Weekend Update #265
Thank you for your continued support and engagement. Each week, we're sharing what companies we're researching and the what, the who and the how that we think makes the companies interesting and unique. This roundup is brought to you weekly by a group of interns, creative minds, artists and investors who believe that through best in class investing along with the democratization of financial education we can do great things together. Enjoy, Explore and Share.
Major equity indices retreated this week as fears of AI disruption across industries turned investor focus to valuation risks. Nicknamed the SaaSpocolypse, selling activity in software names has led the S&P Software & Services Select Industry Index to a 19% loss over the past month. Key economic releases in the January Nonfarm Payrolls report and CPI report were both positive views of underlying U.S. activity, but the readings were overshadowed by software pressure. While this data should enable Fed Chair Powell and incoming Chair Warsh to continue with the rate cutting cycle, significant debate persists around the neutral rate and an adequate federal funds rate to protect from inflationary risks over the coming year.
NFIB’s Small Business Optimism report for January fell below expectations as expectations for economic conditions fell and hiring plans fell to the lowest level since May 2020. Retail Sales data for December disappointed, showing no month-over-month growth as holiday discounts and selective consumers were headwinds to growth. Nonfarm Payrolls for January showed the U.S. added 130,000 jobs, double the median economist estimate, led by Education & Health Services, Professional & Business Services, and Construction industries. The Labor Force Participation Rate increased to 62.5% while the U-3 Unemployment Rate decreased to 4.3%, both indications of labor market improvement to the start of the year. Meanwhile, Average Hourly Earnings grew by 3.7% year-over-year, which was one of the three lowest monthly growth rates since May 2021. Initial Jobless Claims for the week ended February 7 fell to 227,000, continuing a downward trend from the September 2025 peak. Existing Home Sales for January were 3.91 million, the lowest monthly level since September 2024 and posting the biggest monthly drop since February 2022. The January CPI report was the biggest positive surprise for the week, with headline metrics growing 0.2% month-over-month and 2.5% year-over-year, both below economists’ estimates. The slowdown in price growth was driven by moderating housing costs and falling gasoline prices in the month.
With a host of earnings calls for investors to digest this week, some of the biggest gainers following earnings were Coinbase, Arista Networks, Applied Materials, Spotify, Datadog, Vertiv, and Vertex. Meanwhile, stocks suffering from post-earnings selling pressure were Zillow, Draftkings, Humana, Applovin, and Pinterest. In addition to the SaaSpolalypse fears, Japan’s snap election was also in focus this week, as Prime Minister Sanae Takaichi’s party won the most parliament seats since World War II. Trading of dollar-denominated Japanese yen has increased in volatility around speculation of FX intervention, which can have spillover effects to U.S. markets. The recent yen strengthening has been the strongest since early 2025, and U.S. dollar traders are awaiting further clarity on the direction of policy as the dollar is close to 4-year lows. Next week, the December PCE report will be in focus, as the Federal Reserve’s preferred inflation metric should give more insight into the future interest rate path.
Friday’s Close (Weekly Performance)
S&P 500 6,836.17 (-1.39%)
Nasdaq 22,546.67 (-2.10%)
Dow Jones 49,500.93 (-1.23%)
Thank you Blue Room Senior Analyst JARED FENLEY.
Company Participants
Brian Armstrong — Co-Founder and Chief Executive Officer
Alesia Haas — Chief Financial Officer
Anil Gupta — Vice President of Investor Relations
Brian Armstrong — Co-Founder and Chief Executive Officer
Bitcoin remains the best performing asset class of the past decade. We've been through cycles like this many times at Coinbase, and adoption continues to grow, regulatory clarity is on the horizon, and I'm more bullish than ever. Moreover, we've successfully diversified the business withe stablecoins, subscription and services revenue, and now trading of other asset classes like stocks, prediction markets, and commodities means our revenue is less correlated to crypto price fluctuations.
We launched the Everything Exchange in Q4 and are seeing early signs of success. Global trading volume and market share doubled year-over-year, reaching new all-time highs. Just last week, as crypto prices fell, gold and silver futures drove record notional volume on our exchange. We hit our highest 24-hour trading volume in over a year, in fact. Coinbase set a new transaction all-time high, with AI agents adopting stablecoin wallets. Base is quickly establishing itself as the on-chain home for the on-chain home for AI.
So looking ahead, our strong balance sheet and progress on the Everything Exchange gives us the ability to continue investing in these market conditions. We'll keep buying Bitcoin, we'll continue to buy our stock back, and we won't stop building.
Now, I want to talk about how we're going to win in 2026. Financial services is a massive industry and there's multiple trillions of dollars of revenue up for grabs. Crypto is updating the financial system from trading to payments to lending, and Coinbase is the best positioned company in the world to capitalize on this transformation. Here are four reasons why.
Number one, we store more crypto than any other company. We're the most trusted brand in crypto, and we work with thousands of institutions, including five G-SIB banks and 150 government agencies. Just as one example, we store 12% of all crypto in the world, more than the next four competitors combined. Assets on platform has grown about 3x over the past three years. And these assets are very sticky as we connect more products into them. So that's the first reason.
Company Participants
Harley Finkelstein — PresidentJ
eff Hoffmeister — Chief Financial Officer
Carrie Gillard — Director of Investor Relations
Conference Call Participants
Colin Sebastian — Baird
Keith Weiss — Morgan Stanley
Ken Gawrelski — Wells Fargo
Martin Toner — ATB Cormark Capital Markets
Paul Treiber — RBC Capital
Shweta Khajuria — Wolfe Research
Tim Chiodo — UBS
Harley Finkelstein — President
Thanks, Carrie, and thanks to everyone here for joining us. We've got a lot to talk about today. First, we'll talk about 2025. It was another year of durable growth, faster product shipping, and disciplined cash generation. We'll also talk about Q4 in particular, which delivered the highest quarterly revenue in Shopify's history and saw huge names from across all industries join the platform, from General Motors to Sonos to L'Oreal to the Bettiton Group to Keurig Dr Pepper to Amer Sports, who owns incredible brands like Wilson, Solomon, and Peak Performance, all moving to Shopify. And we'll talk about where Shopify is heading in 2026.
But before we get into the details, I want to start by doing something a little bit differently this time, because this year is not like any other year. I want to repeat something that Toby said back in May 2015 on the day that Shopify became a publicly-traded company. He said this:
“Shopify will be the only platform needed to build an empire. By the time we're done, we will have created the new normal.”
Well, don't worry, we are far from done. But this quote perfectly captures both where Shopify is today and what you can expect to see from us next. Let me explain. Tobi said Shopify will be the only platform needed to build an empire. Well, we believe that 2025 marked an inflection point in that goal.
Empires are now being built every single day on Shopify. Brands like FIGS, and Gymshark, and Skims that were all born on the platform hit over 1 million orders well inside of a decade. And then there's some like Comfort that have done it in less than five years. That is remarkable. Toby's vision might have sounded bombastic in 2015, but a decade later, it is reality for millions of entrepreneurs.
Now in that same quote, he also said, “by the time we're done, we will have created the new normal.” Well, 2026 is about to show the world what he meant by that. The AI era has now reached commerce and you're about to see what that looks like at scale. You're seeing the start of this new normal. And when Tobi said we would be the ones creating it, he was not exaggerating. Shopify was built for this moment.
No one, and I mean no one is better-positioned to lead-in this new era. We've spent decades building the infrastructure that allows every type of merchant to thrive. We have trillions of data points from billions of transactions across millions of merchants. Simply put, we believe we have a more diverse commerce dataset than almost anyone else on the Internet. And of course, data is what AI is fueled by. This is an enormous advantage, and it's also a real responsibility, and it's not one we take lightly.
You may have seen that we just announced the Universal Commerce Protocol, or UCP that we co-developed with Google. That means that we are literally setting the standard on how the world will shop with AI. We've also added more integrations so our merchants will be able to sell on every major AI platform, and we've launched a product to power AI shopping for brands that aren't even on Shopify yet.
As you know, Shopify will always bias towards long-term sustainable growth, and we are not afraid to make big bets where we see opportunity. Well, that's what we did here. And this year is when those bets show up. More on that in a minute.
But first, let's get into the results we drove in 2025. I'm going to talk a lot about growth here because, first and most importantly, we are a growth company. And second, growth across all areas of our business in 2025 has been remarkable. But here's the thing, it was not growth at any cost. We grew profitably just as we said we would, and we scaled with discipline. Our free-cash flow exceeded $2 billion in 2025, delivering another year of consistent free-cash flow margin. This is what building a generational company looks like.
Now here's the headline — In 2025, GMV was up 29%, hitting $378 billion, and revenue topped $11.5 billion, up 30%, accelerating from 2024's growth of 26%. Now, let's pause on that for a moment. Putting up these kinds of top-line growth numbers at our size is incredibly hard, and it is not common. And we have been growing at this rate for as long as I can remember. In fact, since we IPOed in 2015, we've grown our revenue over 20% every single year. That is what durable growth at-scale looks like. And that scale is consistently compounding quarter-after-quarter. Q4 was our first-ever quarter of revenue above $3 billion. That's more than all of our revenue in 2020. Let me repeat that. We just did more revenue in a single quarter than the entirety of 2020.
Our growth philosophy is simple and effective. We win more merchants to sell for, we build more services for them to sell on, and we attract more buyers for them to sell to. And here's how that played out in 2025. Revenue in our largest market, North America, was up 28%, and we now power more than 14% of the U.S. e-commerce market. We welcome huge names like Estee Lauder Companies, Starbucks, Coach, Michael Kors, Burton Snowboards, e.l.f. Cosmetics, Toys R Us, and Goop. And new merchants continue to come from all corners of commerce, from Follett Education who manages campus bookstores across America, to the iconic snack brand Welch's, and even the sports-betting company FanDuel. That is a seriously diversified mix of brands.
And our international merchant base grew even faster. Revenue was up 36% year-over-year, and nearly half our merchant base is now located outside of North-America. We welcome huge global brand names like Caring Beauty, which is the beauty division of Alexander McQueen, Valencia Aga and Creed, Karl Lagerfeld, MiLa, JW Anderson, Stoka, and UGG Australia, plus new signings from names like L'Oreal and TopShop in Q4 alone.
Company Participants
Anthony Wood — Founder, Chairman and Chief Executive Officer
Charlie Collier — President, Roku Media
Dan Jedda — Chief Financial Officer
Conrad Grodd — Vice President, Investor Relations
Analyst
The first one, can you help us bridge the 1Q revenue outlook of over 21% growth to the full year outlook of about 18% growth?
Anthony Wood — Founder, Chairman and Chief Executive Officer
I'll kick this off and then turn it over to Dan, who can talk more about the outlook. So let me just start by taking a minute to reflect on our execution over the past several years. In 2023, our priority was to rightsize our cost structure and reach adjusted EBITDA breakeven in 2024, and we achieved that goal a full year ahead of schedule. And this early progress positioned us to invest further in our platform monetization initiatives. As a result, in advertising, we deepened integration with leading demand-side platforms and scaled our measurement and performance capabilities. In subscriptions, Q4 was our biggest quarter ever for premium subscription net adds. We expect to add more Tier 1 partners and rollout bundles this year, and we plan to expand Howdy beyond Roku and take it to additional platforms.
So these initiatives are paying off for us. We grew platform revenue 18% in 2025 and we accomplished all of this while growing our streaming households both in the US and globally. Looking ahead to 2026 and beyond, we're confident in our ability to sustain double-digit platform revenue growth while continuing to grow profitability.
So with that introduction, let me turn it over to Dan.
Dan Jedda — Chief Financial Officer
Thanks, Anthony, and thanks for the question.
Let me just add a little bit to what Anthony said. Exactly two years ago, when we were entering 2024, we said that now that we rightsized our cost structure, we would relentlessly focus on growing our platform revenue, improving our monetization, and driving profitability, including free cash flow. In Q4, we grew platform revenue over 18%, surpassing $1.2 billion, we achieved adjusted EBITDA of $169 million and net income of $80 million. All were records for us.
For full year, we also grew our platform revenue 18%, achieved adjusted EBITDA of $421 million, which represents a margin expansion of 255 basis points, and we generated free cash flow of $484 million, also a record for us and over 100% year-over-year growth. With our strong free cash flow, we purchased $150 million of ROKU stock through our share buyback program and achieved near 0% dilution for Q4, the lowest dilution we have ever reported. This year, our outlook for platform revenue growth is more than 21% in Q1 and 18% for full year, as we continue to execute on our monetization initiatives. Our full year adjusted EBITDA guidance of $635 million represents over 50% year-over-year growth and margin expansion of 267 basis points to 11.6%.
I expect that free cash flow will again be above adjusted EBITDA as we remain CapEx light, and it's also worth noting that we have over $1 billion of a deferred tax asset, which will keep our cash taxes low for many years. I see our free cash flow continuing to be strong and outpacing EBITDA beyond this year. In fact, I see a path to over $1 billion in free cash flow by the end of 2028, if not sooner, which will be a significant milestone for us.
We have incredibly strong momentum going into 2026 and our focus is on sustaining growth. So to get to your question specifically on Q1 versus full year, a few factors are shaping our Q1 outlook. First, Q1 last year was our easiest comp at just under 17% year-over-year. Second, Q1 of this year includes the full benefit of Frndly. As you recall, we closed that acquisition in Q2 of last year. And I guess, finally, we have stronger visibility into Q1 versus the second half of the year. So as we gain better visibility into Political and into H2, we'll provide updated guidance.
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