Shopify added nearly $900 million of revenue in three months, roughly a third of the sales it generated in the comparable period a year earlier. The business is expanding quickly, and the income statement is moving faster: operating income rose 68% to $488 million.
That is the easy reading of the latest 10-Q. The less tidy detail is where the growth came from. Gross profit increased 31%, slower than revenue, and gross margin slipped from 48.6% to 47.7%.
Management attributes the mix shift to the parts of Shopify that sit closer to merchants' transactions than to subscriptions. Those lines can add sales and operating income, but they carry a different margin profile.
"Factors Affecting the Comparability of Our Results Change in Revenue Mix As a result of the continued growth of Shopify Payments, referral fees, other transaction services and other services rendered as part of strategic partnerships and Shopify Capital, our revenues from merchant solutions have increased."
Shopify, 10-Q, Aug. 5, 2026
In plain English, Shopify is collecting more revenue from payments, capital and transaction services. That helps explain why revenue grew faster than gross profit, without requiring a slowdown in the overall business.
Shopify says the margin math is mostly a product of that mix. Subscription solutions carry higher margins; merchant solutions carry lower ones. The latest three months show the arithmetic clearly: net income rose 66% to $1.5 billion, but gross margin still moved down.
"Our gross margin is generally driven by the mix between our higher margin subscription solutions revenue and lower margin merchant solutions revenue."
Shopify, 10-Q, Aug. 5, 2026
The profit picture improved below gross profit. Operating margin widened from 10.9% to 13.6%, while operating cash flow rose 54% to $658 million. Capital spending was just $4 million, down from $6 million, so the company generated more cash without a comparable increase in that outlay.
Cash conversion, measured against net income, did edge down from 0.47 times to 0.44 times. Research and development spending rose 13%, and stock compensation rose 13% to $128 million. The filing therefore offers two operating readings at once: stronger cash generation and lower capital spending, alongside a revenue mix that puts pressure on the first layer of profitability.
That distinction matters because the stock is not priced like a business whose growth can be separated from its earnings quality. At the latest close of $122.56, Shopify carried a 129.9 times price-to-earnings ratio and a 13.7 times enterprise-value-to-sales ratio. Most of the valuation sensitivity is therefore tied to the price attached to future earnings, while the filing's immediate question is more basic: how much of the growth arrives through lower-margin services?
Shopify's annual results show revenue rising from $5.6 billion in 2022 to $11.6 billion in 2025, with operating margin recovering from negative territory to 12.7%. The latest filing extends that growth record, but also keeps the merchant-solutions mix in view. International expansion adds another moving part, with more revenue and costs expected in foreign currencies.
The current filing puts merchant-solutions mix alongside gross margin. Fast growth and lower gross margin are both present.
Source: Shopify's 10-Q filed Aug. 5, 2026, for the three months ended June 30, 2026.