SHOPIFY INC. 10-K

Item 1: Business Overview Shopify provides essential internet infrastructure for commerce. Shopify's all-in-one platform makes it easier to start, run and grow a business, powering sales online, in store, and everywhere in between. Shopify's mission is to make commerce better for everyone with a platform and services that are engineered for speed, customization, reliability and security, while delivering a better shopping experience for consumers everywhere. Shopify's business is designed to empower our merchants by offering a comprehensive, multi-channel commerce platform that supports their business as it grows. As owners and operators, merchants set their course, while Shopify offers them the tools to seamlessly manage, market and sell their products across various sales channels, including online storefronts, physical retail spaces, AI platforms, social media and more. Emphasizing merchant-first innovation, Shopify provides an integrated back-end system to streamline operations, from managing inventory and transaction management to building relationships with buyers. With a robust and continuously updated infrastructure, Shopify's goal is to provide merchants with cutting-edge technology to thrive in a competitive market. Our Merchants We believe we can help merchants of all verticals and sizes, from aspirational entrepreneurs to companies with large-scale, direct-to-consumer or business to business ("B2B") operations, or both, realize their potential at all stages of their business life cycle. Our merchants represent a wide array of retail verticals and business sizes and no single merchant has ever represented more than five percent of our total revenues in a single reporting period. As of December 31, 2025, we had millions of merchants from more than 175 countries using our platform, geographically dispersed as follows: 44% in the United States, 31% in Europe, the Middle East and Africa, 16% in Asia Pacific, Australia and China, 5% in Canada and 5% in Latin America. Shopify's products are designed to enable our merchants' success, which drives our business model. Over time, historical merchant cohorts (the group of merchants that join the platform in a given year) have increased their sales, adopted additional merchant solutions, upgraded their subscription plans and purchased additional apps. Over time, revenue from these historical cohorts has increased and growth in revenue from merchants that remain on the Shopify platform has more than offset decreases in revenues from merchants leaving the platform (as shown in the chart below). Moreover, the total annual revenue generated by each of our previous cohorts has grown on a generally consistent basis. We intend to grow our base of merchants by both inspiring entrepreneurship through marketing programs and trial experiences and continuing to improve the ease with which merchants can get a new or existing business up and running with Shopify. 7 Table of Contents Ecosystem A rich ecosystem of app developers, theme designers and other partners, such as digital and service professionals, marketers, photographers and affiliates has evolved around the Shopify platform. We believe our partner ecosystem helps drive the growth of our merchant base by extending the functionality of the Shopify platform through the development of apps, which in turn further accelerates growth of the ecosystem. As of December 31, 2025, more than 21,000 apps were available in the Shopify App Store. Our Offerings Our business model has two revenue components: a recurring subscription component that we call subscription solutions and a merchant success-based component that we call merchant solutions. Subscription Solutions We generate subscription solutions revenues primarily through the sale of subscriptions to our platform, including variable platform fees, as well as through the sale of subscriptions to our Point of Sale Pro ("POS Pro") offering, the sale of apps, the registration of domain names and the sale of themes. We offer pricing plans designed to meet the needs of our current and prospective merchants. While most merchants subscribe to our Basic and Grow plans, the majority of our gross merchandise volume ("GMV") has been generated from merchants subscribing to our Shopify Plus plan and enterprise offerings. GMV is the total dollar value of orders facilitated through our platform including certain apps and channels for which a revenue-sharing arrangement is in place in the period, net of refunds, and inclusive of shipping and handling, duty and value-added taxes. GMV does not represent revenue earned by us. Offered at a starting rate that is several times that of our Advanced plan, the Shopify Plus plan solves for the complexity of merchants as they grow and scale globally, offering additional functionality and support, including access to features like Shopify Audiences for customer acquisition, B2B features 8 Table of Contents for selling wholesale and Launchpad for ecommerce automation. We also offer localized pricing plans in select countries where we bill in local currency in order to attract more merchants to our platform. Our subscription plans typically have a one-month term, although merchants can elect to make an annual or multi-year commitment. Merchants who sign on to Shopify Plus or our enterprise offering initially have annual or multi-year subscription terms. Subscription terms generally renew automatically unless notice of cancellation is provided in advance. POS Pro subscriptions fees are charged on a per month and per location basis, with an option to elect an annual commitment. Merchant Solutions We offer a variety of merchant solutions to augment those provided through our subscriptions and to address the broad array of functionality merchants commonly require, including accepting payments, securing working capital and shipping. We believe that offering merchant solutions creates additional value for our merchants by passing on our economies of scale, saving them time and money by making additional functionality available within a single centralized commerce platform, and creates additional value for Shopify by increasing merchants’ use of our platform. We principally generate merchant solutions revenues from payment processing fees and currency conversion fees from Shopify Payments, our fully integrated payment solution. We also generate merchant solutions revenue from our lending services, referral fees from partners, the sale of shipping labels, the sale of Point of Sale ("POS") hardware, advertising on the Shopify App Store and Shop Campaigns, our buyer acquisition offering. Research and Development Shopify is building products and solutions for commerce that enable merchants of all sizes around the world to successfully start and scale their businesses on Shopify. We strive to increase the probability of a merchant's future success by finding and supporting solutions that enable merchant discovery and allow merchants to develop a commerce presence across multiple channels and geographies. We expect to continue to leverage emerging technologies including data analytics, machine learning and AI in our products, to help our merchants increase productivity, improve workflows, make smarter decisions and enhance the reach of their products. For example, Shopify provides a suite of AI-enabled features integrated across the Shopify platform, including Sidekick, our AI-enabled commerce assistant, and Agentic Storefronts, which enables agent-assisted product discovery and checkout across a number of AI platforms. Research and development at Shopify is currently focused on product management, product development and product design to accomplish these goals. We also invest in developing the tools to make it easier for our ecosystem partners to build on and for Shopify to extend the functionality and flexibility of the platform. We believe that by deepening and expanding the range of solutions we offer to merchants and by offering new and better ways to market and sell their products, we will be able to grow our addressable market and meet the needs of merchants in years ahead. Strategy We have focused on rapidly growing our business and plan to continue making investments to drive future growth. We believe that our investments will increase our global revenue base and strengthen our ability to increase sales to our merchants. Our growth strategy is driven by our mission: make commerce better for everyone. Key elements of our growth strategy include growing and expanding our merchant base and the types of merchants we serve and helping our existing merchants continue to grow through continued innovation in our platform and the products we offer to our merchants as well as further growing and developing our ecosystem of partners. We continue to build with a focus on adding the most value for our merchants to help them be successful not just today, but in the years to come. We believe that fueling our merchants' success drives Shopify's success. Seasonality Our business is affected by seasonality due to holiday demand, which historically has resulted in higher GMV and revenue during our fourth quarter, which ends on December 31. We believe that this 9 Table of Contents seasonality has affected and will continue to affect our quarterly results. In addition, while we have historically generated higher merchant solutions revenues in our fourth quarter than in other quarters, our continued growth has partially masked seasonal trends to date. In connection with expected 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. Human Capital Shopify is a company designed for world-class crafters. We value employees who are merchant-obsessed and thrive on change. Teams at Shopify experiment, observe and iterate to make commerce better for everyone. To support and enhance talent growth and development, we created “~Mastery”, Shopify's craft-first talent system, to reward those who show up better to work every day on the continuous journey to improve their craft. Shopify has a remote-first work environment for employees, gathering in-person periodically during the year to connect and solve complex problems. Teams connect through “Local Access” in certain cities, in-person team events (or “Bursts”) and key company gatherings, which in 2025 included a company-wide summit held in Toronto, Canada. These in-person moments foster connection, drive mission alignment and increase impact. Employees also have the opportunity to tackle novel problems and projects through Hack Days, which in 2025 included in-person collaboration in cross-company teams. We are intentional about building a culture and environment that empowers our talented people. We measure employee engagement through regular pulse checks, including a semi-annual survey. We offer wellness resources and programs across four pillars: financial, mental, physical and social wellness, including an Employee Assistance Program that provides employees with confidential help for any work, health or life concern. As of December 31, 2025, Shopify had approximately 7,600 employees worldwide. Technology The Shopify platform is a multi-tenant cloud-based system that is engineered for high scalability, reliability and performance. Open source has played a major role at Shopify from the beginning given our founder's active role on the core team that built Ruby on Rails, the technology that powers much of the Shopify platform. Our platform's cloud-based architecture is designed to support sudden traffic spikes and to provide high reliability to our merchants. The Shopify platform is "single branch" software, which means that all of our merchants use the latest version of Shopify, which eliminates the need to maintain older versions of the platform and enables us to quickly distribute new versions. We also maintain a focus on security, with firewalls, advanced encryption, intrusion detection systems and two-factor authentication and additional safeguards for credit card processing on the platform. Maintaining the integrity and security of our technology infrastructure is critical to our business, and we plan to invest further in our infrastructure to meet our merchants' needs and maintain their trust. Our investment plans include increasingly optimizing our cloud-based infrastructure to deliver local performance and global reach to more merchants than ever before, with consistent levels of availability, performance and resilience. Sustainability Shopify is a company that wants to see the next century and has taken many steps to build a sustainable business, including addressing emissions from building and home office energy usage and business travel and leveraging Google Cloud for most platform operations. In 2019, Shopify launched its Sustainability Fund, which is designed to identify and support impactful carbon-removal and reduction technologies and projects. Shopify is also a founding member of Frontier, alongside Stripe, Alphabet and McKinsey, among others, with a goal to collectively purchase over $1 billion of permanent carbon removal by the end of 2030. Merchants can also choose to address the carbon emissions associated with shipping their orders by adding the Shopify Planet app to their store. 10 Table of Contents Competition Our market is transforming, competitive and highly fragmented, and we expect competition to increase in the future. We believe the principal competitive factors in our market are: • vision for commerce and product strategy; • simplicity and ease of use for merchants and their buyers; • integration of multiple sales channels; • embedding of commerce functionality across more surfaces; • interoperability across surfaces; • cost-effective solutions; • significant app ecosystem; • breadth and depth of functionality; • pace of innovation; • powerful data analytics; • ability to leverage emerging technologies, including AI; • ability to scale; • security and reliability; • support for merchant discovery and brand development; and • brand recognition and reputation. With respect to each of these factors, we believe that we compare favorably to our competitors. The growth of ecommerce may attract new entrants or new offerings from existing competitors. Additionally, some merchants may select one or more integrated or standalone offerings from other providers such as: • ecommerce software vendors; • content management systems; • payment processors; • point of sale providers; • domain registrars; • shipping label providers; • fulfillment service providers; • alternative lenders; • financial services; • cross-border services providers; and • marketplaces. For additional information regarding these and other laws, regulations and rules that affect us and our business, see Part I, Item 1A, "Risk Factors" in this Annual Report on Form 10-K. Intellectual Property Our intellectual property and proprietary rights are important to our business. In our efforts to safeguard them, we rely on a combination of copyright, trade secret, trade dress, domain names, trademarks, patents and other rights in Canada, Ireland, Singapore and the United States, and other jurisdictions in which we conduct business. We also have confidentiality agreements, assignment agreements and license agreements with employees, contractors, merchants, distributors and other third parties, which limit access to and use of our proprietary intellectual property. Although we rely, in part, upon these legal and contractual protections, we believe that factors such as the skills and ingenuity of our employees, as well as the functionality and frequent enhancements to our platform, make our intellectual property difficult to replicate. 11 Table of Contents Government Regulation We are subject to a number of foreign and domestic laws and regulations that may affect companies conducting business on the internet, many of which are still evolving and could be interpreted in ways that could adversely affect our business. For example, concern about the use of software as service platforms for illegal conduct, such as money laundering or supporting terrorist activities, may in the future result in legislation or other governmental action that could require changes to our platform. Similarly, legislation or other governmental action around online platforms that might be used to distribute illegal or otherwise harmful content, goods or services, may require changes to our platform. We are subject to U.S. and Canadian laws and regulations that may govern or restrict our business and activities in certain countries and with certain persons, including the economic sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control, the sanctions regulations administered or enforced by the Office of the Superintendent of Financial Institutions in Canada, and the export control laws administered by the U.S. Commerce Department’s Bureau of Industry and Security, the U.S. State Department’s Directorate of Defense Trade Controls and the Canadian Export and Import Controls Bureau. We are currently subject to a variety of laws and regulations in Canada, the United States, the European Economic Area and elsewhere related to financial services. Depending on how our merchant solutions, including our payments and lending products, evolve, we may be subject to additional laws in Canada and other jurisdictions worldwide. We are also subject to federal, state, provincial and foreign laws that may relate to cybersecurity, privacy and the protection of data. Some jurisdictions have enacted laws requiring companies to notify individuals and regulators of data security breaches involving certain types of personal information and our agreements with certain merchants require us to notify them in the event of a security incident. Additionally, some jurisdictions as well as our contracts with certain merchants require us to use industry-standard or reasonable measures to safeguard personal information or confidential information, and thereby mitigate the risk of a security incident. We also expect the enactment of future laws and regulations regarding cybersecurity, privacy and the protection of data, that will likely apply to our business. These laws and other obligations may create regulatory, liability and reputational risks for Shopify. We could also be subject to liability and/or governmental regulation related to the content of merchants' shops, products and services or other activities of our merchants and/or partners in various jurisdictions around the world. In many jurisdictions, new laws, regulations or rules relating to the liability of providers of online services for activities of their customers and other third parties are currently being proposed and debated, or otherwise being tested in court. This liability could relate to a number of different types of legal claims or concerns, including concerns relating to unfair competition, unfair, deceptive and abusive practices, copyright and trademark infringement, defamation, invasion of privacy or other torts, products liability and other theories based on the nature of the relevant goods, services or content. Any legislation, court ruling or other governmental regulation or action that imposes liability on providers of online services in connection with the activities of their customers or their customers’ users could adversely affect our business. In such circumstances we may also be subject to liability under applicable law, which may not be fully mitigated by our terms of service. Any liability attributed to us could adversely affect our brand, reputation, ability to expand our merchant base and financial results. For additional information regarding these and other laws, regulations and rules that affect us and our business, see Part I, Item 1A, "Risk Factors" in this Annual Report on Form 10-K. Additional Information Additional information about Shopify is available on our website at www.shopify.com, on the website maintained by the SEC at www.sec.gov or the website maintained by the Canadian Securities Administrators at www.sedarplus.ca. The aforementioned information is made available in accordance with legal requirements and is not, unless otherwise specifically stated, incorporated by reference into this Annual Report on Form 10-K. We are a "foreign private issuer" as such term is defined in Rule 3b-4 under the Exchange Act, and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. Although, as a foreign private issuer, we are not required to do so, we have chosen to file annual reports on Form 10-K, 12 Table of Contents quarterly reports on Form 10-Q and current reports on Form 8-K with the SEC instead of filing the reporting forms available to foreign private issuers. We will make available free of charge, through our website, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.