$SHOP · SHOPIFY INC.
Shopify filed its Q3 FY2026 10-Q, reporting revenue of $3.742B (+31.6% YoY), net income of $462M ($0.36/share diluted vs. $0.20 a year ago), and operating income of $568M. Gross margin declined to 47.6% from 48.9% in Q3 2025, driven by faster growth in lower-margin Merchant Solutions. The balance sheet shows $4.73B in cash and marketable securities, down from $5.78B at year-end, as the loan portfolio expanded to $2.35B.
- Q3 revenue of $3.742B grew 31.6% YoY, with Merchant Solutions up 35.5% to $2.906B.
- Net income more than doubled to $462M ($0.36/share) from $264M ($0.20/share) in Q3 2025.
- Gross margin contracted to 47.6% from 48.9% a year ago as Merchant Solutions cost of revenue grew faster than subscription.
- Operating income surged 65.6% YoY to $568M, with operating margin expanding to 15.2%.
- Cash and marketable securities fell to $4.73B from $5.78B at year-end 2025, partly funding loan portfolio growth to $2.35B.
Extended-hours trading shows SHOP at $132.76, down 15.02% from the regular close of $156.22 — a ~$30B market-cap wipeout on a $202.72B company. The selloff suggests the 31.6% revenue growth, while strong, disappointed a market priced for even faster expansion, or that the 47.6% gross margin (down from 48.9% YoY) and $127M unrealized loss on equity investments spooked investors.
A $30B+ after-hours wipeout on a $202B company despite doubling net income and 31.6% revenue growth signals the market's razor-thin patience for any margin softness in high-multiple tech.
Shopify's 31.6% revenue growth outpaces most enterprise SaaS peers, but the after-hours reaction mirrors a pattern seen across high-multiple tech: even strong beats get punished if the market sniffs deceleration or margin erosion. The Merchant Solutions mix shift toward lower-margin payments and lending revenue continues to pressure blended gross margins.
Gross margin compression is evident: Merchant Solutions cost of revenue grew 34.8% YoY to $1.786B, nearly matching its 35.5% revenue growth, leaving little operating leverage in the highest-revenue segment. The $127M unrealized loss on equity investments in Q3 alone signals ongoing volatility in Shopify's $4.9B investment portfolio, which has swung between large gains and losses quarter-to-quarter.