Shopify beat its sales growth forecast and maintained strong free cash flow during the third quarter of 2025 as it kept its focus on artificial intelligence (AI).
The Ottawa-based e-commerce giant earned $2.84 billion USD in total revenue during Q3, marking 32 percent growth year-over-year. That’s far ahead of the mid-to-high twenty-percent growth rate it anticipated for this period in Q2.
Shopify also posted an 18 percent free cash flow margin in Q3, for its ninth consecutive quarter in the double-digits by this metric (up from 16 percent during the second quarter and in line with its prior projection).
Q3 marked the highest quarterly GMV growth rate Shopify has seen since the pandemic boom in 2021.
During the company’s third-quarter 2025 earnings call, Shopify president Harley Finkelstein argued that delivering these types of numbers quarter after quarter at this scale is “a huge achievement.” CFO Jeff Hoffmeister said Shopify believes these free cash flow margins “strike the right balance between profitability, discipline, and investment in future growth.”
As of publication time, Shopify’s stock price is trading down less than one percent on the Toronto Stock Exchange and Nasdaq since market close yesterday.
Shopify’s gross merchandise value (GMV), or the total value of all sales processed through its platform, also grew 32 percent compared to the same period last year, exceeding $92 billion.
Hoffmeister said Shopify saw strong GMV growth across all merchant sizes. He noted that Q3 not only marked the ninth consecutive quarter that the company’s GMV grew by more than 20 percent, but represented the highest GMV growth rate quarter Shopify has seen since 2021 amid the pandemic boom in online retail.
The company’s net income during the third quarter was $264 million, a sharp departure compared to the $828-million profit it posted in the same period last year. Last year’s impressive third-quarter net income came thanks to markups to Shopify’s equity investments, whereas its net income this quarter was dragged down by $103 million worth of markdowns.
Shopify’s quarterly profit was also impacted by investments in artificial intelligence (AI) and increased marketing costs, which contributed to a nearly 26-percent jump in the firm’s operating expenses year-over-year.
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The company has been spending heavily on the research and development of AI products and features designed to make it easier for merchants to sell on its platform.
“We’ve been building and investing in this infrastructure to make it really easy to bring shopping into every single AI conversation,” Finkelstein said.
Hoffmeister noted that for over two years Shopify’s head count has also been “flat to down.” Shopify co-founder and CEO Tobi Lütke said at Homecoming this summer that the firm has been embracing AI to prevent stagnation, and during Q3, the company struck a partnership with OpenAI to allow its clients to sell directly through ChatGPT. But some Shopify merchants have also reportedly been frustrated by the company going big on AI customer support.
Shopify has also seen some key executives leave the company in recent months. COO Kaz Nejatian left to lead Opendoor in September and lured away vice-president of operations Giang LeGrice—his former “second-in-command”—in October. CRO Bobby Morrison also left in October as Shopify named Jess Hertz as Nejatian’s replacement.
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Finkelstein said Shopify still sees a lot more room for international growth beyond its core market in North America, including in Europe, where its adoption rates have been increasing.
Hoffmeister noted that Shopify’s gross margin decreased slightly year-over-year due to higher hosting costs thanks to increased merchant transaction value and geographic growth, as well as higher AI usage, which were partially offset by lower support costs.
On the United States trade war front, Hoffmeister said that while merchants have raised prices since tariffs were announced, the US share of cross-border GMV on its platform remained steady during Q3.
This performance comes after Shopify regained its status as Canada’s most valuable company on the back of a strong second quarter.
During the fourth quarter of 2025, Shopify forecasts revenue growth at a mid-to-high twenties percentage rate year-over-year and a free cash flow margin slightly above Q3 as it measures itself against a particularly strong Q4 2024 financial performance.
Disclosure: BetaKit majority owner Good Future is the family office of two former Shopify leaders, Arati Sharma and Satish Kanwar.
Feature image courtesy Unsplash. Photo by appshunter.io.