Shopify Inc. (SHOP) Cash Flow Statement

The OCF/NI ratio swung from -0.83 in 2026Q1 to 0.44 in 2026Q2, indicating that reported profits are not fully translating into cash. This divergence appears driven by large non-cash gains or losses, as operating cash flow remained relatively stable around $658M while net income jumped to $1.5B. Investors should monitor whether this gap persists, as it may signal that earnings are increasingly reliant on non-operating items.

The FCF margin has trended upward over the past ten quarters, reaching 18.3% in 2026Q2, which suggests that Shopify's operating leverage is translating into cash. However, the sequential dip from 19.5% in 2025Q4 to 18.3% in 2026Q2 warrants attention, as it may reflect increased working capital needs or investment in growth. Overall, the trajectory appears positive, with FCF growing faster than revenue in recent quarters.

With capex consistently below $10M per quarter, Shopify's capital intensity is exceptionally low, allowing nearly all operating cash flow to convert to free cash flow. This suggests that the company does not require significant fixed asset investment to support growth, which is typical for software platforms. The minimal capex also implies that depreciation is not a major cash drag, and the company can allocate more cash to strategic initiatives.

The persistent negative working capital changes, particularly -$70M in 2026Q1 and -$72M in 2024Q2, suggest that as revenue grows, Shopify is tying up more cash in operating assets. This may be due to expanding merchant solutions and payments, which likely increase receivables. While the drag is modest relative to operating cash flow, it could intensify if growth accelerates, and investors should monitor collection efficiency.

The initiation of significant buybacks, totaling $1.9B over the last two quarters, suggests that management believes the stock is undervalued or that cash reserves are ample. This deployment comes despite no dividends, indicating a preference for buybacks as a tax-efficient return method. The scale of buybacks relative to free cash flow (over 200% in 2026Q2) implies that Shopify is using balance sheet cash, which may reduce financial flexibility if sustained.

The $1.6B cumulative excess of operating cash flow over net income suggests that reported earnings are conservative, likely due to non-cash charges like stock-based compensation and depreciation. This divergence is a positive signal for cash flow quality, as it implies that the company is not relying on aggressive accruals to boost earnings. However, the recent quarter's reversal (OCF below NI) may indicate a shift, and investors should watch if this trend continues.