e-com Agent a silver bullet or a poison pill?'.

1. Key Metrics Recap

Region & channel performance

North America: revenue up 28% YoY. Share now tops 14% of the US e-com market.

Intl: revenue up 36% YoY, with nearly half of merchants located outside North America. Europe GMV grew 45% in Q4 (+35% at constant FX).

Offline: GMV up 29% YoY. In-store continues to scale.

1. Earnings Call Details

2.1 Exec remarks: key messages

1. Strategy reaffirmed

Quoting co-founder Tobi at the 2015 IPO: 'Shopify will be the only platform you need to build a commerce empire... once we complete our mission, a new normal will emerge.' 2025 has become an inflection point toward that goal. Many brands (e.g., FIGS, Gymshark, Skims, Comfort) hit 1mn+ orders within five years on Shopify, validating the vision.

AI as the core driver: Shopify sits on one of the world's most diverse commerce data sets at trillion-transaction scale, the fuel for AI. 2026 should mark broad AI shopping adoption, with Shopify steering this 'new normal'.

1. UCP and Agentic Commerce

Jointly launched with Google, the Universal Commerce Protocol (UCP) sets a global standard for AI shopping and is the open standard for Agentic Commerce. It spans the end-to-end journey from search to checkout to post-purchase, preserving merchant checkout logic.

Shopify Agentic Storefronts: publish billions of SKUs across leading AI platforms (Google Gemini, ChatGPT, Microsoft Copilot) via the product catalog, letting merchants reach millions of potential buyers in one step. Brands like Glossier, Steve Madden, and Spanx are already on board.

New Agents Program: enables non-Shopify brands to sell via AI platforms and the Shop App, further expanding the ecosystem.

Impact: since Jan 2025, Shopify store orders from AI search have risen 15x. The base is small, but the signal is meaningful, empowering the long tail through merit-based discovery.

1. Shop flywheel

Demand creation:

Shop App is evolving into a discovery destination, offering personalized content, exclusive drops, and interactive experiences. Shop Campaigns (ads) doubled revenue in 2025, with merchant adoption up 3x. In 2026, coverage will expand to eight channels including X, Snapchat, and Bing, and merchants pay only on conversion.

Shopify Product Network: merchants can automatically surface relevant items from other Shopify stores and earn commissions. It is already live on collection pages, PDPs, and carts.

Demand conversion: Shop Pay has become a trust badge for internet buyers. It processed $43bn GMV in Q4 2025, accounting for over 50% of GPV. In 2026, the goal is broader off-Shop expansion to lift checkout conversion and repeat.

1. Global Selling

Product globalization: Shopify Payments has expanded into 60 new countries, added installments (UK, Canada), more local methods in Europe, and USDC stablecoin support. Managed Markets 2.0: now fully integrated with Shopify Payments, delivering domestic-grade payment speed, more methods, faster settlement, and product compliance checks.

Financial & fulfillment: Shopify Capital now covers eight countries, Shop Tracking spans 20+ countries, and AI translation adds eight more languages.

1. Smart operations

Sidekick (AI assistant): positioned as a merchant's 'co-founder', it proactively suggests priorities and helps execute. New feature Sidekick Pulse runs in the background, offering personalized advice based on two decades of data (e.g., recommending a jewelry brand bundle four top sellers). Data: within three weeks of launch, Sidekick created ~4,000 custom apps, 29,000 automations, and 355,000 task lists, and edited 1.2mn photos.

SimGym: simulates real buyer behavior to preview store impact before code changes. No-code design: over 500k merchants used AI to create 6.5mn custom elements.

Bottom line: AI removes limits on reach and resources. More billion-dollar brands should emerge in the next decade than in the last century, and Shopify aims to power them.

6. Financials & outlook

Q1 2026 guidance

Revenue growth: expected at approx. low-30% YoY, similar to Q4 2025. Drivers: strength in Shop Pay, growth from existing merchants, multi-channel acquisition, and Intl expansion, especially Europe.

Gross profit: USD GP to grow approx. high-20% YoY. Gross margin will reflect the growth gap between Subscription and Merchant Solutions, though the spread should narrow.

Opex: 37%–38% of revenue, improving by a few pts YoY.

FCF margin: low-to-mid teens, slightly below Q1 2025, mainly as Q1 is a seasonal GMV trough and the effective tax rate is modestly higher YoY. The impact should moderate over the full year.

2.2 Q&A

Q: Agentic Commerce is early and incremental for both merchants and Shopify. Will Shopify's ability to monetize remain stable for transactions initiated via AI interfaces and agents built on UCP?

A: Agents are a new sales interface that lets merchants reach customers they could not previously engage. LLMs will not bypass Shopify checkout; the complex commerce back end (logistics, payments, inventory, analytics) continues to run through Shopify, which is our core strength. Monetization focus is on driving adoption by merchants and consumers and ensuring a superb experience.

UCP is designed to preserve the merchant-intended experience across any interface, mirroring the online store. For Shopify merchants, potential margins are identical to online-store transactions. The interface is nascent with a small base but is scaling fast, and Shopify will sit at the center of Agentic Commerce.

Q: How will the Agentic Commerce ecosystem develop? What milestones will accelerate adoption over the next 12–18 months?

A: Over the 12 months to Jan 2025, AI search orders grew 15x off a small base and remain early. We are laying track through 2025 and scaling in 2026, leveraging 20 years of unique commerce complexity know-how. Merchants are already live (e.g., Glacier, Spanx, Stanley, Steve Madden).

Since last quarter we co-developed UCP with Google (launched in early Jan) to standardize agent–merchant transactions. We launched Agentic Storefronts so merchants can syndicate products to Google AI, Gemini, ChatGPT, and Microsoft Copilot with minimal effort. We also rolled out the Agents Program for non-Shopify merchants to sync catalogs and start partnering. The key is to keep building so this becomes the standard for every agent app, with Shopify as the core partner for existing merchants and an on-ramp for those off-platform who want into agent-led e-com.

Q: Beyond core subscriptions and payments/checkout, what other monetization opportunities does Agentic Commerce enable?

A: The model is simple: we are on the same side as merchants — the more they sell, the more we earn, fully predicated on merchant success. Even without new monetization vectors, revenue scales with merchant count and GMV.

Whatever path Agentic Commerce takes for e-com penetration, our job is to be best positioned so merchants win under any evolution. Progress is on track.

Q: How will the economics and competitive dynamics evolve, and how does Shopify's role at the infrastructure layer change?

A: For Shopify merchants, Agentic Commerce unit economics match online-store transactions. Using ChatGPT as an example, merchants use Shopify Payments and monetization comes via payment fees, as with other apps — Shopify Payments is the default for our merchants.

LLMs will not bypass Shopify checkout. Checkout has two parts: the front-end UI for buyer interaction and the back-end server-to-server processing. Under UCP, merchants retain their back-end checkout. In the ChatGPT flow, OpenAI runs the front end while Shopify still runs the back end — orders, payments, and more continue to flow through Shopify infra.

UCP spans discovery, checkout, fulfillment, and returns. Commerce is complex and error-prone; co-creating a standard with Google ensures merchants get the right experience in the right way.

Q: How will you balance FCF margin with investment and growth in 2026?

A2: Our philosophy is unchanged. For nearly two years we've balanced investing for the future and delivering revenue growth while producing current FCF margins. Catalog started two years ago, Sidekick is two years in, and UCP is newer. We have been building next-gen commerce for some time, and current FCF margins reflect that balance. We guided Q1, no full-year guide, but our stance mirrors the past two years.

Q: Will agentic AI and UCP become a catalyst for enterprise adoption of Shopify?

A: At NRF we announced the Agents Program, opening our infra to all brands. For brands not ready for a full migration, it's a way to capture agent-led commerce without missing the window. It mirrors a prior playbook: years ago, non-Shopify merchants could adopt Shop Pay or checkout components first, then many fully migrated to Shopify.

Tobi recently spoke about the 'Catalog': others must crawl the web to get product data, while Shopify holds structured data on billions of SKUs, enabling agents to surface the most relevant products in seconds. Merit- and relevance-based discovery is becoming the norm, and retailers globally want broader reach.

That demand ultimately points to Shopify — not only Agentic Storefronts but also UCP. The Agents Program is another path to onboard merchants into Agentic Commerce. More brands selling through agents lifts the whole ecosystem, and Shopify's role is to set the standard. The tracks are laid, and Shopify sits at the core.

Q: Is UCP overlapping, competing, or complementary with ACP proposed by OpenAI and Stripe? Do we face a VHS vs. Betamax moment before mainstream adoption?

A: UCP's goal is straightforward: provide a common language for agents and retailers. Merchants keep brand and attribution, buyers get a trusted experience, and agents can scale. UCP is built to span the full journey — search, cart, checkout, and post-order — preserving merchant checkout logic so custom builds need not be rebuilt. It is payment-agnostic by design and adaptable across scenarios.

For example, complex subscriptions at Butcher Box or AG1 (skip, double, pause) or white-glove delivery for large furniture (precise delivery windows) must carry into the agent world, and UCP enables that. UCP covers the full commerce journey, not just the transaction. With 20 years of experience, we know commerce breaks easily. UCP works, is already adopted by leading global retailers, and our work with Google is delivering results.

Q: At the BOD level, how are merchants reacting to the AI roadmap when evaluating a migration to Shopify? Are they weighing custom AI builds, and how does your roadmap and their in-house capability factor in?

A: We hold the pole position in Agentic Commerce, and also in speed of shipping and platform unification. Large enterprises (e.g., GM, L'Oréal, Amer Sports) typically come with concrete problems to solve. They either fear missing agent-led commerce or want to replace legacy in-house stacks and avoid maintaining engineering teams of hundreds to refocus on core business.

Enterprise momentum is not only about agents but also POS, omnichannel, and Shop Pay's high conversion and trust badge. Modern retailers want unified commerce, not fragmented systems, and need a single source of truth to scale and handle surges like Super Bowl drops, B2B, and subscriptions. The build-your-own era is over, creating a major opening for Shopify. Merchants already on Shopify feel advantaged vs. those off-platform, and that view is spreading at the enterprise level, helping us win more, faster.

Q: Shop Campaigns doubled revenue and tripled adoption, adding X, Snapchat, and Google. How does it work and monetize?

A: Our ads tools are progressing well, and Shop Campaigns is delivering: 3x merchant adoption and 2x revenue. It is a no-risk acquisition tool — merchants pay only when a sale occurs, bringing in buyers and powering brand discovery.

New surfaces in 2025: Shopify stores, Instagram, Facebook, Google, X, Bing, Snapchat. In 2026 we will reinvest returns to drive growth by expanding inventory, improving performance, and helping merchants scale more efficiently. Combined with Shop App and the Product Network, our ecosystem is becoming a distribution engine, and the ads product is delivering tangible ROI for users.

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