What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-11 compared with 2025-02-11 · 124 added, 192 removed, 407 unchanged (44% of the section changed)

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In this MD&A, we present Shopify's results of operations and cash flows for the fourth quarter and the fiscal years ended December 31, 2025, 2024 and 2023, and our financial position as of December 31, 2025.

You should read this MD&A together with our audited consolidated financial statements and the accompanying notes thereto included elsewhere in this Annual Report on Form 10-K.

You should read this MD&A in conjunction with the audited consolidated financial statements and the accompanying notes thereto included elsewhere in this Annual Report on Form 10-K.

Our audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.

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Risk Factors of this Annual Report on Form 10-K.

Forward-looking statements are intended to assist readers in understanding management's expectations as of the date of this MD&A and may not be suitable for other purposes See "Forward-looking Statements" in Part I of this Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Forward-looking statements are intended to assist readers in understanding management's expectations as of the date of this MD&A and may not be suitable for other purposes.

See "Forward-looking Statements" in Part I of this Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

In this MD&A, references to our "solutions" means the combination of products and services that we offer to merchants, and references to "our merchants" as of a particular date means the total number of unique shops that are paying for a subscription to our platform.

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a recurring subscription component we call subscription solutions and a merchant success-based component we call merchant solutions.

In the year ended December 31, 2024, subscription solutions revenues accounted for 26% of our total revenues (26% in the year ended December 31, 2023).

In the year ended December 31, 2025, subscription solutions revenues accounted for 24% of our total revenues (December 31, 2024 - 26%).

We offer a range of plans that increase in price depending on additional features and economic considerations.

Shopify Plus is offered at a starting rate

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that is several times that of our standard Shopify plans.

Shopify Plus solves for the complexity of merchants as they grow and scale globally, offering additional functionality and support, including features like Shopify Audiences, B2B features and Launchpad, for ecommerce automation.

BarkBox, Vuori, BevMo, Carrier, JB Hi-Fi, Meta, ButcherBox, SKIMS and Supreme are a few of our notable merchants seeking a reliable, cost-effective and scalable commerce solution.

Shopify Plus is offered at a starting rate that is several times that of our standard Shopify plans.

Shopify Plus solves for the complexity of merchants as they grow and scale globally, offering additional functionality and support, including access to features like Shopify Audiences, B2B features and Launchpad, for ecommerce automation.

Aldo, BarkBox, Carrier, Meta, Vuori, SKIMS and Supreme are a few of our notable merchants seeking a reliable, cost-effective and scalable commerce solution.

The flexibility of our pricing plans is designed to help our merchants grow in a cost-effective manner and to provide more advanced features and support as their business needs evolve.

We have also launched localized pricing plans in select countries where we bill in local currency in order to reduce friction and attract more merchants to our platform.

Revenue from subscription solutions is generated through the sale of subscriptions to our platform, including variable platform fees, as well as through the sale of subscriptions to our POS Pro offering, the sale of apps, the sale of themes and the registration of domain names.

Subscription solutions revenues increased from $1.8 billion in the year ended December 31, 2023 to $2.4 billion in the year ended December 31, 2024, representing an increase of 28% .

Subscription solutions revenues

increased from $2.4 billion in the year ended December 31, 2024 to $2.8 billion in the year ended December 31, 2025, representing an increase of 17%.

Our merchants typically enter into monthly subscription agreements.

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A detailed description of this metric is presented below in the section entitled, "Key Performance Indicators".

We offer a variety of merchant solutions that are designed to add value to our merchants by passing on our economies of scale and augment our subscription solutions.

During the year ended December 31, 2024, merchant solutions revenues accounted for 74% of total revenues ( 74% in the year ended December 31, 2023).

We offer a variety of merchant solutions that are designed to add value to our merchants by passing on our economies of scale and augmenting our subscription solutions.

During the year ended December 31, 2025, merchant solutions revenues accounted for 76% of total revenues (December 31, 2024 - 74%).

We principally generate merchant solutions revenues from payment processing fees and currency conversion fees from Shopify Payments.

Shopify Payments is a fully integrated payment processing service that allows our merchants to accept and process payment cards online and offline.

In addition to payment processing fees and currency conversion fees from Shopify Payments, we also generate merchant solutions revenue from referral fees from third parties, other transaction services and other services rendered as part of strategic partnerships and Shopify Capital.

Shopify Capital helps eligible merchants secure financing and is currently available for merchants in the United States, the United Kingdom, Canada and Australia.

Shopify Payments is a fully integrated payment solution.

In addition to payment processing fees and currency conversion fees from Shopify Payments, we also generate merchant solutions revenue from our lending services and financial products, referral fees from partners, the sale of shipping labels, the sale of POS hardware, advertising on the Shopify App Store and Shop Campaigns, our buyer acquisition offering.

The majority of our merchant solutions revenues are directionally correlated with the level of GMV that our merchants process through our platform.

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We believe that our investments will increase our revenue base, improve the retention of this base and strengthen our ability to increase sales to our merchants.

Building a 100-year company requires a balance between growth and profitability, and we maintain a portfolio of investments with varying time horizons in our cash management program.

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We also maintain a portfolio of investments with varying time horizons in our cash management program.

Key Performance Indicators

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Monthly Recurring Revenue

We calculate MRR at the end of each period by multiplying the number of merchants who have subscription plans with us at the period end date by the average monthly subscription plan fee, which excludes variable platform fees, in effect on the last day of that period, assuming they maintain their subscription plans the following month.

MRR is the aggregate value of all subscription plans, excluding variable platform fees, in effect on the last day of the period, assuming merchants maintain their subscription the following month.

Subscription plans to both our platform and our POS Pro offering are included in this calculation.

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MRR allows us to average our various pricing plans and billing periods into a single, consistent number that we can track over time.

We also analyze the factors that make up MRR, specifically the number of paying merchants using our platform and changes in our average revenue earned from subscription plan fees per paying merchant.

We also consider the factors that contribute to MRR, specifically the number of paying merchants using our platform, the number of merchants that are on full-price plans or paid trials, the mix of subscription plan types and overall pricing of our subscription plans.

In addition, we use MRR to forecast monthly, quarterly and annual subscription plan revenue, which makes up the majority of our subscription solutions revenue.

We had $178 million of MRR as of December 31, 2024 compared to $144 million as of December 31, 2023 and $109 million as of December 31, 2022, as described above.

In the year ended December 31, 2024, the MRR growth rate for the period was lower than the same period in 2023 driven mainly by the effects of the increase in subscription plan pricing for certain plans during the second quarter of 2023 and the lift from paid trial incentives launched in the second half of 2022 that converted in 2023.

The amounts associated with prospective merchants on trial incentives were immaterial to MRR as of December 31, 2024, but we expect to continue to see an increase in MRR as these cohorts of merchants convert to full price subscription plans.

In the year ended December 31, 2023, we observed a higher MRR growth rate compared to the same period in 2022.

The MRR growth rate in the year ended December 31, 2023 was driven mainly by the effects of the increase in subscription plan pricing during the second quarter of 2023 and merchants converting to full price subscription plans that were previously on paid trial incentives.

The paid trial incentives initially launched in the second half of 2022.

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We had $205 million of MRR as of December 31, 2025 compared to $178 million as of December 31, 2024 and $144 million as of December 31, 2023.

In the year ended December 31, 2025, the MRR growth rate for the period was lower than the same period in 2024 driven by the impact of extending the length of paid trials.

Gross Merchandise Volume

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For the year ended December 31, 2025 we facilitated GMV of $378.4 billion (December 31, 2024 - $292.3 billion, December 31, 2023 - $235.9 billion), representing year-over-year growth 29% (2024 vs 2023 - 24%).

In 2024, o ver 57% of our GMV was generated in the United States.

On a constant currency basis, in which GMV in the year ended December 31, 2024 is converted using the comparative period's monthly average exchange rates, yea r-over-year growth was 24% (2023 vs 2022 - 16%).

On a constant currency basis, in which GMV in the year ended December 31, 2025 is converted using the comparative period's monthly average exchange rates, year-over-year growth was 28% (2024 vs 2023 - 24%).

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 significantly.

Merchant solutions are intended to complement subscription solutions by providing additional value to our merchants and increasing their use of our platform.

Gross profit margins on Shopify Payments, the biggest driver of merchant solutions revenue, are typically lower than on subscription solutions due to the associated third-party costs of providing this solution.

We view this revenue stream as beneficial to our operating margins, as Shopify Payments requires significantly less sales and marketing and research and development expense than Shopify’s core subscription business.

The lower margins on merchant solutions compared to subscription solutions means that the continued growth of merchant solutions may cause a decline in our overall gross margin percentage.

The sales of our logistics businesses in the second quarter of 2023 impacted the comparability of our results.

We view this revenue stream as beneficial to our operating margins, as Shopify Payments requires significantly less sales and marketing and research and development expenses than Shopify’s core subscription business.

The lower margins on merchant solutions compared to subscription solutions means that the continued growth of merchant solutions has caused in the past, and may cause in the future, a decline in our overall gross margin percentage.

Our merchant solutions revenues are directionally correlated with the level of GMV that our merchants facilitated through our platform.

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While we believe that this seasonality has affected and will continue to affect our quarterly results, our continued growth has partially masked seasonal trends to date.

As a result of the continued growth of our merchant solutions offerings, we believe that our business may become more seasonal in the future and that historical patterns in our business may not be a reliable indicator of our future performance.

As a result of the continued growth of our merchant solutions offerings, we believe that our

business may become more seasonal in the future and that historical patterns in our business may not be a reliable indicator of our future performance.

Foreign Currency Fluctuations

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Quantitative and Qualitative Disclosures About Market Risk—Risks and Uncertainties" below for additional information on the effect on reported results of changes in foreign exchange rates.

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Key Components of Results of Operations

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Merchant Solutions

We principally generate merchant solutions revenues from payment processing fees and currency conversion fees from Shopify Payments, referral fees from partners, Shopify Capital and Transaction Fees.

Other revenue generating services and products include, but are not limited to, the sale of shipping labels through Shopify Shipping, the sale of point-of-sale ("POS") hardware, advertising on the Shopify App Store and Shop Campaigns, our buyer acquisition offering.

In the second quarter of 2023, we sold our logistics businesses.

Prior to the sales of these businesses, Shopify Fulfillment Network and Deliverr fulfillment services generated revenue from their respective fulfillment solutions, which included picking, packing and preparing orders for shipment and outbound shipping, as well as additional revenues from inbound shipping, storage, returns processing and other fulfillment-related services as needed by merchants.

We also earned revenues from providing cloud-based software on collaborative warehouse fulfillment solutions.

We principally generate merchant solutions revenues from payment processing fees and currency conversion fees from Shopify Payments, our lending services and financial products and referral fees from partners.

Other revenue generating services and products include, but are not limited to, the sale of shipping labels, the sale of POS hardware, advertising on the Shopify App Store and Shop Campaigns, our buyer acquisition offering.

For a discussion of how we expect seasonal factors to affect our merchant solutions revenue, see “Factors Affecting the Comparability of our Results—Seasonality".

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Over time, we expect that our subscription solutions gross margin percentage will fluctuate modestly based on the mix of subscription plans that our merchants select and the timing of expenditures related to infrastructure expansion projects.

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Cost of Merchant Solutions

Cost of merchant solutions primarily consists of costs that we incur when transactions are processed using Shopify Payments, such as credit card network fees (charged by credit card providers such as Visa, Mastercard and American Express) as well as third-party processing fees.

Cost of merchant solutions also consists of rewards earned by merchants through our rewards program, processing fees related to billing our merchants, POS hardware costs, product costs associated with expanding our product offerings, including Shopify Balance, third-party infrastructure and hosting costs, chargeback protection program costs, amortization of acquired intangible assets and an allocation of costs incurred by both the operations and support functions, including personnel-related costs directly associated with merchant solutions such as salaries, benefits and stock-based compensation.

In the second quarter of 2023, we sold our logistics businesses.

Prior to the sales of these businesses, merchant solutions cost of revenues included amortization of acquired intangible assets relating mostly to the acquired Deliverr, Inc.

("Deliverr") and 6 River Systems, LLC technology, costs associated with picking, packing and preparing orders for shipment, outbound shipping, warehouse storage, overhead costs and other costs for fulfillment-related services as part of our logistics offerings and materials and third-party manufacturing costs associated with fulfillment robots sold to customers rather than leased to customers, which were capitalized and depreciated into cost of revenues.

Cost of merchant solutions also consists of rewards earned by merchants through our rewards program and advertising costs related to our customer acquisition services, processing fees related to billing our merchants, POS hardware costs, product costs associated with expanding our product offerings, including Shopify Balance, third-party infrastructure and hosting costs, chargeback protection program costs, amortization of acquired intangible assets and an allocation of costs incurred by both the operations and support functions, including personnel-related costs directly associated with merchant solutions such as salaries, benefits and stock-based compensation.

We expect that the cost of merchant solutions will increase in absolute dollars in future periods as the number of merchants utilizing these solutions increases, resulting in a growth in volumes processed.

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We plan to continue to expand sales and marketing efforts to attract new merchants, retain revenue from existing merchants and increase revenues from both new and existing merchants.

Sales and marketing expenses are expected to increase in absolute dollars but over time, we expect sales and marketing expenses will eventually decline as a percentage of total revenues.

Sales and marketing expenses are expected to increase in absolute dollars but over time, we expect sales and marketing expenses will decline as a percentage of total revenues.

Research and Development

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We continue to focus our research and development efforts on adding new features and solutions, and increasing the functionality and enhancing the ease of use of our platform.

While we expect research and development expenses to increase in absolute dollars as we continue to increase the functionality of our platform, over the long term we expect our research and development expenses will eventually decline as a percentage of total revenues.

General and Administrative

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We expect that over time general and administrative expenses will decrease as a percentage of total revenues as we focus on processes, systems and controls to enable our internal support functions to scale with the growth of our business.

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Transaction and Loan Losses

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Transaction and loan losses are expected to increase in absolute dollars over time as merchant penetration and adoption grow.

Impairment on Sales of Shopify's Logistics Businesses

Impairment on sales of Shopify's logistics businesses consists of impairment charges incurred as the result of the sales of our logistics businesses in 2023.

Other Income (Expense)

Other income (expense) consists primarily of unrealized and realized gains or losses on equity and other investments, losses on our equity method investment in Flexport, Inc.

("Flexport"), transaction gains or losses on foreign currency, interest income and interest expense related to Shopify's convertible senior notes.

(Loss) Gain on Equity and Equity Method Investments

(Loss) gain on equity and equity method investments consists primarily of unrealized and realized gains or losses on equity and other investments, gains or losses as a result of our share of the income or loss on our equity method investment in Flexport, Inc.

("Flexport") and loss on the embedded derivative held to settle our previously issued convertible senior notes (the "Notes") in the fourth quarter of 2025.

Equity and other investments in publicly traded companies with readily determinable fair values are carried at fair value at each balance sheet date based on the closing share price at the end of the period.

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The results from these equity and debt investments may fluctuate from period to period and may cause volatility to our earnings as well as impact comparability of our results from period to period.

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Other income consists of the interest income, net transaction gains or losses on foreign currency and interest expense related to the Notes.

Results of Operations

The following table sets forth a summary of our condensed consolidated statement of operations for the years ended December 31, 2024, 2023 and 2022:

The following table sets forth a summary of our condensed consolidated statement of operations for the years ended December 31, 2025, 2024 and 2023 For a discussion of the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024:

Years ended December 31,

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Income (loss) from operations 1,468 1,075 (1,418)

Other income (expense), net 1,153 1,603 (2,801)

Income (loss) before income taxes 2,228 185 (3,623)

(Provision for) recovery of income taxes (209) (53) 163

Net income (loss) 2,019 132 (3,460)

Net income (loss) per share attributable to shareholders:

Net (loss) gain on equity and equity method investments (6)

(316) 853 1,361

Other income, net 357 300 242

Income before income taxes 1,509 2,228 185

Provision for income taxes (278) (209) (53)

Net income 1,231 2,019 132

Net income per share attributable to shareholders:

Basic $ 0.95 $ 1.57 $ 0.10

Diluted $ 0.94 $ 1.55 $ 0.10

Shares used to compute net income (loss) per share attributable to shareholders:

Shares used to compute net income per share attributable to shareholders:

Basic 1,298,955,860 1,289,812,124 1,281,554,559

Diluted 1,304,953,255 1,301,509,980 1,295,511,385

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(1) Includes stock-based compensation expense and related payroll taxes as follows:

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(3) In the year ended December 31, 2023, we had $148 million of severance related costs associated with the reduction in workforce with $28 million in sales and marketing, $102 million in research and development and $18 million in general and administrative.

Additionally, in the year ended December 31, 2022, we had $30 million of severance related costs associated with the reduction in workforce with $11 million in sales and marketing, $8 million in research and development and $11 million in general and administrative.

(4) In the year ended December 31, 2022, we incurred $97 million of expenses related to legal matters.

In the year ended December 31, 2024, we released an accrual for an estimated liability of $55 million associated with a legal matter.

(4) In the years ended December 31, 2025 and 2023, we had $13 million and $38 million, respectively, of impairment related costs associated with right-of-use assets and leasehold improvements.

(5) In the year ended December 31, 2024, we released an accrual for an estimated liability of $55 million associated with a legal matter.

(6) Includes the impact of any gains or losses on the embedded derivative on our Notes.

Discussion of the Results of Operations

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Subscription solutions revenues increased for the year ended December 31, 2025 compared to the same period in 2024.

The year-over-year increase was primarily a result of growth in MRR, which was driven largely by a higher number of merchants using our platform and by an increase in subscription plan pricing for certain plans in the second quarter of 2023.

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Subscription solutions revenues increased for the year ended December 31, 2023 compared to the same period in 2022.

The increase was primarily a result of growth in MRR, which was driven largely by the number of merchants on our platform, as well as prospective merchants on the free and paid trials converting to full price subscription plans during the period and by an increase in subscription plan pricing for certain plans in 2023.

The largest component of the year-over-year change was an increase in subscription fees of $360 million driven by an increase in MRR, which was the result of a higher number of merchants using our platform and by a larger percentage of subscriptions coming from higher priced plans, such as Plus.

The increase was also driven by higher GMV resulting in an increase in subscription fees from the variable component of certain subscription contracts.

Merchant Solutions

Merchant solutions revenues increased for the year ended December 31, 2025 compared to the same period in 2024.

The increase in merchant solutions revenues was primarily a result of Shopify Payments revenue, relating to payment processing and currency conversion fees, growing in year ended December 31, 2024 compared to the same period in 2023.

This increase was a result of an increase in our Shopify Payments penetration rate and increased merchant usage of our platform.

The largest component of the year-over-year change was an increase in Shopify Payments revenue, driven by an increase in our Shopify Payments penetration rate and an increase in GMV from merchants using our platform.

These factors drove $67.2 billion of additional GMV facilitated using Shopify Payments in 2025 compared to the same period in 2024, representing growth of 37% year over year.

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North America, 88%, APAC, 89% and EMEA, 83% (December 31, 2024 - North America, 91%, APAC, 90% and EMEA, 86%).

Merchant solutions revenues increased for the year ended December 31, 2023 compared to the same period in 2022.

The increase in merchant solutions revenues was primarily a result of Shopify Payments revenue, relating to payment processing and currency conversion fees, growing in the year ended December 31, 2023 compared to the same period in 2022.

This increase was a result of an increase in our Shopify Payments penetration rate and number of merchants using our platform.

These factors drove $31.0 billion of additional GMV facilitated using Shopify Payments in 2023 compared to the same period in 2022 , representing growth of 29% year over year.

For the year ended December 31, 2023 , the Shopify Payments penetration rate was 58.1% , resulting in GMV of $137.0 billion that was facilitated using Shopify Payments.

This compares to a penetration rate of 53.8%, resulting in GMV of $106.1 billion that was facilitated using Shopify Payments in the same period in 2022.

As of December 31, 2023 Shopify Payments adoption among our merchants was as follows:

North America, 91%, APAC, 90% and EMEA, 81% (December 31, 2022 - North America, 91%, APAC, 89% and EMEA, 74%).

Shopify Payments adoption decreased in 2025 as Shopify Payments expanded into more markets across the world.

Shopify Payments penetration remains a better metric for assessing the overall growth of Shopify Payments.

Cost of Revenues

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Cost of subscription solutions increased for the year ended December 31, 2025 compared to the same period in 2024.

The increase was due mainly to an increase in cloud and infrastructure costs and increase in payment processing fees on merchant billings.

As a percentage of revenues, cost of subscription solutions remained flat for the year ended December 31, 2024 compared to the same period in 2023.

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Cost of subscription solutions increased for the year ended December 31, 2023 compared to the same period in 2022.

The increase was primarily due to an increase in payment processing fees on merchant billings and cloud and infrastructure costs, partially offset by a decrease in support costs.

As a percentage of revenues, cost of subscription solutions decreased for the year ended December 31, 2023 compared to the same period in 2022, due to lower growth on cloud and infrastructure costs, relative to the growth in revenue as well as a decrease in support costs.

The increase was driven by an $83 million increase in cloud and infrastructure costs.

Cost of Merchant Solutions

Cost of merchant solutions increased for the year ended December 31, 2025 compared to the same period in 2024.

The increase was primarily due to higher payment processing fees resulting from an increase in GMV facilitated through Shopify Payments, offset by decreased costs associated with our logistics operation and amortization of acquired intangibles as a result of the sales of our logistics businesses in the second quarter of 2023.

As a percentage of revenues, cost of merchant solutions remained flat for the year ended December 31, 2024 compared to the same period in 2023 due to Shopify Payments representing a larger percentage of total revenue offset by decreased costs associated with revenue from our logistics operations and amortization of acquired intangibles as a result of the sales of our logistics businesses in the second quarter of 2023.

Cost of merchant solutions increased for the year ended December 31, 2023 compared to the same period in 2022.

The increase was primarily due to higher payment processing fees resulting from an increase in GMV facilitated through Shopify Payments and Shop Cash issued following the program launch in June 2023, offset by a decrease in costs associated with our logistics operations and a decrease in acquired intangibles following the sales of our logistics business in the second quarter of 2023.

As a percentage of revenues, cost of merchant solutions remained flat for the year ended December 31, 2023 compared to the same period in 2022 due to higher payment processing fees from Shopify Payments caused by increased network costs and changes in payment card type relative to the increase in Shopify Payments revenue and Shop Cash issued following the program launch in June 2023.

The increases were offset by the decrease in costs associated with revenue from our logistics operations and a decrease in amortization of acquired intangibles following the sales of our logistics business in the second quarter of 2023.

The increase was driven by higher payment processing fees resulting from an increase in GMV facilitated through Shopify Payments.

Years ended December 31,

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Percentage of total revenues 48 % 50 % 50 %

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Operating Expenses

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Percentage of total revenues 14 % 16 % 17 %

Sales and marketing expenses increased for the year ended December 31, 2024 compared to the same period in 2023, due to increases of $84 million in overall marketing program spend primarily related to an increase in performance marketing spend, $68 million in payouts related to our affiliate partner programs and $43 million in employee-related costs, offset by a decrease in severance related costs of $28 million associated with the reduction in workforce in the second quarter of 2023.

Sales and marketing expenses decreased for the year ended December 31, 2023 compared to the same period in 2022, due to decreases of $58 million in employee related costs and $53 million in online marketing spend, partially offset by increases of $38 million in offline marketing spend, $30 million in payouts related to our affiliate partner program and $17 million in severance related costs.

Sales and marketing expenses increased for the year ended December 31, 2025 compared to the same period in 2024, due to increases of $242 million in overall marketing program spend and $41 million in employee-related costs, offset by a $15 million decrease in payouts related to our affiliate partner programs.

Research and Development

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13 % 15 % 25 %

Research and development expenses decreased for the year ended December 31, 2024 compared to the same period in 2023, due to decrease in employee-related costs of $114 million, the acceleration of stock-based compensation of $164 million primarily related to the sales of our logistics businesses in the second quarter of 2023 and severance related costs of $102 million associated with the reduction in workforce in the second quarter of 2023.

Research and development expenses increased for the year ended December 31, 2023 compared to the same period in 2022, due to acceleration of stock-based compensation of $164 million primarily related to the sales of our logistics businesses and an increase in severance related costs of $93 million.

The increases were partially offset by a decrease of $57 million in employee-related costs.

Research and development expenses increased for the year ended December 31, 2025 compared to the same period in 2024, due to increases of $105 million in employee-related costs and $61 million in computer hardware and software costs.

General and Administrative

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Percentage of total revenues

General and administrative expenses decreased for the year ended December 31, 2024 compared to the same period in 2023, due to a reversal of an estimated legal liability of $55 million recorded in the second quarter of 2024, impairment expenses of $38 million incurred relating to certain office locations we ceased using in the third quarter of 2023 and severance related costs of $18 million associated with the reduction in workforce in the second quarter of 2023, offset by increases in indirect taxes of $20 million and employee-related costs of $6 million in 2024.

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General and administrative expenses decreased for the year ended December 31, 2023 compared to the same period in 2022, due to $97 million in legal expenses incurred in the third quarter of 2022, a decrease of $70 million in employee-related costs and a decrease of $46 million in impairment related costs associated with right-of-use assets and leasehold improvements.

General and administrative expenses increased for the year ended December 31, 2025 compared to the same period in 2024, due to a reversal in the second quarter of 2024 of a previously recorded estimated legal liability of $55 million and an increase of $13 million for impairment related costs associated with right-of-use assets and leasehold improvements, offset by a decrease of $17 million in indirect taxes.

Transaction and Loan Losses

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Percentage of total revenues

Transaction and loan losses increased for the year ended December 31, 2024 compared to the same period in 2023, due to an increase of $41 million in losses related to lending services driven by an expansion of our offerings and programs relative to the same period in 2023 and increase of $31 million in losses related to Shopify Payments, related to higher realized losses in the period and an increase in expected losses primarily driven by higher GMV processed through Shopify Payments.

Transaction and loan losses increased for the year ended December 31, 2023 compared to the same period in 2022, due to an increase of $11 million in losses related to Shopify Capital driven by an expansion of our Capital offerings and programs relative to the same period in 2022 and an increase of $4 million in losses related to Shopify Payments, primarily related to higher realized losses in the period with the increase in GMV.

Impairment on Sales of Shopify's Logistics Businesses

In the year ended December 31, 2023, we had a net impairment on the sales of our logistics businesses of $1.3 billion, inclusive of impairment of $1.4 billion in goodwill, $337 million in intangible assets and $93 million in net assets and transaction costs, reduced by non-cash consideration received of $528 million.

Other Income (Expense)

Transaction and loan losses increased for the year ended December 31, 2025 compared to the same period in 2024, due to increases of $124 million in losses related to Shopify Payments driven by an increase in expected losses, higher realized losses in the period, higher GMV processed through Shopify Payments relative to the same period in 2024, and $61 million in losses related to lending services driven by an expansion of our offerings and programs relative to the same period in 2024.

Net (loss) gain on equity and equity method investments

Years ended December 31,

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(in US $ millions, except percentages)

Other income (expense), net 1,153 * 1,603 * (2,801)

Net (loss) gain on equity and equity method investments (316) * 853 (37)% 1,361

* Not a meaningful comparison

In the year ended December 31, 2024, we had net unrealized income on equity and other investments of $1.0 billion, of which $823 million was in investments with readily determinable fair values and was the result of the change in share prices from December 31, 2023 to December 31, 2024, $82 million in unrealized gain related to our investment option in Klaviyo and $89 million of unrealized gains offset by $14 million in unrealized losses and impairments related to investments without readily determinable fair values.

Additionally, we had interest income of $308 million and a net loss of $138 million on our equity method investment.

In the year ended December 31, 2023, we had an unrealized loss on equity and other investments of $1.4 billion of which $1.5 billion was in investments with readily determinable fair values and was the result of an unrealized gain on our Klaviyo investment as a result of its initial public offering during the year and the change in share prices from December 31, 2022 to December 31, 2023 in our Affirm and Global-E investments, partially offset by $110 million of unrealized losses related to investments without readily determinable fair values due to impairments in the year.

Additionally, we had interest income of $241 million and a net loss of $58 million on our equity method investment.

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In the year ended December 31, 2022, we had an unrealized loss on equity and other investments of $3.0 billion due to our investments with readily determinable fair values, investments without readily determinable fair values and interest income.

The unrealized losses were offset slightly by net realized gains on equity and other investments of $124 million and interest income of $75 million.

(Provision for) Recovery of Income Taxes

In the year ended December 31, 2025, we had net unrealized loss on equity and other investments of $186 million, which included a $205 million unrealized loss in investments with readily determinable fair values which was the result of changes in share prices from January 1, 2025 to December 31, 2025, $129 million unrealized loss in an investment option, offset by a $171 million unrealized gain on investments without readily determinable fair values which was the result of an observable price change.

Additionally, we recognized a loss of $123 million on the embedded derivative held prior to the settlement of the Notes, a net loss of $40 million on our equity method investment, offset by a realized gain of $33 million from the deemed sale of equity and other investments.

In the year ended December 31, 2024, we had net unrealized income on equity and other investments of $1.0 billion, of which $823 million was in investments with readily determinable fair values and was the result of changes in share prices from December 31, 2023 to December 31, 2024, $82 million in unrealized gain related to our investment option in Klaviyo and $89 million of unrealized gains offset by $14 million in unrealized losses and impairments related to investments without readily determinable fair values.

Additionally, we had a net loss of $138 million on our equity method investment.

Other income, net

Years ended December 31,

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(in US $ millions, except percentages)

(Provision for) recovery of Income taxes (209) * (53) * 163

Other income, net 357 19% 300 24% 242

In the year ended December 31, 2025, other income, net was driven by interest income of $331 million recognized on marketable securities compared to interest income of $308 million recognized on marketable securities for the same period in 2024 and net gain on foreign exchange of $26 million compared to $8 million net loss on foreign exchange for the same period in 2024.

Provision for Income Taxes

Years ended December 31,

2025 % Change 2024 % Change 2023

(in US $ millions, except percentages)

Provision for Income taxes (278) 33% (209) * (53)

* Not a meaningful comparison

In the year ended December 31, 2025, we had a provision for income taxes of $278 million on account of earnings, offset by unrealized losses on the company's equity and other investments.

In the year ended December 31, 2024, we had a provision for income taxes of $209 million on account of earnings and unrealized gains on the Company's equity and other investments, net of an offset to the reversal of valuation allowance.

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This also resulted in a reduction in deferred tax assets, including unused non-capital tax losses, that were fully offset by a valuation allowance.

This compares to a provision of income taxes of $53 million in the same period of 2023 primarily as a result of earnings in jurisdictions outside of North America.

In the year ended December 31, 2023, we had a provision for income taxes of $53 million primarily as a result of earnings in jurisdictions outside of North America.

This compares to a recovery of income taxes of $163 million in the same period of 2022 primarily as a result of the unrealized loss on equity and other investments, share-based compensation and the change in valuation allowance related to deferred tax assets in Canada, as well as the United States.

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Summary of Quarterly Results

The following table sets forth selected unaudited quarterly results of operations data for each of the eight quarters ended December 31, 2024.

The information for each of these quarters has been derived from unaudited condensed consolidated financial statements that were prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflects all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the results of operations for these periods in accordance with U.S.

This data should be read in conjunction with our unaudited condensed consolidated financial statements and audited consolidated financial statements and related notes for the relevant period.

The following table sets forth selected quarterly results of operations data for each of the eight quarters ended December 31, 2025.

The information for each of these quarters has been derived from unaudited consolidated financial statements that were prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflects all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the results of operations for these periods in accordance with U.S.

This data should be read in conjunction with our unaudited consolidated financial statements and audited consolidated financial statements and related notes for the relevant period.

These quarterly operating results are not necessarily indicative of our operating results for a full year or any future periods.

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Transaction and loan losses 114 148 80 75 76 58 42 51

Impairment on sales of Shopify's logistics businesses — — — — — — 1,340 —

Total operating expenses 1,062 1,048 1,011 966 887 835 804 871

Income (loss) from operations 465 283 241 86 289 122 (1,636) (193)

Other (expenses) income, net 956 577 (38) (342) 393 606 335 269

Income from operations 631 343 291 203 465 283 241 86

Net gain (loss) on equity and equity method investments (5)

182 (112) 658 (1,044) 906 484 (120) (417)

Other income, net 79 77 130 71 50 93 82 75

Income (loss) before income taxes 892 308 1,079 (770) 1,421 860 203 (256)

Provision for income taxes (128) (32) (32) (17) (25) (10) (10) (8)

(Provision for) recovery of income taxes (149) (44) (173) 88 (128) (32) (32) (17)

Net income (loss) 743 264 906 (682) 1,293 828 171 (273)

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Diluted $ 0.57 $ 0.20 $ 0.69 $ (0.53) $ 0.99 $ 0.64 $ 0.13 $ (0.21)

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(1) Includes stock-based compensation expense and related payroll taxes as follows:

Three months ended

Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 (a)

Jun 30, 2023 (a)

Dec 31, 2025 Sep 30, 2025 Jun 30, 2025 Mar 31, 2025 Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024

(in US $ millions)

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125 116 120 123 118 115 109 111

(a) Includes accelerated stock-based compensation of $1 million and $4 million in sales and marketing during the second and third quarter of 2023, respectively, and $164 million in research and development during the second quarter of 2023.

(2) Includes amortization of acquired intangibles as follows:

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4 3 3 3 2 4 4 4

(3) In the third quarter of 2022, we incurred $97 million of expenses related to legal matters.

(3) In the second quarter of 2024, we released an accrual for an estimated liability of $55 million associated with a legal matter.

(4) In the second quarter of 2023, we had $148 million of severance related costs associated with reductions in workforce with $28 million in sales and marketing, $102 million in research and development and $18 million in general and administrative.

In the third quarter of 2022, we had $30 million of severance related costs associated with reductions in workforce with $11 million in sales and marketing, $8 million in research and development and $11 million in general and administrative.

(5) In the third quarter of 2023, we had $38 million of impairment related costs associated with right-of-use assets and leasehold improvements.

(4) Includes impairment related costs associated with right-of-use assets and leasehold improvements of $3 million in the third quarter of 2025 and $10 million in the second quarter of 2025.

(5) Includes loss on embedded derivative held to settle the Notes, initially with a $29 million unrealized loss during the third quarter of 2025, which then resulted in a $123 million realized loss during the fourth quarter of 2025.

We believe that year-over-year comparisons are more meaningful than our sequential results due to seasonality in our business.

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Quarterly Revenue and Gross Margin Trends

Historically, revenues experienced a seasonal decrease in our first quarter as consumers typically reduce their spending following the holiday season resulting in a seasonal decrease in GMV per merchant, which was not completely offset by merchant and MRR growth.

Subsequently, revenues have increased in each of the next three quarters as a result of merchant, MRR and overall GMV growth.

Our merchants have processed additional GMV during the fourth-quarter holiday seasons, and as a result we have generated higher merchant solutions revenues in our fourth quarters compared to other quarters.

Our merchants have processed additional GMV during the fourth-quarter holiday seasons, and as a result we have generated higher subscription solutions and merchant solutions revenues in our fourth quarters compared to other quarters.

Due to the continued growth of our merchant solutions offerings, we believe that our business may become more seasonal in the future.

Our gross margin is generally driven by the mix between our higher margin subscription solutions revenue and lower margin merchant solutions revenue.

While our total revenues have increased in recent periods, the mix has shifted towards merchant solutions revenue, most notably in the fourth quarter due to higher holiday volume of orders facilitated and the resulting Shopify Payments revenue during this period.

While our total revenues have increased in recent periods, the mix has shifted towards merchant solutions revenue, most notably in the fourth quarter due to higher order volumes facilitated during the holiday season and the resulting Shopify Payments revenue during this period.

We expect this overall trend to continue over time.

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In connection with expanding our operations internationally, we anticipate a growing proportion of our revenues and cost of sales transactions to be incurred in foreign currencies as compared to USD due to increased Shopify Payments, Shopify Capital, subscriptions and other billings to select countries in local currency.

Fluctuations in foreign currencies relative to the USD may impact identified quarterly and yearly trends.

Quarterly Operating Expenses Trends

Excluding the events described below and outlined in the tables above, prior to the second quarter of 2023 operating expense growth was relatively steady.

Following the workforce reduction and sales of our logistics businesses in the second quarter of 2023, operating expenses decreased and continued to decrease in the third quarter of 2023.

In the fourth quarter of 2023 and the first quarter of 2024, we saw increased spend to support our operations growth.

Due to the reversal of a previously recorded estimated legal liability in the second quarter of 2024, operating expenses decreased versus the first quarter of 2024.

In the third quarter of 2024 and continuing into the fourth quarter of 2024, operating expenses increased in connection with operations growth.

We recognized an impairment on the sales of our logistics businesses in the second quarter of 2023.

We also recognized restructuring expenses in the second quarter of 2023 which caused an increase in research and development, sales and marketing and general and administrative spend relative to revenue in the quarter.

We impaired certain office spaces in the third quarter of 2023, which caused an increase in general and administrative expense relative to revenue.

In the second quarter of 2024, we released the remaining portion of the litigation contingency recorded in the second quarter of 2022 which decreased general and administrative spend.

In addition, the sales of our logistics businesses in the second quarter of 2023, impacted the comparability of operating expenses.

Excluding the items outlined in the tables above, operating expenses have increased in connection with revenue and operations growth.

We note a significant portion of our operating expenses are incurred in foreign currencies which may impact the comparability of our quarterly and yearly trends.

Quarterly Other (Expense) Income Trends

Historically, there have been no consistent trends associated with other (expense) income as changes are impacted by fluctuations in the fair value of our equity investments in public companies with readily determinable fair values, observable changes or impairments associated with our equity investments in private companies without readily determinable fair values, changes in our equity method investment based on our share of income and loss, including amortization of the basis difference, changes in the fair value of our investments in convertible notes of private companies, foreign exchange rates and interest rates.

Quarterly Gain (Loss) on Equity and Equity Method Investments and Other Income Trends

Historically, there have been no consistent trends associated with gain (loss) on equity and equity method investments and other income as changes are impacted by fluctuations in the fair value of our equity investments in public companies with readily determinable fair values, observable changes or impairments associated with our equity investments in private companies without readily determinable

fair values, changes in our equity method investment based on our share of income and loss, including amortization of the basis difference, changes in the fair value of our investments in convertible notes of private companies, changes in the fair value of the embedded derivative held to settle the Notes, foreign exchange rates and interest rates.

The results from these changes may fluctuate from period to period and may cause volatility to our earnings as well as impact comparability of our results from period to period.

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Total net assets increased $1.9 billion as of December 31, 2025 compared to December 31, 2024, due to the increase of $1.3 billion in total assets and the decrease of $650 million in total liabilities.

The increase in net assets is primarily due to the cash provided by operating activities of $1.6 billion and an increase in Equity and other investments from net unrealized gains on our investments of $1.0 billion.

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The increase in net assets is primarily due to the cash provided by operating activities of $2.0 billion, a net increase in marketable securities and long-term investments of $518 million, and an increase in loans and merchant cash advances, net of $560 million, offset by the settlement of the Notes for $1.0 billion in cash.

The following table presents the total value of the Company's cash and cash equivalents, marketable securities, long-term investments, equity and other investments and equity method investments by the assets' underlying geographic location:

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Liquidity and Capital Resources

To date, we have financed our operations primarily through the sale of equity securities as well as the sale of the Notes, raising approximately $7.8 billion, net of issuance costs, from investors.

In connection with the expiration of our previous short-form base shelf prospectus, we filed a new short-form base shelf prospectus with the securities commissions in each of the provinces and territories of Canada, except Quebec, and a corresponding shelf registration statement on Form F-10 with the U.S.

SEC, on November 12, 2024.

This shelf prospectus and registration statement enables Shopify to offer Class A subordinate voting shares, preferred shares, debt securities, warrants, subscription receipts, units, or any combination thereof, from time to time during the 25-month period that the shelf prospectus is effective.

We generate liquidity through operating cash flows and the proceeds from the exercise of stock options.

Shopify maintains a short-form base shelf prospectus with the securities commissions in each of the provinces and territories of Canada, except Quebec, and a corresponding shelf registration statement on Form F-10 with the U.S.

This allows us to offer Class A subordinate voting shares, preferred shares, debt securities, warrants, subscription receipts, units, or any combination thereof, from time to time during the 25-month period that the shelf prospectus is effective.

The type of securities and the specific terms thereof will be determined at the time of any offering and will be described in the applicable prospectus supplement to be filed separately with Canadian securities regulators and the SEC.

Our principal cash requirements are for working capital and ongoing operations.

Excluding current deferred revenue and convertible senior notes, working capital as of December 31, 2024 was $6.5 billion.

The $920 million in aggregate principal amount of Notes due in less than one year may be settled in Class A subordinate voting shares instead of cash, at our option.

As a result of our employee compensation program there is a potential for an increase in cash usage as employees have the ability to elect how much of their total compensation will be in the form of cash versus stock-based compensation awards.

Excluding current deferred revenue, working capital as of December 31, 2025 was $7.2 billion.

Given the ongoing cash generated from operations and our existing cash and cash equivalents, we believe there is sufficient liquidity to meet our current and planned financial obligations over the next 12 months and into the foreseeable future.

Our future financing requirements will depend on many factors, including but not limited to our growth rate, subscription renewal activity, the timing and extent of spending to support development of our platform, the expansion of sales and marketing activities, the macroeconomic conditions and overall levels of consumer spending on goods and potential strategic investments and acquisitions activity.

Our future cash requirements will depend on many factors, including but not limited to our growth rate, subscription renewal activity, the timing and extent of spending to support development of our platform, the expansion of sales and marketing activities, the macroeconomic

conditions and overall levels of consumer spending on goods and potential strategic investments and acquisitions activity.

Although we currently are not a party to any material undisclosed agreement and do not have any understanding with any third parties with respect to potential material investments in, or material acquisitions of, businesses or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing.

Additional funds may not be available on terms favorable to us or at all.

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Cash, Cash Equivalents and Marketable Securities

Cash, cash equivalents and marketable securities increased by $471 million to $5.5 billion as of December 31, 2024 from $5.0 billion as of December 31, 2023, primarily as a result of cash provided by our operations partially offset by the purchase and origination of loans, net of repayments and the purchase of equity and other investments.

Cash, cash equivalents and marketable securities increased by $299 million to $5.8 billion as of December 31, 2025 from $5.5 billion as of December 31, 2024, primarily as a result of cash provided by our operations and proceeds from the exercise of stock options, partially offset by the settlement of the Notes, the purchase and origination of loans, net of repayments, and the purchase of equity and other investments.

Cash equivalents and marketable securities include money market funds, term deposits, U.S.

federal bonds and agency securities and corporate bonds and commercial paper, all maturing within the 12 months from December 31, 2024.

federal bonds and agency securities and corporate bonds and commercial paper, all maturing within 12 months from December 31, 2025.

The following table summarizes our total cash, cash equivalents and marketable securities as well as our operating, investing and financing activities for the years ended December 31, 2025, 2024 and 2023:

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(in US $ millions)

Cash, cash equivalents and marketable securities (end of period) 5,479 5,008 5,053

Cash, cash equivalents and marketable securities (end of year) 5,778 5,479 5,008

Net cash provided by (used in):

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Net increase (decrease) in cash and cash equivalents 47 85 (236)

Decrease in marketable securities (1)

386 191 (1,861)

Increase in marketable securities (1)

Net increase (decrease) in cash, cash equivalents and marketable securities 299 471 (45)

(1) Excludes $709 million and $115 million of marketable securities classified in "Long-term Investments" as of December 31, 2024 and 2023, respectively.

(1) Excludes $975 million, $709 million and $115 million of marketable securities classified in "Long-term Investments" as of December 31, 2025, 2024 and 2023, respectively.

Cash Flows From Operating Activities

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Within merchant solutions, the largest source of cash flows are Shopify Payments processing fee arrangements, which are received on a daily basis as transactions are processed.

We also generate significant cash flows from our subscription solutions with subscription revenues.

We also generate cash flows from our subscription solutions with subscription revenues.

These payments are typically paid to us at the beginning of the applicable subscription period, except for our Shopify Plus merchants who typically pay us at the end of their monthly billing cycle.

Our primary uses of cash from operating activities are for third-party payment processing fees, employee-related expenditures, marketing programs and outsourced hosting costs.

For the year ended December 31, 2024, net cash provided by operating activities was primarily the result of operating income, once adjusted for non-cash items, slightly offset by a use of cash due to an increase in non-cash working capital.

For the year ended December 31, 2025, net cash provided by operating activities was primarily the result of operating income, once adjusted for non-cash items, slightly offset by change in working capital resulting in a use of cash due to an increase in non-cash working capital.

Cash Flows From Investing Activities

Net cash used in investing activities in the year ended December 31, 2024 was driven by $939 million used for purchases of marketable securities, net of maturities, $464 million used for purchases and originations of loans, net of repayments and sales, $137 million used for purchases of equity and other investments, $30 million used in acquisitions of businesses, net of cash acquired and $19 million used to purchase property and equipment, which consisted mainly of leasehold improvements and computer equipment.

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Net cash used in investing activities in the year ended December 31, 2025 was driven by $579 million used for purchases and originations of loans, net of repayments and sales, $488 million used in purchases of marketable securities, net of maturities, $99 million used to purchase equity and other investments, $56 million used in acquisitions of businesses, net of cash acquired and $26 million used to purchase property and equipment, offset by $58 million other cash flows provided by investing activities.

Cash Flows From Financing Activities

Net cash provided by financing activities in the year ended December 31, 2024 was driven by proceeds from the issuance of Class A subordinate voting shares and Class B restricted multiple voting shares as a result of stock options exercises.

Net cash used in financing activities in the year ended December 31, 2025 was driven by $1.0 billion to settle the Notes and the embedded derivative, offset by $232 million provided by proceeds from the issuance of Class A subordinate voting shares and Class B restricted voting shares as a result of stock options exercises.

In February 2026, the Company's Board of Directors authorized a share repurchase program permitting the repurchase of up to $2 billion of the Company's Class A subordinate shares, provided that the number of Class A subordinate voting shares repurchased does not exceed 5% of the Company's issued and outstanding Class A subordinate voting shares.

The share repurchase program has no fixed expiration and the actual timing, number and value of Class A subordinate voting shares repurchased will depend on a variety of factors, including price, business and market conditions, applicable legal requirements and alternative investment opportunities.

Contractual Obligations

Our principal commitments consist of our Notes and obligations under our operating leases for office, warehouse and commercial space.

Our principal commitments consist of obligations under our operating leases for office, warehouse and commercial space.

The following table summarizes our contractual obligations as of December 31, 2025:

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(in US $ millions)

Convertible senior notes (1)

921 — — — 921

Operating lease and unconditional purchase obligations (1)

229 150 75 166 620

Total contractual obligations 1,176 352 88 193 1,809

(1) $920 million in aggregate principal amount of Notes due in less than one year may be settled in Class A subordinate voting shares instead of cash, at our option.

(1) Consists of payment obligations under our office and commercial space leases as well as other unconditional purchase obligations.

Litigation and Loss Contingencies

In the third quarter of 2022, a jury in the U.S.

District Court for the District of Delaware returned a verdict finding that the Company infringed three web technology patents owned by Express Mobile, Inc.

and the Company recorded an estimated liability in that period for damages and potential interest of $55 million.

During the year ended December 31, 2024, the Company reversed the previously recorded liability of $55 million within "General and administrative" in the consolidated statement of operations and comprehensive income, as a loss contingency was no longer considered probable.

The initial recognition of the liability in 2022 related to a jury in the U.S.

District Court for the District of Delaware returning a verdict finding that the Company infringed three web technology patents owned by Express Mobile, Inc..

The Company filed a post-trial motion for judgment as a matter of law.

In the second quarter of 2024, the court granted that motion, vacating the jury verdict in its entirety and mooting the plaintiff's motion for pre- and post-judgement interest.

As a result of this decision, in the second quarter of 2024, the Company reversed the previously recorded liability within "General and administrative" in the condensed consolidated statement of operations and comprehensive income (loss), as a loss contingency was no longer considered probable.

In the year ended December 31, 2024, the court granted that motion, vacating the jury verdict in its entirety and mooting the plaintiff's motion for pre- and post-judgment interest.

In 2025, the U.S.

Court of Appeals dismissed Express Mobile's appeal and affirmed there was no infringement by the Company.

We are not aware of any other litigation matters or loss contingencies that would be expected to have a material adverse effect on the business, consolidated financial position, results of operations or cash flows.

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We also entered into an indemnification agreement that governs the liability obligations of the purchaser in connection with these guarantees.

These arrangements, and our obligations arising from such arrangements, are not expected to have a material impact on the current or future financial performance or financial condition of the Company.

These arrangements, and our

obligations arising from such arrangements, are not expected to have a material impact on the current or future financial performance or financial condition of the Company.

Critical Accounting Policies and Estimates

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To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected.

We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we re-evaluate these

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estimates on an ongoing basis.

We refer to accounting estimates of this type as significant accounting policies and estimates, which we discuss below and in further detail in Note 3 - Significant Accounting Policies of our audited consolidated financial statements for the year ended December 31, 2024 included in this Annual Report on Form 10-K.

We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we re-evaluate these estimates on an ongoing basis.

Revenue Recognition

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The Company also holds investments in convertible notes of private companies which are classified as available-for-sale debt securities, for which the Company has elected to account for under the fair value option.

The investments are carried at fair value at each balance sheet date and any movements in the fair values are classified as "Other income (expense), net" in the consolidated statement of operations and comprehensive income (loss).

The investments are carried at fair value at each balance sheet date and any movements in the fair values are classified as "Other income, net" in the consolidated statements of operations and comprehensive income.

The Company evaluates each investment to determine if the investment should be accounted for as an equity method investment based upon equity ownership, significant influence and ongoing involvement in the investee, including factors such as representation on the investee's Board of Directors.

Investments that qualify for the equity method of accounting treatment are carried at the Company’s investment amounts and adjusted each period for the Company’s share of the investee’s income or loss and amortization of the basis difference, which is the difference between the fair value of our investment in the company and the underlying equity in the net assets of the investee.

The Company assesses its equity and other investments in private companies and equity method investment for impairment through analyzing market conditions, business results and other qualitative measures that suggest that the carrying amount of the investment may be impaired, and the decline in value below the carrying amount is determined to be other than temporary.

The Company assesses its equity and other investments in private companies and equity method investment for impairment through analyzing market conditions, business results and other qualitative measures that indicate that the carrying amount of the investment may be impaired, and the decline in value below the carrying amount is determined to be other than temporary.

Loss Contingencies

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The Company evaluates developments in legal matters that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate.

Significant judgment is

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required to determine both probability and the estimated amount of a loss or potential loss.

Significant judgment is required to determine both probability and the estimated amount of a loss or potential loss.

The Company may be unable to reasonably estimate the reasonably possible loss or range of loss for a particular legal contingency for various reasons, including, among others, because:

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The Company evaluates tax positions taken or expected to be taken in the course of preparing tax returns to determine whether the tax positions have met a “more-likely-than-not” threshold of being sustained by the applicable tax authority.

The Company is subject to review and audit by tax authorities around the world, which may lead to adjustments to our tax liabilities.

Significant judgment is required in assessing our tax positions.

Tax benefits related to tax positions not deemed to meet the “more-likely-than-not” threshold are not permitted to be recognized in the consolidated financial statements.

The Company's accounting policy is to recognize interest and penalties related to uncertain tax positions as a component of income tax expense.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis