Shopify's Q2 makes the SaaS apocalypse thesis hard to defend. Revenue grew 34% to $3.5 billion on GMV of $115 billion, up 32%, with gross profit up 31% and free cash flow up 55%. Operating expense keeps falling as a share of revenue, which is exactly what analysts reward, and also what happens when a company spends a couple of years cutting headcount.

Rick and Jessica work through what's actually moving those numbers. Merchant solutions grew 37% and now accounts for 78% of total revenue, while the subscription line isn't growing anywhere close to GMV. Sales and marketing spend grew 20% against 32% GMV growth, and R&D grew 13% even with the AI investment story running at full volume, which is the ratio that keeps analysts quiet. Read that revenue mix honestly and Shopify looks like a payments and lending business that happens to sell software.

That's the setup for the Stripe question. Merchants process on Stripe, but their relationship is with Shopify, so if Shopify ever swaps processors, Stripe is the one holding the bag. Meanwhile the Shop brand creeps forward another notch every year, from a checkout button to a consumer login to its own installment product. Identity is the wedge into a consumer internet strategy that has very little to do with helping merchants sell more socks.

Analysts wanted to know whether Shopify will sell AI as a separate line item, and Harley Finkelstein has one answer he'll give you 27 different ways. Shopify is the layer underneath every agentic surface, so GMV has to flow through it and the register rings on the way past. The risk buried in that plan is an agentic front end that becomes the wallet itself and routes around Shopify entirely, which stops being hypothetical when PayPal is in play and Stripe is circling. Whether Shopify would ever make a run at PayPal depends on how cheap it gets, and on whether Harley decides he needs a wallet of his own before somebody else builds one.

Also in this episode, why Sidekick's real moat is context rather than model quality, what happens to app developers who don't hand their data over, and transaction and loan losses running at $141 million against $80 million.

The Watson Weekly Weekend episode by Avalara. Accurate tax at checkout, visibility into tariffs and duties before an order ships, and fewer surprises for your customers. See what Avalara has built for growing brands at avalara.watsonweekly.com

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