Shopify Inc. Class A subordinate voting sharesSHOP

Supply chain and procurement · Supplier operation and dependance

We currently rely on two suppliers to provide the technology we offer through Shopify Payments. At present, we have payment service provider agreements with Stripe, Inc. and PayPal, Inc. and their respective affiliates. Any disruption or problems with our Payment Service Providers or their services could have an adverse effect on our reputation, results of operations and financial results.

Human capital and workforce · Talent acquisition and retention

If we are unable to attract, retain and motivate qualified personnel or maintain and continue to evolve our corporate culture, our business will be harmed. Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. Our ability to identify, hire, develop, motivate and retain qualified personnel will directly affect our ability to maintain and grow our business.

Core operations · Quality control and product defects

If our software or hardware contain undetected errors or defects, our business, financial condition and results of operations could be adversely affected. The software underlying our platform is complex and, despite internal testing, may contain errors, defects, security vulnerabilities or software bugs that are difficult to detect and correct.

Core operations · Capacity utilization and efficiency

We may be unable to achieve or maintain data transmission capacity. Our merchants often draw significant numbers of buyers to their shops over short periods of time, including from events such as new product releases, holiday shopping seasons and flash sales, which significantly increases the traffic and volume of transactions processed on our platform.

Digital transformation and innovation · Integration and interoperability

The success of our platform depends, in part, on our ability to integrate third-party apps, themes and other offerings into our third-party ecosystem. Third-party developers and partners may change the features of their apps, themes and other offerings or alter the terms governing the use of their offerings in a manner that is adverse to us and our merchants.

Digital transformation and innovation · Technology obsolescence and evolution

Our business and prospects would be harmed if changes to technologies or new versions or upgrades of operating systems and internet browsers adversely impact the process by which merchants and buyers interface with our platform and other product offerings.

Digital transformation and innovation · Artificial intelligence and automation

Our use of AI and machine learning may present additional risks, including risks associated with the use of AI algorithms and tools, the data sets used to train AI-powered models, the content produced by AI and the complex, developing regulatory environment. Shopify does not currently develop its own foundational AI models. Instead we incorporate AI-powered tools and capabilities licensed from third parties into select merchant products.

Strategic execution · Geographic expansion and market entry

Our limited operating history in new and developing markets and new geographic regions may increase the risk that our growth and expansion efforts will not be successful. We operate in new and developing markets that may not develop as we expect and elements of our business strategy are new and subject to ongoing development.

Market position and competition · Competitive pressure and market share loss

Our business is highly competitive. We may not be able to compete successfully against current and future competitors. We face competition in various aspects of our business and we expect such competition may intensify in the future, as existing and new competitors introduce new services or enhance existing services and as our business continues to evolve and expand into new areas.

Innovation and product development · Intellectual property protection and infringement

We may also become subject to claims, lawsuits (including class action or individual lawsuits), government or regulatory investigations, inquiries or audits and other proceedings. Third parties have in the past asserted, and may in the future assert, that we are directly or secondarily liable because a merchant or partner offered or sold products or services that infringe intellectual property rights.

Economic and market conditions · Economic recession and downturns

A portion of our business consists of small and medium-sized businesses. Small and medium-sized businesses tend to be more susceptible than larger businesses to general economic conditions and other business-related risks, which has, and may continue to, contribute to merchant turnover. These businesses may be particularly susceptible to changes in economic conditions, including pressure from inflation, declines in consumer spending, international trade risks and/or the imposition of trade protection measures.

Geopolitical and trade · Trade policies tariffs and sanctions

These risks include, but are not limited to: burdens, complexity and potential delays involved with compliance with foreign laws and regulations and laws and regulations potentially applicable to international or cross-border operations including tariffs and customs, export controls, taxation, copyright, consumer protection, international trade, anti-money laundering, sanctions laws.

Economic and market conditions · Consumer spending and confidence

A portion of our business consists of small and medium-sized businesses. Small and medium-sized businesses tend to be more susceptible than larger businesses to general economic conditions and other business-related risks, which has, and may continue to, contribute to merchant turnover.

International and currency · International operations and emerging markets

Our business is susceptible to risks associated with international operations, including international sales and the use of our platform in various countries. We currently have merchants in more than 175 countries and we expect to continue to expand our international operations and penetration in international markets in the future.

Capital structure and performance · Financial performance volatility

We have incurred net losses in the past and we expect to make substantial investments in our business in the future. As such, we may be unable to maintain our profitability in the future. In prior years, we incurred net losses and have also had an accumulated deficit.

Credit and liquidity · Access to capital and financing

We may need to raise additional funds to pursue our growth strategy or continue our operations, and we may be unable to raise capital when needed or on acceptable terms. From time to time, we may seek additional equity or debt financing to fund our growth, enhance our platform, respond to competitive pressures or make acquisitions.

Industry regulation · Regulatory compliance and changes

Payments processed through Shopify Payments, Shop Pay Installments or payments processed or funds managed through Shopify Balance may subject us to regulatory requirements, additional fees and other risks that could be costly and difficult to comply with or that could harm our business.

Tax and financial reporting · Transfer pricing and international tax

We currently conduct activities in the United States, Ireland, Singapore and other jurisdictions through our subsidiaries pursuant to transfer pricing arrangements that require affiliated companies to deal on an arm's length basis. Tax authorities may disagree with positions we have taken and successfully challenge our transfer pricing as not reflecting arm's length principles.

Tax and financial reporting · Tax compliance and changes in tax law

Unanticipated changes in tax laws or adverse outcomes resulting from tax examinations could adversely affect our operating results and financial condition. With sales and operations in various countries, we are subject to multiple forms of taxation in many jurisdictions around the world with increasingly complex tax laws.

Reputation and brand · Social media and digital reputation

We receive media coverage globally. Any unfavorable media coverage or negative publicity about our industry or our company including, without limitation, the quality and reliability of our platform, our level of customer service, privacy and security practices, product changes, our business operations, litigation, or regulatory activity could seriously harm our reputation.