The e-commerce giant continues to invest heavily in artificial intelligence as it anticipates global growth.
Shopify beat forecast sales growth and maintained strong free cash flow in the third quarter of 2025 while maintaining its focus on artificial intelligence (AI).
The Ottawa-headquartered e-commerce giant's total revenue for the third quarter was $2.84 billion, up 32 per cent year-over-year. This is well above the mid to high 20% growth rate that was expected for this period in the second quarter.
Shopify also reported an 18 percent free cash flow margin in the third quarter, the ninth consecutive quarter of double-digit free cash flow margins (up from 16 percent in the second quarter and in line with previous guidance).
The third quarter marked the highest quarterly GMV growth rate Shopify has seen since the pandemic boom in 2021.
During the company's Q3 2025 earnings call, Shopify President Harley Finkelstein said delivering these numbers quarter after quarter at this scale is a “huge achievement.” CFO Jeff Hoffmeister said Shopify believes this free cash flow margin “strikes the right balance between profitability, discipline and investment in future growth.”
At press time, Shopify's share price had fallen less than one percent on the Toronto Stock Exchange and Nasdaq since yesterday's market close.
Shopify's gross merchandise value (GMV), or the total value of all sales processed through its platform, also grew 32 percent year-over-year, topping $92 billion.
Hoffmeister said Shopify saw strong GMV growth across all store sizes. He noted that the third quarter not only marked the ninth consecutive quarter in which the company's GMV grew by more than 20 percent, but also marked the highest quarter of GMV growth Shopify has seen since 2021 amid the pandemic boom in online commerce.
The company posted net income of $264 million in the third quarter, a sharp departure from the $828 million profit it posted in the same period last year. Last year's impressive third-quarter net income was driven by premiums on Shopify's equity investments, while its net income this quarter was down due to writedowns of $103 million.
Shopify's quarterly earnings were also impacted by investments in artificial intelligence (AI) and increased marketing spending, which contributed to a nearly 26 percent jump in the firm's operating expenses compared to last year.
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The company is spending heavily on research and development of AI products and features designed to make it easier for sellers to sell on its platform.
“We've been building and investing in this infrastructure to make it easier to incorporate shopping into every conversation using AI,” Finkelstein said.
Hoffmeister noted that Shopify's headcount has also been “steadily declining” for more than two years. Co-founder and CEO of Shopify Tobi Lütke said on returning home this summer, the company began using AI to prevent stagnation, and in the third quarter the company achieved partnership with OpenAI to allow its customers to sell directly via ChatGPT. But some Shopify merchants also have as reported were disappointed that the company was actively pursuing AI-powered customer support.
In recent months, Shopify has also seen some key executives leave the company. Chief Operating Officer Kaz Nejatyan left to lead Opendoor in September and lured visiting vice president of operations Jung LeGrice—his former “second-in-command”—in October. CRO Bobby Morrison also left in October. How Shopify has named Jess Hertz as Nejatyan's replacement.
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Finkelstein said Shopify continues to see much more opportunity for international growth outside of its core market in North America, including in Europe, where its adoption rate is growing.
Hoffmeister noted that Shopify's gross profit decreased slightly year-over-year due to higher hosting costs due to higher merchant transaction costs and geographic growth, as well as higher use of artificial intelligence, partially offset by lower support costs.
Regarding the U.S. trade war, Hoffmeister said that although sellers raised prices after the tariffs were announced, the U.S. share of cross-border GMV on its platform remained stable during the third quarter.
This talk came after Shopify restored his status as Canada's Most Valuable Company following a strong second quarter.
For the fourth quarter of 2025, Shopify projects revenue growth in the mid-to-twenty percent year-over-year and free cash flow margin slightly higher than the third quarter as the company compares itself to a particularly strong Q4 2024 financial indicators.
Disclosure: BetaKit's majority owner Good Future is the family office of two former Shopify leaders, Arati Sharma and Satish Kanwar.
Image provided Unsplash. Photo by the author appshunter.io.
