Shopify makes money through two broad buckets: subscription fees from merchants who use its platform and a growing suite of merchant solutions that includes payment processing, shipping, capital lending, and more. For investors trying to understand how Shopify makes money, the real story is in how the balance between these segments has shifted over time and which parts of the business are compounding fastest. Grasping the Shopify business model is one of the first steps toward evaluating SHOP as a long-term holding.
Key takeaways
- Shopify's revenue comes from two main segments: subscription solutions (monthly plans) and merchant solutions (payments, shipping, capital, and other tools)
- Merchant solutions now account for the larger share of total revenue, driven primarily by Shopify Payments adoption
- The Shopify business model is a classic "land and expand" approach: attract merchants with subscriptions, then monetize more of their transaction volume over time
- Growth isn't just about adding new stores. Rising gross merchandise volume (GMV) per merchant and higher attach rates for services like Shopify Capital and Shopify Fulfillment are meaningful drivers
- Understanding Shopify revenue streams helps investors separate surface-level growth from structural improvements in unit economics
How does Shopify make money? The two-segment breakdown
At the highest level, Shopify organizes its revenue into subscription solutions and merchant solutions. Subscription solutions is the more intuitive piece: merchants pay a monthly fee to use Shopify's e-commerce platform. Plans range from basic tiers aimed at solo entrepreneurs up to enterprise-grade offerings like Shopify Plus for large brands. This segment is recurring, predictable, and carries strong gross margins.
Merchant solutions is the larger and faster-growing segment. It includes everything Shopify earns beyond the subscription fee, primarily payment processing through Shopify Payments, but also referral fees from the Shopify App Store, Shopify Capital (merchant lending), Shopify Shipping, and Shopify Markets for cross-border selling. Think of it this way: the subscription gets a merchant onto the platform, and merchant solutions captures a slice of their business activity once they're there.
Gross Merchandise Volume (GMV): The total dollar value of orders processed through Shopify's platform. GMV matters because merchant solutions revenue (especially payments) scales directly with it. Higher GMV per store means more revenue without needing to add new merchants.
Subscription revenue: the foundation of the Shopify business model
Subscriptions are where the relationship starts. Shopify offers tiered pricing, and merchants self-select based on their size and needs. The basic plan costs relatively little per month, which keeps the barrier to entry low. Shopify Plus, the enterprise tier, charges significantly more and often involves custom contracts. This tiered structure means Shopify captures more revenue as merchants grow, even within the subscription segment alone.
Here's what makes this interesting for investors: subscription revenue is high-margin and sticky. Once a merchant builds their storefront, integrates their inventory, and trains their team on Shopify's tools, switching costs are real. They're not impossible, but they're meaningful enough that churn rates for established merchants tend to stay low. The subscription base acts as a stable revenue floor that the rest of the business builds on top of.
That said, subscription revenue has been growing more slowly than merchant solutions in percentage terms. This isn't necessarily a problem. It reflects the fact that Shopify's "expand" strategy is working: merchants stay on the platform and spend more on additional services over time.
How does Shopify Payments drive the largest revenue stream?
Shopify Payments is the single biggest component of merchant solutions, and it's worth understanding on its own. When Shopify launched its own integrated payment processing (powered by Stripe's infrastructure), it fundamentally changed how SHOP makes money. Instead of just collecting a subscription fee and letting third-party processors handle transactions, Shopify started capturing a percentage of every sale made through its platform.
The economics work like this: Shopify charges merchants a payment processing fee on each transaction, similar to what they'd pay using any other processor, but with the convenience of native integration. Higher Shopify Payments adoption means more of the platform's total GMV flows through Shopify's own rails, which directly grows revenue.
The metric to watch here is the Shopify Payments penetration rate, meaning what percentage of GMV runs through Shopify Payments versus third-party processors. This rate has been climbing steadily as Shopify expands Payments to more countries and more merchants opt in for the simplicity. Every percentage point increase in penetration translates to meaningful incremental revenue without adding a single new store.
Payment Processing Take Rate: The percentage of each transaction that Shopify keeps as revenue from payment processing. You can estimate this by dividing Shopify Payments revenue by the GMV processed through Shopify Payments. It helps you gauge how efficiently Shopify monetizes transaction volume.
What about revenue beyond payments? Shopify Capital, Shipping, and the App Store
Shopify has been steadily layering on additional merchant services, and each one adds a new Shopify revenue stream tied to merchant activity rather than just merchant count.
Shopify Capital provides cash advances and loans to merchants based on their sales history on the platform. Shopify has a unique data advantage here: it can see a merchant's real-time revenue, making credit risk assessment faster and more precise than traditional lenders. Revenue comes from the fees and interest on these advances. This is a high-margin business when loss rates stay controlled.
Shopify Shipping offers merchants discounted shipping rates through negotiated carrier partnerships. Shopify earns revenue on the spread between what it pays carriers and what it charges merchants. As Shopify's merchant base grows, its negotiating leverage with carriers improves, which can widen that spread over time.
The Shopify App Store and themes marketplace generate referral revenue. Third-party developers build apps and themes for Shopify merchants, and Shopify takes a cut of each sale. This is an ecosystem play: the more useful the app store becomes, the stickier the platform gets, and Shopify earns revenue from developer activity it doesn't have to build itself.
Shopify Markets helps merchants sell internationally by handling currency conversion, duties, and local payment methods. Cross-border commerce is complex, and Shopify charges for simplifying it. This service is still relatively early in its growth curve but represents a logical expansion of the platform's value.
What's driving Shopify's growth beyond new store signups?
This is the question that separates casual observers from serious analysts. The surface-level narrative is that Shopify grows by signing up more merchants. That's partly true, but it's incomplete. Several structural drivers matter just as much, if not more.
GMV growth per merchant. As existing merchants grow their businesses, they process more volume through Shopify. This lifts merchant solutions revenue even if the total number of stores stays flat. It's the "expand" part of land and expand.
Higher attach rates for additional services. When a merchant starts using Shopify Payments, then adds Shopify Capital, then starts using Shopify Shipping, each added service increases Shopify's revenue per merchant. The attach rate for each service is a leading indicator of how well Shopify is monetizing its base.
Shopify Plus growth. Enterprise merchants pay more for subscriptions and process significantly higher GMV. Shifting the merchant mix toward larger brands lifts both subscription and merchant solutions revenue per account.
International expansion. Shopify Payments availability in new countries opens up GMV that was previously processed through third parties. Geographic expansion of Payments is one of the cleanest ways Shopify grows its take rate on existing volume.
Offline commerce via Shopify POS. Shopify's point-of-sale system extends the platform into physical retail. Merchants using both online and in-store Shopify tools process more total GMV through the ecosystem, and Shopify captures payment fees on in-person transactions too.
How to evaluate the Shopify business model as an investor
If you're researching SHOP, there are a few frameworks worth applying. You can explore the stock in more detail on the Shopify research page on Rallies.ai.
Revenue mix shift. Track the ratio of merchant solutions to subscription revenue over time. A growing merchant solutions share suggests Shopify is deepening its relationship with existing merchants, which tends to be more durable than pure customer acquisition growth.
Take rate trends. Divide total merchant solutions revenue by total GMV to get an approximate take rate. A rising take rate means Shopify is extracting more value per dollar of commerce on its platform. A flat or declining take rate might signal pricing pressure or lower-margin service growth.
Gross margin by segment. Subscription revenue carries higher gross margins than merchant solutions (payment processing has real costs). As the revenue mix shifts toward merchant solutions, overall gross margin can compress even while the business grows. Understanding this dynamic prevents misreading the financials.
Free cash flow conversion. Shopify went through a period of heavy investment in logistics and other initiatives. Watching how efficiently revenue growth translates to free cash flow tells you whether the business model is maturing or still in investment mode.
For a broader look at how to evaluate companies like Shopify, the stock analysis resource hub covers core frameworks and approaches.
How SHOP makes money compared to other e-commerce platforms
Shopify's model is different from marketplace-based e-commerce companies. A marketplace like Amazon directly intermediates between buyers and sellers, taking commissions and controlling fulfillment. Shopify doesn't own the customer relationship or the transaction in the same way. It's a software and infrastructure provider that lets merchants build their own brand and storefront.
This distinction matters. Shopify doesn't carry inventory risk. It doesn't need to win the "buy box." Its growth depends on merchant success rather than consumer acquisition. The tradeoff is that Shopify doesn't capture as much per transaction as a marketplace, but it also doesn't bear the same operational complexity or capital intensity.
Compared to other e-commerce software providers, Shopify's edge is ecosystem breadth. Payments, capital, shipping, app store, POS, international tools: the integrated stack is hard to replicate piecemeal. Merchants who use multiple Shopify services are unlikely to leave for a competitor that only offers one or two of them.
What about profitability?
Shopify's path to sustained profitability has been a topic of debate. The company has historically prioritized growth and reinvestment over margins. Investors evaluating the stock should focus on whether gross profit dollars are growing (they have been) and whether operating leverage is starting to show up as the company scales past its heaviest investment phase. If you want to dig into the numbers yourself, tools like the Rallies.ai Vibe Screener let you filter for profitability and growth metrics across companies.
Try it yourself
Want to run this kind of analysis on your own? Copy any of these prompts and paste them into the Rallies AI Research Assistant:
- Break down how Shopify makes money — what are their main revenue streams, how do merchant subscriptions compare to payment processing fees, and what's driving their growth beyond just more stores signing up?
- Break down how Shopify makes money — what are their biggest revenue streams and what's growing fastest?
- Walk me through Shopify's take rate on GMV and how it has trended as Shopify Payments penetration increased. What does this mean for future revenue growth?
Frequently asked questions
How does Shopify make money from merchants who use the free trial?
Shopify doesn't earn meaningful revenue during free trial periods. The trial is a customer acquisition tool designed to get merchants building on the platform. Revenue begins when merchants convert to a paid subscription plan. From there, Shopify earns additional revenue as merchants adopt payment processing and other services.
What is Shopify's largest revenue stream?
Merchant solutions, which includes Shopify Payments, Shopify Capital, shipping, and app store referral fees, is the larger of Shopify's two revenue segments. Within merchant solutions, payment processing generates the most revenue. This segment has grown faster than subscriptions as more merchants adopt Shopify's integrated tools.
How does the Shopify business model differ from Amazon?
Shopify is a software platform that helps merchants run their own independent stores. Amazon is a marketplace where sellers list products alongside millions of other sellers. Shopify merchants own their customer relationships and branding. Amazon controls the buyer experience and often competes with its own sellers. The revenue models reflect this: Shopify earns subscription fees and service fees, while Amazon earns marketplace commissions, advertising revenue, and fulfillment fees.
What are Shopify revenue streams beyond subscriptions and payments?
Shopify also earns from Shopify Capital (merchant lending), Shopify Shipping (discounted carrier rates with a markup), referral fees from the App Store and themes marketplace, Shopify Markets (cross-border commerce tools), and Shopify POS (in-person retail hardware and software). Each of these services ties revenue to merchant activity rather than just merchant count.
Does Shopify take a percentage of each sale?
If a merchant uses Shopify Payments, Shopify charges a payment processing fee on each transaction, which is a percentage plus a small fixed amount. Merchants who use third-party payment processors instead pay Shopify a separate transaction fee on top of whatever their processor charges. Either way, Shopify earns something on most transactions processed through its platform.
How does SHOP make money from Shopify Plus?
Shopify Plus is the enterprise-tier plan designed for high-volume merchants and large brands. It charges higher monthly subscription fees, often through custom contracts. Plus merchants also tend to process significantly more GMV, which means Shopify earns more from payment processing and other merchant solutions. Plus accounts are disproportionately valuable on a per-merchant basis.
Is Shopify profitable?
Shopify has reached profitability on a GAAP basis after years of prioritizing investment and growth. Investors should look at both gross profit trends and free cash flow generation to assess the durability of profitability. The mix shift toward merchant solutions, which carries lower gross margins than subscriptions, means headline margin improvement can look slower even as total profit dollars grow. You can review Shopify's financial metrics on the SHOP research page.
Bottom line
Understanding how Shopify makes money comes down to two pieces: sticky subscription revenue that forms the platform's foundation, and a growing merchant solutions business that captures more value from every dollar of commerce flowing through the ecosystem. The Shopify business model rewards the company when its merchants succeed, which aligns incentives in a way that many investors find compelling.
If you want to go deeper on evaluating companies like SHOP, the frameworks in the stock analysis section are a solid starting point. And for hands-on research, the Rallies AI Research Assistant can help you break down business models, compare revenue streams, and stress-test your investment thesis.
Disclaimer: This article is for educational and informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other type of advice. Rallies.ai does not recommend that any security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. Before making any investment decision, consult with a qualified financial advisor and conduct your own research.
Written by Gav Blaxberg, CEO of WOLF Financial and Co-Founder of Rallies.ai.