Q3 2023 Shopify Inc Earnings Call
With us today after their prepared remarks, we will open it up for your questions.
We will make forward looking statements on our call today that are based on assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected we undertake no obligation to update these statements except as required by law you can read about these assumptions risks and uncertainties in our press release this morning, as well as in our filings with the U S and Canadian <unk>.
<unk> well.
We will also speak to adjusted financial measures, which are non-GAAP and not a substitute for GAAP financial measures reconciliations between the two are in the tables at the end of our press release and finally, we report in U S. Dollars. So all amounts discussed today are in U S dollars, unless otherwise indicated with that I will turn the call over to Harley.
Thanks, Carrie and good morning, everyone. We are here to discuss our latest quarterly results, which reflect shopify is continued growth and commitment to empowering businesses around the globe are.
Our Q3 results should be taken as a clear indicator of our ability to reshape shopify, making us faster more agile and ready for sustained profitable growth.
Jimmy was up 22% revenue was up 25%.
Gross profit was up 36% and free cash flow margin was 16%.
Simply put we executed extremely well in Q3 delivering results that reflect the power of our merchant first business model and the progress we're making to further solidify shop place position as the global leader in Commerce.
At Shopify, we excelled in the face of change it's embedded in our DNA and inspires us to continually learn innovate and deliver more products to make commerce better for everyone.
In the past six months I've talked about how the wider commerce landscape is rapidly changing and how shopify has adapted to this.
Operating with greater discipline and efficiency to ensure merchants with the tools they need to navigate any macroeconomic environment.
The trust, we have built with our merchants combined with our growing scale highlights the power of our platform and gives us increasing opportunities to deliver even more value to our merchants.
From small local retailers to large global corporations shop place, helping them achieve even greater heights of success.
So let's dive in to the key accomplishments in the quarter as we continue to execute on the massive opportunity ahead, supercharging merchants of all sizes to sell to anyone anywhere and always.
Starting with product no. Other platform is built for every facet of commerce like Shopify has whether it's online or in person.
SMB or enterprise direct to consumer or wholesale domestic or global.
We are multi dimensional and moving quickly to expand our unified commerce platform to not only remove barriers for merchant success, but also to help them thrive from AI to checkout to shop pay we are making the hard things easy and everything else possible.
At Shopify, we believe AI is for everyone and its capabilities should be captured and embedded across the entirety of our business. We've integrated Shopify magic our suite of free AI enabled features across our products and workflows and merchants are already finding success with unblocking productivity and creativity.
So I play Magic you take the power Shopify, and a merchant's own data to make it work better for them.
Whether it's enabling unique personalized page and content generation like instantly crafting and about US page in your brand voice and tone or building accustom page to showcase all the size available in your latest product collection, we are equipping businesses with more ways to enhance their workflow and streamlined daily operations. So they can focus on what matters most.
Growing their business.
Moving onto shop like checkout, we continue to invest into building the most seamless secure and efficient checkout experience for our merchants.
Since launching checkered extensibility or new way to customary sharply checkout last year, we've seen improvements across our merchant base is more adaptable loads faster and converts better designed to handle high volumes. It is ideal for the worlds largest flash sellers like the iconic brand Supreme.
Its approach to extensibility is fully compatible with sharpei, making it the world's first completely customized one click checkout and all of this customization or upgrade safe. So merchants never have to Miss out on the latest features and optimizations we release.
Since launch we've exponentially expanded our suite of Apis components and capabilities and seen over 400 checkout apps in the Shopify App store that supports checkered extensibility through.
The quarter more brands are using checkered extensibility to leverage its enhanced flexibility performance and capabilities. We now have consumer's favorite brands like Rughal thrive cosmetics and Mr beef and thousands of others using our checkered extensibility with more transitioning over every day.
In September we launched the new one page checkout, a significant change to our checkout experience that underscores our commitment to creating an experience that is the only fast and streamlined but also more enjoyable for the buyer ultimately leading to higher conversion.
And just two months, we're already seeing one page checkout speed up buyer completion time by an average of four seconds that is a huge achievement considering its potential to boost customer acquisition sales and brand loyalty as I mentioned earlier checkered extensibility is fully compatible with shop pay making it the world's first completely customizable one click.
Checkup with over 100 million buyers are reusing shop pay it has increasingly become the go to choice for consumers getting popularity over guest checkout and credit cards.
In the quarter Sharpei facilitated $12 billion in <unk>, an increase of 50% year over year and cumulative $110 billion since its launch in 2017.
Surpassing the 100 billion dollar Mark on sharp pain was a significant achievement for the team, but we have our sights set on further establishing <unk> as the preferred accelerated checkered method across commerce, it's a tool that a retailers large and small on platform and off will continue to seek out given shopify is overall conversion rate outpaced the competition.
Titian by up to 36% and an average 15% more than others for.
For embedding AI into our solutions to optimizing checkout to expanding the availability of shop. Hey. These are just a snapshot of the wide array of ways Shopify is making it easier for merchants don't only sell locally but globally.
Cross border Jim V was approximately 15% of total GMB in the quarter and in late September we successfully launch markets pro to general availability in the U S. Attracting thousands of merchants to this new product offering.
Markets Pro takes on the most stressful and time consuming elements of international transactions. So our merchants don't have to as a fully integrated merchant of record solution. It is built on top of markets markets Pro is a great option for merchants looking to scale to new countries quickly without having to navigate international tax compliance or fraud, while tapping.
To the best in class International shipping options with prepaid duties since the rollout the product has become one of the fastest growing e-commerce merchant of record providers and we cannot wait to expand its accessibility to other countries beyond the U S. In 2024.
Our primary focus for international remains centered on extending shop of ice products and capabilities to enhance the merchant experience in every market.
This includes things like launching shipping guidance for merchants navigating them through streamline privacy guidance initiating localization experiments across various marketing channels, and bringing localization tools and AI back language translations to the Shopify App store.
And it's working in Q3 similar to the first half of the year, we delivered considerable Jim V and merchant growth in key European markets, like Germany, France, and the U K with DMV in these three markets growing greater than two ex GM V for all other geographies.
With our growing international and cross border tools, we are increasing the ways for merchants to reach customers in new markets with ease and with our growing network of partners merchants can offer their products on even more channels and services. It is this increasing optionality and integrated ecosystem that separates us from everybody else, we offer an agile and scale.
Double platform that can open and scale to a thousand physical retail locations turn on social channels like Tictoc Youtube and Instagram with the click of a button expand to wholesale via shop like collective or our <unk> solution.
Connect in sync data with multiple marketplaces, like Walmart Amazon ebay through our marketplace connect app.
And all of this can be done within shopify, giving brands a single centralized place to reach a larger base of customers anywhere anytime and always.
Within retail our go to market efforts continue to yield strong results offline <unk> increased 26% year over year in the quarter, driven primarily by larger retailers joining the platform.
Nearly a third of point of sale Jim V. In Q3 came from Shopify, plus merchants and our point of sale Pro subscriber base was up 34%.
All powerful indicators that our world class point of sale product is fueled by even stronger go to market that is delivering results and bringing more merchants onto the platform.
The strength of our unified Commerce platform and scalability of our retail channel continues to draw in major omnichannel retailers like Banana Republic home Princess Polly and the Sacramento Kings.
We have worked consistently to build up the features and functionality that larger multi location retailers require including powerful customizable staff permissions remote management of the point of sale products and innovative professional payment devices like our new point of sale go which we brought to the U K and Ireland in the quarter. Many of these larger merchants are using shop.
If I point of sale to streamline their operations, giving them a clearer view of their business and greater ability to build personalized customer relationships.
Even as more and more large brands to shopify for a unified commerce capabilities, we remain the best commerce offering for small and medium sized businesses. This is evident on our ongoing partnership with Intuit as well as our newly established partnership with fair, making them a recommended wholesale marketplace as part of the partnership Fair also recommends shopify as the preferred.
Bidder for delivering exceptional point of sell experiences to their merchant base, which is hundreds of thousands of retail shops in 20 countries. This partnership further reinforces the robustness of our offering for retailers aiming to stay at the forefront of commerce.
As consumers increasingly expect to interact with their favorite local shops, both online and in person. We spent the past year developing a plan for retailers, who primarily operate in physical locations, but also desire a simple online presence we call it our retail plan.
Tailored for retail first businesses for $89 a month retailers can leverage the strength of shopify through our point of sale platform to help them run and manage their brick and mortar stores.
Since its launch in early August 16% of our retail pro locations growth has come from merchants subscribing to this plan, while it's still early days the retail Plenish is another way in which we are uniquely positioning ourselves to expand the entry points into shopify, thereby facilitating more commerce through our platform driving the shopify flywheel.
In addition to our success in the retail channel the momentum in our B to B business continues to accelerate during the third quarter, our business nearly doubled year over year and by August we already had surpassed our entire beta BG NV for all of 2022. These are strong indicators that our efforts to develop advanced features for B to b are making an impact.
And we have no intention of slowing down.
To establish herself as industry leaders, particularly for large enterprise merchants, we're leveraging art rapid innovation and product development muscle to bring additional wholesale features such as staff permissions for sales reps and extensible discounts to make it easier to drive sales.
As more consumer favorite brands on Shopify, like Laura Mercy and bare minerals adopt this product we continue to tap into our immense potential of our platform to enhance our engagement with our existing merchants and support them in growing this channel.
Beyond serving our existing merchant base B to B is a huge growth opportunity for shopify to tap into new verticals and cater to an entirely new cohort of merchants, who exclusively conduct b to b transactions.
It is a massive industry that we believe we can fundamentally transform and our efforts to continue to make commerce better for everyone.
As we looked at further expand and strengthen our market presence as a leader in commerce choice and flexibility matter, we have proven that serving both startups and large companies is not mutually exclusive, especially when you have one of the best ecosystems on the planet to deliver at both ends of the market.
Our partner ecosystem is the largest ecosystem of commerce partners in the world with four times more global partners than the next largest commerce provider D.
The ecosystem that we've cultivated extended over the years includes our community of developers and partners that are dedicated to commerce more than 10000 apps in our App store.
Top system integrators, like IBM, and Deloitte as well as our recently announced partnership with multinational advertising and technology Company W. P. P.
And strong platform partnerships like stripe globally as well as newer partnerships like the expanded ones. We are building with flex port and adient.
One of Shopify is greatest strengths is creating world class partnerships with commerce and product companies that are a win win for both parties. This is central to the flywheel that every company tries to cultivate that we actually have and are incredibly proud of.
Our ecosystem is critically important to the success of our merchants if our partners succeed our merchants succeed and we succeed this is by design and it's happening across all dimensions of our business.
And in the past few months, we've had some exciting things happening for shopify and our partners.
For advertising product audiences, we recently announced integrations with Tic Toc snap <unk>, joining our existing roster of channel AD partners, including meta Google and Pinterest.
On the App side, our long term partner Clave, you, who officially launched their app in the Shopify App store back in 2018 has successfully IPO, which demonstrates the strength of shopify ecosystem and helping our partners find success congratulations to the entire <unk> team on this huge achievement.
We announced our partnership with Amazon, which will release, an app and shopify app ecosystem in the coming weeks getting merchants the choice to offer buy with prime directly within their shopify checking this new App will give U S based merchants, who use Amazon fulfillment network the option to add by with prime into their shopify checkout and all of it will be processed by shopify payments.
<unk>.
And finally, we have signed a commercial agreement with flex port as our preferred logistics provider, we look forward to partner with flexible to bring fast affordable and reliable logistics offerings to our merchants.
More choice means more opportunities to succeed and that's where a building at shopify.
Shopify is no longer just e-commerce in North America for small businesses, we are a global unified commerce platform for merchants of all sizes, whether it's full stack headless are composed of both we have a suite of capabilities that are built for every type of enterprise every new entrepreneur and every SMB that is looking for a fast and scalable.
That offers incredible value no matter, what a merchant might need shopify has a solution that is right for them and we're building more everyday to increase the optionality and the ways in which we can help businesses succeed and the best part is that every single day consumer's favorite brands and the brands of Tomorrow are all coming to shopify they try.
US to provide them with the cutting edge tools to not only find success today, but to build brands and thrive in the future of commerce.
Some of the brands that launched since our last earnings call include Pucci, the well known French fashion House and luxury retail brand owned by Lv MH, Ted Baker, the U K fashion designer as well as Anastasia Beverly Hills. The celebrity makeup artist makeup brand and Jaylo beauty the beauty skincare line with Jennifer Lopez, all highlighting our continued ability.
To meet the needs of merchants across verticals and geographies.
Our go to market strategy came out with a robust multi dimensional unified commerce platform is attracting more brands with established online and offline presences to shopify.
Brands like Paige denim and Oaken Fort who recently signed with Shopify, because we can offer them optionality and scalability to power their businesses online offline and everywhere in between.
We also saw our go to market efforts lead to shopify, signing deals with enterprise level brands around the world, including luxury marketplace Moda operandi footwear company Tom's liberated brands, the retail and E. Commerce, operator of board rider, which is home to brands like Quiksilver, Roxy DC shoes Billabong element.
And many more.
Premium wine company Treasury wine estates specialty beverage marketplace Bev mode powered by go Puff.
Our largest EMEA brand to date, Danish online or physical yarn brand Hobey, along with Austrian beauty brand EMR hair, and beauty and snow peak, a Japanese design camping your company, our largest brand signing in Japan.
Beyond these brands many others continue to come to shopify, because we offer the best value for flexible scalable infrastructure to help them succeed and our excitement around the enterprise opportunity is only growing stronger as we engage in signed more consumers' favorite brands across geographies and channels.
Before I hand, it over to Jeff Let me just give you a quick update on how shopify is working with brands to create incredible unique experiences that customers are absolutely raving about over the summer the shop App went on tour with Drake. It's the first time in four years that Drake is gone on tour. So it's a big deal for us fans all over the world.
So we took the shop app onshore with him and crafted something special for us fans that they can only get through the shop App, we created a QR code and Geo fences with custom radiuses to drop as fans thousands of surprise Drake related gifts.
Fans could scan the QR code at the show head to the drink related shop, putting their shipping details and be sent awesome products like unreleased Nike sneakers, and Champagne Hot steps and every drop was different with surprise products at a surprise time. These drops are creating huge hybrid every tour stop with people starting to crowd around for the drop after the show.
It's been incredible to see and be a part of and all of it is being done on shopify or merchant obsession and powerful platform ideally positions us at the epicenter of the future of commerce unleashing new ways for merchants to engage and drive authentic connections with their customers to wrap it up millions of merchants around the world recognize and value the rich.
Set of mission critical solutions that we provide them our unified commerce operating system is the backbone powering brands all over the world. We continue to make it possible for every business owner on shopify to leverage the power of the latest technology like AI. So they can build their businesses faster and unlock a new level of creativity and productivity beyond there.
Wildest expectations, so as our merchants get ready for their busiest shopping season of the year. There next floss shell or even their very first sale, we are ready arming them with the speed reliability and accessibility they need across channels partners and products to help them capture every opportunity every step of the way and with that I'll turn the.
Call over to Jeff.
Thanks, Harley, let's dive into our Q3 results starting with G. M D.
G M. B in Q3 was $56 billion of 22% year over year as merchants delivered another strong quarter of growth the 22% year over year growth in <unk> represent the highest quarterly growth rate since the pandemic driven growth rates of <unk> 2021.
Growth in our merchant base globally was a largest contributor to our GMB growth year over year.
Three other key factors continued gains in Europe, Harley mentioned in his comments the GMB in Germany, France, and the U K, our three largest merchant bases in Europe combined grew greater than two times the GMB for all other geographies globally.
The same is true for all of EMEA GMB grew two times the rate of the rest of the world. The GMB strength in Europe is stemming from multiple sources with the growth being driven equally by new merchant acquisition and sales growth in our existing merchandise secondly, same store sales growth in our existing merchants globally, and finally robust growth in our point of sale business.
Which increased 26% year over year for the quarter, driven primarily by larger retailers joining the platform.
Turning to revenue revenue for the third quarter was $1 $7 billion up 25% year over year, which translates into a year over year growth rate of 30% when excluding the logistics business. The key contributors to our revenue growth included the GMB strength, we just discussed the growth in our merchant solutions business, which was driven by a combination of increased <unk>.
On attrition of payments and continued growth across a broad number of solutions, including capital markets and installments.
A full quarter of benefit from the subscription pricing changes on our standard plans and.
And growth in the number of active merchants across each of standard plus and point of sale.
In Q3, our product attach rate was 3.05% up from 296% in Q3 of 2022.
Key contributors were growth in payments subscription solutions from the pricing change capital markets installments and tax.
Now to discuss our two revenue streams merchant solutions revenue and subscription solutions revenue.
Q3 merchant solutions revenue was $1.2 billion, increasing 24% year over year driven by growth in <unk> continued penetration of shopify payments and strength in our other merchant solutions, particularly shopify capital markets and installments.
These partially offset by not having the logistics business in the quarter.
$32 8 billion of <unk> was processed on shopify payments in the third quarter, 31% higher than in the third quarter of 2020 to.
The penetration rate of shopify payments as a percentage of G. M. D was 58% compared to 54% in Q3 of 2022.
Several factors drove the quarter's higher gross payments volume compared to the prior year, including.
The strong performance by those merchants, utilizing shopify payments and increasing percentage of which our shopify plus.
New merchant adoption across the globe.
Greater penetration of shop pay.
And continued growth of our integrated point of sale solution in physical retail stores.
These partially offset by a <unk> mix shifting to EMEA, where we have lower G. P V penetration than our core countries.
Subscription solutions revenue was $486 million of 29% over Q3 of 2022 primarily driven by the growth in the number of merchants on both our standard and plus plans as well as the first full quarter of impact from the pricing increases on our standard plans.
Q3, <unk> was $141 million up 32% year over year, we saw strong year over year growth in MRI across each of standard plus and point of sale.
The year over year strength stemmed from increases in the number of merchants across all three of these categories combined with for standard the pricing plan that we implemented earlier this year.
For point of sale, which was up 34% our new retail plan combined with improvements in our go to market strategy and for plus continued growth in new merchants and upgrades with plus growing to 31% of MRI for Q3 of this year.
Moving on to gross profit.
Gross profit was $901 million for the quarter of 36% year over year.
Gross margin for subscription solutions was 81, 9% compared to 78, 1% in Q3 of 2022.
The increase was driven primarily by a full quarter of the pricing changes as well as support efficiencies.
Gross margin for merchant solutions was 41.0 per cent compared to 37, 2% in Q3 of 2022.
Merchant solutions gross margin improvement was primarily due to the lack of the dilutive margin impact of our logistics business in the prior year.
When excluding the impact of logistics, our merchant solutions gross margin was down a point year over year. It's the same factors, we experienced in the second quarter, including growth of our lower margin Shopify payments business was.
Was partially upset by growth in other higher margin merchant solutions, including capital installments and markets.
This brings our overall Q3 gross margin to 52, 6% compared to 48, 5% in the prior year.
Excluding the dilutive impact of the logistics business in Q3 of 2022 gross margin in Q3 was essentially flat year over year driven by growth in our higher margin subscription solutions business, primarily due to the pricing changes offset by continued growth in our lower margin payments business within merchant solutions.
Operating expenses were 779 million for the quarter down 23% compared to Q3 of 2022.
The decline year over year was primarily driven by lower head count the sale of the logistics business and the $127 million in one time charges, primarily pertaining to legal accruals incurred in the prior year.
Compared to our second quarter operating expense of $818 million, excluding the charges from the sale of our logistics business, it's related SBC and severance our Q3 operating expenses were lower quarter over quarter largely from.
Lower compensation expense driven by a full quarter of lower head count, partially offset by real estate charged for the disposal of the last lease we have related to our logistics business and our reduced footprint in one of our ongoing offices as a result of lower head count.
Relative to our outlook three items drove our lower third quarter operating expenses headcount marketing and back office.
On head count we are selectively hiring in key areas, but we decided to restart that process at a slower pace. So compensation expense was lower than planned.
Marketing came in lower as we continue to remain disciplined in our spend.
And lastly back office, then came in even better than expected in areas, such as travel events legal and recruiting.
Bringing this to the bottom line operating income was $122 million in the quarter.
Stock based compensation for Q3 was $102 million compared to $150 million for the same period, a year ago, driven primarily by lower head count.
Capital expenditures were 2 million for the quarter.
Q3 free cash flow was $276 million or 16% of revenue. We have mentioned in our past few calls our focus on operating discipline and you're seeing that play out in our free cash flow margins.
We have delivered four consecutive quarters of free cash flow generated more free cash flow in Q3 than the prior three quarters combined and have grown both free cash flow dollars and free cash flow margin sequentially. Each quarter. This year again all of this in line with the work that we've been doing to drive strong free cash flow margins.
Turning to our balance sheet, our cash and marketable securities balance was $4 9 billion as of September 30th and we had a net cash position of 4.0 billion after consideration of the outstanding convertible notes.
Before turning to outlook I want to highlight the flex where commercial agreement that has now been signed we are excited to continue to partner with Ryan in the flex more team to bring our merchants affordable and reliable logistics offerings. It is still very early days and we do not expect this agreement to have a material impact on our results for the rest of the year.
Let's now turn to outlook our expectations for the rest of the year are as follows.
First on revenue.
We expect revenue for the full year to grow at a mid twenties percentage rate on a year over year basis, driven by fourth quarter revenue growth in the high teens on a GAAP basis, which translates into a year over year growth rate in the low to mid twenties, when excluding the 400 to 500 basis points impact from this day all of our logistics business.
Our expectations for growth in Q4 reflect the continued strength of our business and the year over year growth rate reflects the tougher comparison to Q4 of last year, which was our highest quarterly growth rate last year and included a particularly strong black Friday cyber Monday weekend Q.
Q4 gross margin percentage is expected to be up 300 to 400 basis points over Q4 of last year with the clear driver being the removal of the dilutive margin impact of our logistics business, which was itself approximately 300 to 400 basis points.
Excluding that impact on logistics Q4, gross margin is expected to be flat year over year.
Other key factors contributing to our Q4 gross margin expectations are the benefit of the price increase in our standard pricing, which is offset by higher expected payments volume and penetration.
As a reminder, our Q4 gross margin historically has declined relative to Q3 due to the higher percentage of revenue coming from payments given the G. M B volume from the holiday season.
Our guidance implies that our gross margins will increase for calendar year 2023 compared to 2022.
We believe that our Q4 operating expense dollars will be down at a low single digit percentage rate compared to our Q3 operating expense dollars of $779 million, our cost base to stabilize and as we continue to lean into the new shape of Shopify, we continued to demonstrate our ability to operate more efficiently leveraging automation and process improvements while continuing.
To launch new products and invest in key areas.
Moving to stock based compensation SBC is expected to be approximately $100 million in Q4.
We continue to expect capital expenditures to be approximately $45 million for all of 2023, which includes $33 million that we incurred related to logistics in the first two quarters of the year.
Finally on free cash flow, our free cash flow margin and our free cash flow dollars have both improved sequentially every quarter. This year and this trend is expected to persist into Q4.
We anticipate that our Q4 free cash flow margin will be in the high teens. This.
This continued improvement in our free cash flow should be viewed as a clear indicator of the steps that we've taken this year to drive towards greater profitability as we build for the long term.
Before I close out the call I mean, as we previously announced we will be hosting an investor day for financial analysts and institutional investors on December 5th in New York.
We will not be providing a long term detailed financial model at the Investor Day, which you can expect from US is to hear from the key leaders across our business, including Tobi Harley cows, our COO, Bobby our Chief revenue Officer, and Glenn <unk>, Our vice president of product for Shopify core.
Throughout the event, we plan to discuss the significant market opportunity ahead of us are multiple durable growth levers and our approach to product innovation and go to market.
More information regarding the event can be found on our corporate website investors Dot Shopify dot com.
In closing the topline growth in our business remains very strong our focus on operating expenses remains unwavering and our free cash flow generation continues to strengthen.
All of these factors clearly showcase the resilience of our business model are robust market position and our capacity to generate more value for our merchants would subsequently drives our success.
With that I'll now turn the call back over to Kerry for your questions.
We will now open the call for your questions. Please use the raise hand feature into them to ask your question. If youre dialing in by phone you will need to press star nine to join the queue and star fixed on mute yourself, we ask that you limit yourself to one question. So we can try to get through as many questions as possible. Our first question comes from D. J Hynes of Canaccord.
Hey, guys. Congrats on the strong results really nice to see a Harley given the success, we see what the standard plan price increases how does that inform your thinking on price optionality in the plus base as you look to 'twenty four.
Hey, D. J. Thanks for the question Yeah. I mean, you said that we saw when we increase our standard price by about a third we didn't really see any issue come from merchants I think the price to value equation of Shopify is still so far in the side of a value and and so one of the other things we think about a lot more recently certainly than the past monetization and.
General, we're really thinking about how to monetize which products and when we're doing that across the board whether its when do we monetize audiences. When do we re look pricing on shopify, plus or the enterprise offering, but that's something that we're taking a really hard look at and I think the success of the centered price change earlier. This year proved to us that we can still we can incrementally changed our pricing in the future.
Without creating any major shift in that price to value ratio. So something we keep in mind on the enterprise side certainly.
Right now what we're seeing is that you know.
Every enterprise needs something different and someone had lists someone something right out of the box like plus others want more of a modular system like commerce components and right now no matter, what you need from Shopify, we have a product and solution for you and it's working really really well. So we will continue to look real pricing when it comes to things like enterprise, but certainly the the basic price.
It makes us quite optimistic that theres still room, there for us to change pricing in the future.
Thank you for your question. Our next question comes from Craig My Art and finance with Technology partners.
Good morning, and thanks for taking the questions.
Wanted to ask about your commentary regarding enterprise level.
Payments penetration.
You know when I think about the competitive dynamic that you're going into one are you largely replacing sort of one solution providers meeting strictly a payments provider plus perhaps an additional.
Website E Commerce company.
And secondly are there a lot of instances, where the processor or the back end processor might stay the same and the relationship changes from the merchant to you just.
Thanks, Craig I'll take that question as well.
So in terms of shopify payments penetration.
But the 58% right now that is an all time high in penetration rate and you're seeing us onboard new businesses of Shopify that are using shopify payments you know banana Republic home for example, our high smile or Anastasia. These new brands that are coming on in some cases. These are very very large.
Businesses that are still opting to use shopify payments, we're also seeing plus dropped like.
Plus merchants S. P yourself by payment penetration is actually higher than standard penetration. So there's a lot of opportunity there to keep going as we bring more merchants on more more merchant, we'll take it but remember one of the things that we think is a real lever to increase more merchants using more.
Solutions from us generally, but specifically payments things like shop payer sharpie installments of shopify balance or shelf life audiences or some of the Shanghai market features like you know foreign exchange conversion you have to be on shopify payments to use that and so we think we have a lot of opportunity there.
Second part of your question in terms of where are they coming from when.
When we see these much larger brands come onto Shopify in some cases theyre looking to modernize their entire technology stack, which includes their payment provider and we are the perfect solution for that in other cases, they may migrate over but they may have an existing contract with a previous payment company eventually when those explorations happened, we do see them.
For the most part moving onto Shopify payments, it's a better product the pricing is incredibly competitive and as we scale. There's really no reason to use any other payment provider. If you can use shopify payments and then using it.
Okay. Thank you for your question. Our next question will come from Matt Pfau of William Blair.
Hey, great. Thanks for taking my question wanted to just ask on the AI features that you've recently released and if you've noticed any discernible benefit to your business from these as customers have begun to leverage them and then also any learnings on how to potentially monetize some of these features thanks.
Yes in two ways first of all we are we ourselves are using AI inside of shopify to make better decisions, but also for things like things like our support our support team using it so that you know questions like.
Domain.
Reconfiguration or a new password or I don't know what my password is those things should not necessarily or acquire.
Our high touch communication, what that does is it means that our support team are able to have much higher quality conversations and actions business coaches for the merchants on shopify. So we're already using it ourselves but in terms of AI for our merchants remember AI has really been a part of the story for a very long time here. If you kind of think about commerce and shopify, we kind of interact at the intersection.
Section of humans and technology and that's exactly what AI is really really good at so we think we're uniquely positioned to harness the power of AI and the ultimate result of it will be these capabilities for our merchants to grow their businesses. We also think that AI is for everyone and it could add real value specifically to retail now unlike other AI products the difference with with Shanghai Magic as it is.
Designed specifically for commerce, and it's not necessarily just one feature of when product, it's really embedded across shopify to make these workflows and our products easier to use it makes it easier for merchants to run and scale their businesses and of course, you know it.
We think it's going to unlock a ton of possibilities for not just small merchants the merchants of all sizes and we're going to continue to to work on that over time, it's just going to get better and better.
Thank you for your question. Our next question will come from Samad Samana Jefferies.
Hi, Good morning, Thanks for taking my question and Great results.
Maybe if I could ask on shopify and markets and markets probe that your products, especially with Marcellus program.
The company currently 15% of transactions cross border how much of that you think realistically could at some point be processed through markets or markets pro.
And if it's not being done that way, where is that 15% being process today by shopify merchants and just trying to understand the opportunity and how they move over to the product.
More value for them and allow you to monetize them better as well.
Thanks for the question.
The international side as Jeff mentioned in his prepared remarks, I mean, we're seeing growth in the U K, Germany, France, JV is growing two X faster than global Jim D. In Q3, we want to make selling internationally on day, one as easy as it is to sell locally and both markets and markets Pro are doing just that and markets Pro as you know as you heard us now in G E.
And in Q3, but the the focus and the strategy is really to continue to localize products to implement these important commercial initiatives to make it much easier for merchants outside of North America also to start and scale their businesses.
And in terms of where that's coming from.
Markets has been out for a while that really gives merchants the simple tools to launch localized products.
And it includes really essential features for international selling and then if you want to really you know.
<unk> Pro is really where you know if you want to take one of the most stressful and time consuming elements of international transactions out of out of your day to day market's pro is the right thing free with a fully integrated merchant of record solution.
Since the rollout the product has become one of the most one of the world's fastest growing e-commerce merchant of record providers and it's only going to get better over time, we've introduced things like foreign exchange hedging Express international shipping tax compliance and now merchants like Mr. Beast in Wolf pack and maybe very large merchants are already using it. So we'll continue to see that roll out.
Overtime, but Europe is going really well for us the rest of the world is going well for us and it's not just getting more merchants internationally to shopify. It's also getting existing merchants to increase their <unk> by making it really easy to sell at every part of the world.
Thank you. Our next question comes from Brad Sills with Bank of America.
Oh right are you there.
Hum.
Can you hear me, yes, great.
Great.
Thanks, So much I wanted to ask about the.
The Si channel.
Some of the progress you might be seeing there with Vermont.
<unk>.
Our some of those.
Customers that youre targeting there are different from the traditional shopify plus.
And Margaret.
How's the Si channel help them to optimize.
Thank you.
Thanks, Brett look.
More large enterprise retailers are joining shopify is happening every single day and I think across the market. These large brands. These large businesses are recognizing both the value, but also the ease of combining our solutions with their existing infrastructure, they're doing it because they want a better total cost of ownership, but they also want to future proof their business and at the start of this year, we announced I think January 3rd our new.
Solution, we now have something for everyone, whether its headless or shopify, plus or it's things like Congress components and part of that is also finding new channels to get in front of those merchants and we talked about brands.
Coogee from Elvia, MAGE, or Moda operandi or board riders, which owns billabong and quick silver and go puffs. These are all different types of merchants in different geographies and so what youre seeing is a very intentional push to find better on ramps into shopify and one of those on ramps is it are the size and that is going really really well. So we now have agreements with Deloitte Ian why.
KPMG Accenture IBM consulting cognizant, we just announced a new one with W. P P.
What it's really doing is it's helping very high volume and high complexity merchants and businesses that they already work with daily.
Really migrate onto Shopify, you have companies like Accenture right now that are actually training entire teams on selling shopify and and working together on these these high high revenue and high profit projects together and it's working but you're also seeing is for the first time do things like you know participate in the Gartner Magic quadrant, which we are now the high.
And in that in that study in terms of ability to execute and our leader there youre seeing us.
Create new summits in new events for where we're bringing 600 global enterprise partners together, we had a partner summit a couple of weeks ago and L. A these are things we didn't do historically and we're doing that because we know that these are these sort of enterprise merchants and retailers that we want to bring on in the future. They require a different on ramp into the business and S. O I's play a big role in that and it's working.
Thanks, so much.
Thank you for your question, we will now go to Clark Jefferies Piper Sandler.
Hello, Thank you for taking the question Jeff.
Jeff I wanted to ask about the low single digit decline in Opex between Q4 and Q3, what specifically is going be the largest driver sequential dollar move there in any way to think about what remains the lowest hanging fruit for cost optimization.
Yeah, I think one of the things that youre going to see from US is the continued implementation of all the hard work we've been doing over the last four quarters, the specifically and make sure we're continuing to get to the new shape of shopify and get to an operating expense level, which we think will allow us to be disciplined on costs, while we're going to continue to grow the top line. The things that we've talked about I think from a head.
Count perspective, I alluded to that both as it was in Q3 results in terms of also how we think about Q4.
Stabilize and where we are from a head count perspective, we will continue to hire in select key areas.
We will continue to make sure we're making investments in things like AI, we want to always be there for merchants, we will continue to invest in what we're doing on the product development front, but as you heard from my comments as it relates to Q3, we've been very disciplined in the back office, we have been very disciplined on the marketing front, we will always Q3, I talked about leaning into what we're seeing in our markets.
Behind point of sale and also as it relates to offline in Europe. So when we see more opportunities on the marketing side, we will lean in but also importantly at the same time, what we're doing is we're being really disciplined across all the different markets products channels geographies. So if we look at the returns, which we as a senior management team has spent a lot of time looking at the returns by channel.
By segment in terms of what are the are the marketing dollars need to cross in terms of the threshold before we spend enough in any given quarter. We don't meet those thresholds and obviously, we won't spend there. So I think it's going to be continued discipline on head count continued disciplined marketing and driving the back office largely through automation.
Thanks for your question. Our next question will come from city pilot Groggy at Mizuho Securities.
City are you there.
Yeah can you hear me yes.
Okay.
Thanks for taking my question.
Ask about the shop App.
Attraction. So it's good to see some of this marketing initiative you guys doing like Greg store.
But could you help us understand like what's the adoption so far like what percentage of your consumer currently purchase from Shopify merchants use up shop, App and what is kind of active user you are seeing there.
We look at the returns we as a senior management team has spent a lot of time looking at the returns by channel by segment in terms of what are the marketing dollars need to cross in terms of the threshold, where we spend enough in any given quarter. We don't meet those thresholds. Then obviously, we won't spend there. So I think it's going to be continued discipline on head count continued discipline on marketing and driving the back office.
Yes, we're not talking about those.
Those metrics were not disclosing just yet, but the shop that is becoming much more popular I mean, we had when we launched it we were very clear that the goal is really to strengthen merchant relationships and increase customer LTV. It is a new one channel. It offers this end to end shopping experience for consumers. They get a real time order tracking in a checkout with shop in shop installments. So from.
Through automation.
Thanks for your question. Our next question will come from city pilot Groggy at Mizuho Securities.
The consumer perspective.
It's just an incredible place where some of the most favorite brands.
I'll have wonderful products listed from a merchant perspective, where it really matters. If it's in one channel that can help them drive traffic the way they want and it's something that obviously you can only get by being on Shopify now in terms of some of the stuff. We're doing now and we've been teaming up you mentioned this earlier, but we haven't seen me up with branch well beyond Drake companies like Spanx and festivals in Steve Madden, where we're bringing.
City are you there.
Yeah can you hear me yes.
Okay.
Thanks for taking my question.
I'll ask about the shop App.
Some of the biggest brands onto shop, app, and providing them with opportunities like shop cash to give these great promotions to their audiences a grocer G. M. V. Also grows their user base and we've done about 40 of these so far with some of the largest brands. The current focus for shop App as is sort of threefold first is enable merchants to customize the in App shopping experience with things like shop Minis.
Traction so it's good to see some of this marketing initiative you guys doing leg drugstore.
But could you help us understand like what's I adopt since overlay what percentage of your consumer currently that purchased from Shopify merchants use Sop shop, App and what is kind of active user you are seeing there.
Yeah, we're not talking about that those metrics were not disclosing just yet but for the shop that is becoming much more popular I mean, we had a lot. When we launched it we were very clear that the goal is really to strengthen merchant relationships and increase customer LTV. It is a new one channel that offers an end to end shopping experience for consumers. They get a real time order tracking inapt checkout with shop here.
It is beautiful mobile application that actually allows them to reflect the brand in the shop at the second is to build incredible brand awareness and acquire new customers, that's where sharp cash is playing a big role and then finally, how do they convert browsers into buyers things like signing with shop and shop identities, and obviously seamlessly transact with shop, Hey, this is getting to be a real.
And shopping installments so from from the consumer perspective, it's just an incredible place where some of the most favorite brands all.
Wonderful channel for these merchants to use and so we'll talk a little bit more about how it's growing in terms of some of the some of the metrics you would ask for in the future, but generally I mean for anyone that uses shop App you know how great. It's become it's only going to get better.
I'll have wonderful products listed from a merchant perspective, where it really matters. If it's in one channel that can help them drive traffic the way they want and it's something that obviously you can only get by being on Shopify now in terms of some of the stuff we're doing them and we've been teaming up you mentioned this earlier, but we've been seeing up with branch well beyond Drake companies like Spanx and festivals in Steve Madden, where we're bringing.
Thanks Denny.
Our next question comes from Tim T EDA at UBS.
Great. Thank you I wanted to dig in a little bit more to some of the comments around shop pay moving off platform. If you could just talk a little bit about how you envision the button competing maybe with the likes of Paypal or Apple pay across the broader retail landscape in terms of checkout chair and if theres any great early signs of.
Some of the biggest brands onto shop, app, and providing them with opportunities like shop cash to give these great promotions to their audiences a grocer GM V. Also grows their user base and we've done about 40 of these so far with some of the largest brands. The current focus for shop App is or is it sort of threefold first is enable merchants to customize the in app shopping experience with things like shop Minis.
Maybe example, retailers where the shop pay button has been added alongside those payment methods for non shopify merchants.
It is beautiful mobile application that actually allows them to reflect the brand in the shop App. The second is to build incredible brand awareness and acquire new customers, that's where sharp cash is playing a big role and then finally, how do they convert browsers into buyers things like signing with shop and shop identities, and obviously seamlessly transact with shop, Hey, this is getting to be a re.
And also to the extent that this could be an opportunity to sort of get a trial with some of the more enterprise merchants they get to work with shopify and get a good experience with shop pay and then potentially move more of their e-commerce infrastructure over to shopify. Thanks a lot.
You you sort of nailed it which is that.
Wonderful channel for these merchants to use and so we'll talk a little bit more about how it's growing in terms of some of the some of the metrics you'd asked for in the future, but generally I mean for anyone that uses shop App you know how great. It's become it's only going to get better.
This really allows us to begin a business relationship with brands and business isn't huge retailers that may not otherwise be ready to fully migrate onto shopify enterprise, whether it's shopify plus or it's a titlist hydrea are charging product or even commerce components, but shop pay off platform is still very much. It's early days, but we see that as.
Thanks setting.
Next question comes from Tim Seattle at UBS.
Great. Thank you I wanted to get a little bit more to some of the comments around shop pay moving off platform. If you could just talk a little bit about how you envision the button competing maybe with the likes of Paypal or Apple pay across the broader retail landscape in terms of checkout share and if theres any great early signs of.
They're really the tip of a spear for for enterprise and it allows us to begin a relationship but why is that is sharp pain in particular, so important or right. Now it is the highest converting checkout on the internet more than 100 million buyers have opted into shop pay and it's already I mean, the quarter alone. It's facilitated $12 billion of G. M V and 110 billion cumulative since we.
Maybe example, retailers where the shop pay button has been added alongside those payment methods for non shopify merchants.
Launched it so we know that shop. He is consumers' favorite way to check of an accelerated perspective, and now really what we're trying to do is continue to make it easier to check out of a shop. He added into things like Shopify point of sale for example, and expanded across more surfaces, but really making sharp paid the preferred accelerated check it across commerce.
Also to the extent that this could be an opportunity to sort of get a trial with some of the more enterprise merchants they get to work with Shopify and a good experience with shop pay and then potentially move more of their e-commerce infrastructure over to shopify. Thanks a lot.
Is the goal here and by creating this opportunity for some very large brands to use shop payoff platform again. The goal is not for them just to use shop health platform indefinitely. It's to begin a business relationship. It's the same philosophy around commerce components right not everyone wants to use all of Shopify. There are some very large brands that historically didn't consider shopify.
You you sort of nailed it which is that.
This really allows us to begin a business relationship with brands and businesses and huge retailers that may not otherwise be ready to fully migrate onto shopify enterprise, whether it's shopify plus or it's a tad less hydriodic hydrogen product or even commerce components, but shop pay off platform is still very much. It's early days, but we see that as.
That are now coming on because they want to use our checkout, which converts 35% better than our competitor or 50% better on average across the entire internet they want to shop here or they want to do something with our inventory they want user admin they want to use point of sale by allowing them to choose certain components of shopify. We believe over time, they will take more and more components to us and Thats what shop pay off platform.
They're really the tip of the spear for for enterprise and it allows us to begin a relationship but why is that is shop, hey in particular, so important of right now it is the highest converting checkout on the internet more than 100 million buyers have opted into shop, Hey, and it's already I mean, the quarter alone. It's facilitated $12 billion of G. M V and 110 billion cumulative since we.
<unk> with.
Thank you for your question. Our next question will come from Martin Toner, and ATV capital markets.
Launched it so we know that shop. He is consumers' favorite way to check of an accelerated perspective, and now really what we're trying to do is continue to make it easier to checkout sharpei added into things like Shopify point of sale for example, and expanded across more surfaces, but really making sharp paid the preferred accelerated check across commerce.
Thanks for taking my question I'd like to hear a little bit more about the commercial agreement with flex work is it a does it include a fee.
<unk> as a percentage of JV.
Is is the goal here and by creating this opportunity for some very large brands to use shop pay off platform again. The goal is not for them just to use shop health platform indefinitely. It's to begin a business relationship. It's the same philosophy around commerce components right not everyone wants to use all of Shopify. There are some very large brands that historically didn't consider shopify.
And when do you think something like that might be material to your overall numbers.
Yeah I'll go ahead and start on this we haven't disclosed all the details around the commercial agreement I did say in my prepared remarks, that's not going to have a material impact on this year.
It's still early days, obviously, we've as a result of the divestiture.
That are now coming on because they want to use our checkout, which convert 35% better than our competitor or 15% better on average across the entire internet they want to shop, payor or they want to do something with our inventory they want to use our admin they want to use point of sale by allowing them to choose certain components of shopify. We believe over time, they will take more and more components to us and that's what shop payoff platform.
We've got a really strong partnership with flex for it we will continue to expand ways to partner with them.
Well either at the Investor day or early next year, we'll talk a little bit more about the financial impact it will have for us but as of right now there's nothing in your models I would change just based on is it just still too early.
<unk> with.
Thank you for your question. Our next question will come from Martin Toner, and ATB capital markets.
Thank you for your question. Our next question comes from Deepak Matti Vanhanen at Wolfe Research.
Hey, guys. Thanks for taking the question maybe for Jeff Jeff just following up on your bogie of Opex guide how much more runway do you see to optimize opex into 2024, specifically in areas like back office, and marketing, which have been a pretty healthy source of leverage. Thank you. So much.
Thanks for taking my question I'd like to hear a little bit more about the commercial agreement with flex work is it a does it include a C.
<unk> as a percentage of JV.
Yes, Thanks, Deepak part of your question I don't want to get at this point into 2024, obviously I'll give you some guidance on 2020, the last quarter of 2023, I think when you look at both Q3 results as well as obviously in Q4, what we've what we've talked about in terms of expectations. Both of those without logistics I think that gives you a reasonable clarity on how we think of.
And when do you think something like that might be material to your overall numbers.
Yeah I'll go ahead and start on this we haven't disclosed all the details around the commercial agreement I did say in my prepared remarks that it's not going to have a material impact on this year.
It's still early days, obviously, we've as a result of the divestiture.
The new shape of Shopify in terms of where we sit right now.
We've got a really strong partnership with flex for it we will continue to expand ways to partner with them well.
Yeah.
We talked about in terms of the guidance.
A slight downturn in terms of operating expenses for Q4. So our goal is as we've talked about and as Harley mentioned in his comments as well earlier one of the questions. We're going to work really hard to make sure that we continue to drive the top line and do that with a very reasonable operating expense base and try and deliver that combination of strong topline growth and financial discipline on opex. So.
Well or either at the Investor day or early next year, we'll talk a little bit more about the financial impact it will have for us but as of right now there's nothing in your models I would change just based on is it just still too early.
Thank you for your question. Our next question comes from Deepak Matthew Vernon at Wolfe Research.
Again, while I don't want to get into 2024, just yet hopefully Q3, and Q4 of 2023 to give you. Some good indication of how we're thinking about things.
Hey, guys. Thanks for taking the question maybe for Jeff Jeff just following up on your bogie of Opex guide how much more runway do you see to optimize opex into 'twenty 'twenty four specifically in areas like back office, and marketing, which have been a pretty healthy source of leverage. Thank you. So much.
Thank you. Our next question comes from Andre ever at Needham.
Yeah. Thanks, Deepak for your question I don't want to get at this point into 2024, obviously I'll give you some guidance on 2020, the last quarter of 2023, I think when you look at both Q3 results as well as obviously in Q4, what we've what we've talked about in terms of expectations. Both of those without logistics I think that gives you a reasonable clarity on how we can.
And have you there.
Anna.
Okay, well go to the next one then.
Take the next question instead from Bobbin shot.
At Deutsche Bank.
About the new shape of Shopify in terms of where we sit right now.
Great. Thanks for taking my question, Jim is very healthy in light of continued pressure on the consumer can you maybe just discuss the trends you saw and how they progressed through the quarter and maybe any divergences across verticals that your merchants play in and how do you feel your merchants are kind of positioned into the holiday season. Thank you.
And well we talked about in terms of the guidance is.
A slight downturn in terms of operating expenses for Q4. So our goal is as we've talked about and as Harley mentioned in his comments as well earlier one of the questions. We're going to work really hard to make sure that we continue to drive the top line and do that with a very reasonable operating expense base and try and deliver that combination of strong topline growth and financial discipline on opex. So.
Yeah, I'll take that question.
I think as you said, we're coming to the busiest shopping season of the year for our merchants are we're seeing really is at the the consumer is quite resilient.
Again, while I don't want to get into 2024, just yet hopefully in Q3 and Q4 of 2023 and give you. Some good indication of how we're thinking about things.
There's always things that are shifting obviously on the broader economic landscape, but I think our job our responsibility is to adapt expand and build over time, so that no matter what happens our merchants are really well prepared and arm them with the solutions they need to be to be successful.
Thank you. Our next question comes from Ana Andre ever at Needham.
But we expect our merchants continue to be resilient and outperformed the broader U S retail market as they as they have in the past I think shopify as a product and and from a decision making perspective is it is such a great deal for for merchants to use the total cost of ownership is lower than on the enterprise side in terms.
And have you there.
Anna.
Okay, well I'll go to the next one then.
Take the next question instead from bobbin shot at.
Of modernizing your stack and making sure. We are merchant are the best products and tools that is super helpful. What do you think about things for example, like advertising with things like audience as it gets better and better when you think about.
At Deutsche Bank.
Great. Thanks for taking my question, Jim is very healthy in light of continued pressure on the consumer can you maybe just discuss the trends you saw and how they progressed through the quarter and maybe any divergences across verticals that your merchants play in and how do you feel your merchants are kind of positioned into the holiday season. Thank you.
Aligning all of their different channels offline online social commerce. All these things they can do so from one centralized back office, which is shopify, but I think there's always going to be pressure points, but historically, our merchants have done really well. We also know that shoppers are staying true to small businesses small shopping small it's actually very very big from a business.
Yeah, I'll take that question.
I think as you said, we're coming to the business of shopping season of the year for for our merchants are we're seeing really is at the the consumer is quite resilient.
Theres always things that are shifting obviously on the broader economic landscape, but I think our job our responsibility is to adapt expand and build over time, so that no matter what happens our merchants are really well prepared and an arm them with the solutions they need to be to be successful.
And most of the consumer's favorite small brands or on Shopify and more recently a lot of the consumer's favorite larger brands are also powered by Shopify. So we expect that the U S consumer and the consumer in general around the world will be resilient in August and will outperform the broader at least the U S retail market as well, but this is also an opportunity for us to go to very large.
But we expect our merchants continue to be resilient and outperformed the broader U S retail market as they as they have in the past I think shopify as a product and a and from from a decision making perspective is it is such a great deal for for merchants to use the total caught up cost of ownership is lower than on the enterprise side in terms.
Brands that historically either had a couple of hundred engineers on their own that they were running their own technology company and say focus on what you do best. This is the cases, the glossy story focus on making great cosmetics, and let US help you power incredible enterprise grade commerce.
Ziv modernizing your stack and making sure. We are merchant are the best products and tools that is super helpful. What do you think about things for example, like advertising with things like audiences. It gets better and better when you think about.
But it also means you know there are some a lot of brands that are on these sort of traditional enterprise E. Commerce stacks that are just very expensive and there are future proofed, there theres sort of living in a world 15 years ago that as an opportunity for us as well.
Aligning all of their different channels offline online social commerce. All these things they can do so from one centralized back office, which are shopify, but I think you know theres always going to be pressure points, but historically, our merchants have done really well. We also know that shoppers are staying true to small businesses small shopping smiles actually fair haired big from a business.
Thank you and our last question will come from Andrew Baum at Wells Fargo.
Hey, guys nice set of results here I guess I'll just follow up on that question I guess, how do you see the holiday season shopping area are shaping up I mean are we kind of expecting more frontloaded. This year with promotion like us is cross border or going to be a continued theme to think about or so.
And most of consumers' favorite small brands or on Shopify and more recently a lot of the consumer's favorite larger brands are also powered by Shopify. So we expect that the U S consumer and the consumer in general in the World. It will be resilient in August and will outperform the broader at least the U S retail market as well, but this is also an opportunity for us to go to very large.
Almonds or point of sale just trying to think of around the drivers of what we can look for this holiday season.
We did a survey in partnership with Gallup recently and actually we found that Americans particular are starting even earlier than before 41% said that they started shopping in October another 39% said, they're going to begin shopping November there's just for the holiday season.
Brands that historically either had a couple of hundred engineers on their own that they were running their own technology company and say focus on what you do best you know this is the case. This the glossy a story a focus on making great cosmetics and let US help you power incredible enterprise grade commerce.
We also had heard from as those consumers in nearly three in four U S holiday shoppers planned to spend about the same or potentially more on holiday gifts this year compared to last.
But it also means you know there are some a lot of brands that are on these sort of traditional enterprise E. Commerce stacks that are just very expensive and there are future proofed, there theres sort of living in a world 15 years ago that as an opportunity for us as well.
And the leading sort of demographic as Gen Z 18 to 29 years old will be the biggest spenders this year and a lot of those their favorite brands are on shopify as well.
Thank you and our last question will come from Andrew Baum at Wells Fargo.
So I mean look I I will it's too soon to tell obviously on the international side, I mean brands need to be international geographically agnostic now the reason that things like markets and markets Pro are so important and such a valuable asset and product instead of shopify is that if youre going to be a leading brand merchant business in the future you have to sell to a global audience and on.
Hey, guys nice set of results here I guess I'll just follow up on that question I guess, how do you see the holiday season shopping area are shaping up I mean are we kind of expecting more frontloaded. This year with promotion like us is cross border or going to be a continued theme to think about or so.
Shopify, we make that incredibly easy.
Almonds or point of sale just trying to think of around the drivers of of what we can look for this holiday season, We did a survey I'm in partnership with Gallup recently and actually we found that Americans particular are starting even earlier than before 41% said that they started shopping in October another 39% said, they're going to begin shopping November this is for.
And before.
Go ahead, I was going to say I'm going to hand, it over to Harley for some closing comments just that last comment you know last quarter, we talked really about this new shape of shopify that we're building. We also talked about on the call a roadmap for the future. When you fast forward to today, what I hope all of you see is that it is working as expected. We're faster we are a leaner we are more focused on our mission.
The holiday season.
We also had heard from as those consumers in nearly three in four U S holiday shoppers planned to spend about the same or potentially more on holiday gifts this year compared to last.
And becoming the global leader in Commerce, we laid out a very deliberate vision in the last couple of quarters to balance both operational ambition and financial discipline and the results speak for themselves delivering topline growth and profitability and and and you're seeing more and more of the biggest brands in the planet joined Shopify. So we like we like this new shape of shop.
<unk>, the leading sort of demographic as Jens the 18 to 29 years old will be the biggest spenders this year and in a lot of those their favorite brands are on shopify as well.
So I mean look I I will it's too soon to tell obviously on the international side, I mean brands need to be international geographically agnostic now the reason that things like markets and markets Pro are so important and such a valuable asset and product instead of shopify is that if youre going to be a leading brand merchant business in the future you have to sell to a global audience and on.
And we're ambitious about the future and and and I Hope you all have a great day and thanks for joining us for this earnings call.
Thank you that concludes our 2023 Q3 call.
Right.
Shopify, we make that incredibly easy.
And before.
Go ahead go ahead, I'm going to hand, it over to Harley for some closing comments just that last comment you know last quarter, we talked really about this new shape of shopify that we're building. We also talked about on the call a roadmap for the future. When you fast forward to today, what I hope all of you see is that it is working as expected. We're faster we are a leaner we are more focused on our mission.
<unk> and becoming this global leader in Commerce, we laid out a very deliberate vision in the last couple of quarters to balance both operational ambition and financial discipline and the results speak for themselves deemed delivering topline growth and profitability and and and you're seeing more and more of the biggest brands in the planet join Shopify. So we like we like this new shape of shop.
Phi and we're ambitious about the future and and and I Hope you all have a great day and thanks for joining us for this earnings call.
Thank you that concludes our 2023 Q3 call.
Right.