Shopify hits $101B GMV quarter as agentic commerce orders surge 13x year-over-year

people uh which I think they what do they call

daily active people

daily active people users they're not users they're people

enjoyers

um enjoyers um that that's playing playing into this as well but

well we have our first guest of the show Harley from Shopify you got a little preview of him he's in the waiting room but he's now in the TBP and Ultradom Harley how are you doing welcome back to the show

good to uh good to be here I I love coming on the show.

Yeah, it's always great having you. Uh, give us an update on Q1. Give us an update on where things are going in the Shopify world.

You know, uh, we had our first hundred billion GME quarter ever in the history of the company last quarter, Q4. Uh, thank you. Uh, and we just had, uh, a a second uh, our a consecutive quarter of GM growth uh, above $11 billion. Obviously the reason why we start with GMV is as you guys know it's it's a proxy for how merchants are doing. Uh revenue was 3.2 billion. I was up 34% and we had free cash flow of $476 million. So across all the metrics uh we we beat which really excited about. I think the big big story here is that and this sort of came up a bunch on the call but the way that merchants are coming to Shopify now is is really quite remarkable. Like we're seeing some of the largest brands on the planet come on. we saw in LVMH and Balman and Bevmo and Orvis and Lens End and in fact the number of merchants selling more than hund00 million annually on Shopify has nearly doubled in the last the last two years. So that's really amazing. Uh we're now like 14% of all US ecom. So we are the second largest online retailer in North America right now which is uh which is amazing. But then on the other side of the spectrum from like the big brands, I think one thing that I didn't get a chance to mention on the call today, but this is why I do your show here is that I actually think one thing that people are missing is that I think uh no group will benefit more than entrepreneurs in sort of this new AI era. It feels to us now that AI is not only making it more accessible, but also it's accelerating a lot faster. Um I know I think you guys may be the one to introduce me to to Grunes. Uh I I I saw on your show a year ago. Uh anyways, I mean Groo started on Shop in 2023. They're doing they they're doing 9 figures now and they just got acquired by Unilver for a billion bucks. I mean it is remarkable that not only the amount of starts happening but also how big they're getting. Um so I'm really really proud of that. And of course we talked a lot about the Agentic stuff on the call, both the the AI shopping but also Shopify sidekick and what we're doing for our merchants. We uh so uh let's double click on that Bevmo uh Shopify use case or or or case study because Bevmo was acquired by Gouff and Gouffuff has a an app for local delivery. How are they using Shopify? That's an interesting partnership that I wouldn't have expected.

Bemo actually has physical stores all US

and so we're powering all their physical stores as well. The reason actually I really like Bevmo is because

go back like this is my 43rd earnings call. If you go back to sort of the early days, you know, like right right after the IPO 2015,

merchants were coming to Shopify for one reason. They were coming, it was small businesses coming for ecom and then obviously some of those business got much bigger and we went into enterprise and and then eventually we added on things like point of sale and more recently commerce. I think the interesting part of of the current business of Shopify is that there are so many on-ramps into the company that Bevmo came to us, a very large company, not a DTC, you know, native brand. They came to us specifically for point of sale across all their physical stores and uh and actually our point of sale business is is going really really well, too. But Bevo's using us for that. At the same time, we're seeing, you know, I I you know, obviously I mentioned Grunes, but like I just looked at um some stats from True Classic TE just put out. This is a company started on Shopify like 5 years ago. They're now one of the largest t-shirt companies on the planet. So, we're getting a lot of small business getting started. Every 26 seconds or so, a brand new entrepreneur gets their first sale. And at the same time, we're seeing companies like L's End or Guild Group or Rag and Bone come to us, too. It feels like this is Shopify, you know, firing all cylinders.

What are Oh, sorry.

Go for it.

Yeah. Just what what are people looking for on agented commerce? It feels like there's a big opportunity. The models are getting better and better. like the capabilities there. Are people looking for acceleration of uh of agentic behavior within the online commerce world or actual growth of e-commerce? Like is agentic commerce the thing that gets more people to place to to use the internet to buy things that are in retail? Like so

yeah.

Yeah. So I I I think that's the exactly the right question to ask. Um, hopefully now I've been on the show enough times and if if anyone who's watching is a merchant or a partner or just a someone who follows Shopify story, we we've we've set ourselves up to really be at the epicenter in sort of this AI era. So, just in terms of AI powered shopping, we've started building all this infrastructure years ago to connect demand and and and merchants on Shopify. We are currently the only platform that is selling inside of ChatGBT, Copilot, and Google. And what we're seeing is that these channels are actually becoming a very serious discovery engine. I'll give you some proof points. Um, we have seen in for Q1 of this year, we've actually seen orders from AI searches are up nearly 13x year. And new buyer orders from AI searches are occurring at twice the rate of traditional organic search. So, not only are more people obviously using Agentic Shopping, but in terms of new buyers, which to your point, are we bringing in more people? Like ecom as a percentage of total retail is still under 20% in the US. It's even lower here in Canada. I think it's about 25% in the UK. So, I think we're actually introducing um like more people to, you know, modern digital commerce through this as well. And I think the way it's happening is they're starting with things like research or looking up a recipe and then very quickly ending up, you know, buying from like our home, excuse our place or or one of these, you know, amazing DTC brands that we have on Shopify. Um, and we now have about a billion products in the catalog. Um, and and and so that means that every Shopify merchant skew is fully syndicated.

Yeah. The other thing I think that that is uh hopefully is is now um pretty clear is is UCP. We co-developed UCP with um with Google. I think I announced it on the show actually during NRF, but it is now is become the industry standard this past week. Last week, Amazon, Meta, Microsoft, Salesforce, and Stripe all joined the UCP tech council. Um and and and so it looks like that's going to be the open standard that that that that is going to win, which we're really excited about because we think it's the open standard that actually thinks about the entire commerce experience.

Okay. uh go deeper on the implications of agentic commerce because I have this thesis that uh that agentic commerce will be most acceleratory in higher ticket more considered purchases because when I think about you know just you know buying a t-shirt maybe I need to run a deep research report for that to land on uh I forget what shirt brand you use it's nice but uh

true classic tea

true classic te's Um, but uh when I think about the process of like buying a car, there's so many more tradeoffs. It's so much more complicated. That's something that someone is probably noodling on with an LLM for weeks before they actually go and purchase. And I'm wondering if you're

Yeah, I'll give you it. Really, I think comes down to the difference of like considered purchases versus like pure utility purchases. So, like when I think about I don't right now I can't imagine myself using Chat GBT to like go grocery shopping. Maybe that changes in the future, but if I'm like ordering food to be delivered to my house, I kind of want to just see a catalog of a bunch of pictures and go through.

Um, and maybe that more of that sort of moves into the sort of agent experience over time. But if I I was like I needed to find I wanted to find a cowboy hat, a lot of sun. I wanted to hide from the sun. So I'm searching like, okay, I want a cowboy hat for a brand that's been around for over 50 years, right? And so I land on like Stson or that.

Yeah. Or or TOAS hopefully, which is which brand would we? I'm not sure. So I I'm not sure I fully agree, at least not yet. I do believe that the more research you do,

um I I I think that the these agentic surface these agent services, these chats are places you will go to do deep research. So um a car is a good example. you do weeks of it as well. On the flip side though, what's amazing about aentic commerce I think in general is that unlike searchbased commerce where you can um you can put your thumb on the scale through advertising and add dollars,

it's aic is more merit-based and because it's more merit-based. So most people watching maybe I I don't know if this is true but most people watching may not have heard of true classic tea but they may have done a bunch of research in previous conversations in fact maybe over over many months where they're talking about you know their their typical price of a t-shirt. Um today I'm wearing a James Purse t-shirt which is more expensive than true classic. So it know it knows that I I I look for I love James Purse. I've talked to it about James Purse. Where can I buy it? What's the GSM weight and all that stuff? Will this be good for this particular trip I'm taking?

I actually think that it'll bias smaller brands that you may not have heard of over larger brands because again, it it has a full contextual history of every conversation you've ever had. And if it's merit-based, then it's going to surface

brands you may have not otherwise have heard of before. Whereas, if you go to type in on a on any search engine, you type in sneakers, you're probably going to get to Foot Locker pretty quickly. I don't think you get to Foot Locker through an agentic conversation. I think you end up with with some sort of direct to consumer brand, especially if you've done re if it knows you like you like on running and you're looking for like you buying tennis shoes and now you're looking for hiking boots. It may show you it should show you based on merit an onrunn pair of hiking boots.

Yeah. The long tail getting fatter,

which which again we'll see what happens. The reason I also I like these proof points again like orders are up. Traffic though, if you look at just AIdriven traffic to Shopify stores that has grown 8x year-over-year. So I I I don't want to be handwavy anymore about um about aentic. I think there's enough handwaving happening around that. I think actually looking at like okay, how many people are coming? What is the search traffic like? How much is you know what what are the conversion rates looking like? I think right now um I think that is getting it is getting real. I also think that you probably some recent headlines but you know you saw chatbt has now moved into this inapp browser into for their checkout which is literally the Shopify checkout. We are really happy about that. We think actually what that allows is that it means that as a merchant who set up their loyalty and their subscriptions and their merchandising and you know their shipping components, their tax now the experience inside a Gentic commerce is as good as it would be on the online store which is kind of what I think consumers want. Like it needs to feel effort effortlessly similar to what your normal experience is even though you're sitting in a conversation window.

Yeah. Yeah, that's that's something it was interesting last year watching a bunch of uh AIEL browsers get built when the entire time my thought was like LLMs effectively are web browsers. They were becoming browsers, right? Where you're having a conversation but then it can then it can pull in stuff um from the traditional web. Very cool. Yeah, I I think this is also where one you you'll see hasn't I mean I don't have any any great examples yet, but I assume next time I'm on the show I'll be able to bring some examples of these breakout SMBs who effectively you know like I love the Grun story going from zero to billion dollar acquisition three years. We just haven't seen that before very often. I think you'll see way more of that. I also think what you'll end up with is

you'll just have more people starting businesses that otherwise may have not. So the the the entry like the Barrett entry is is further down and then their ability to scale is also going to be

we were talking to the Collison brothers about exactly that they're seeing a ton more formation on Atlas more.

Yeah, I saw that crazy slide of of of Atlas.

Yeah. Yeah. Incorporation's like way way up and and it's gotten so easy but it's not I I I think the first phase is make it easy to get started. I think where