Earnings Call Transcript - GLBE Q4 2025

Operator, Operator

Good morning. Welcome to the Global-E Fourth Quarter and Full Year 2025 Earnings Call. This call is being simultaneously webcast on the company's website in the Investors section under News and Events. For opening remarks and introduction, I will now turn the call over to Alan Katz, Global-E's Head of Investor Relations. Please go ahead.

Alan Katz, Head of Investor Relations

Thank you, and good morning, everyone. With me on the call today are Amir Schlachet, Co-Founder and Chief Executive Officer; Ofer Koren, Chief Financial Officer; and Nir Debbi, Co-Founder and President. Amir will begin with a review of the business results for the fourth quarter and full year of 2025. Ofer will then review the financial results for the fourth quarter and full year in more detail, followed by the company's outlook for 2026. We'll then open the call for questions. Before I read the forward-looking statements, I'll note that we have posted an Excel-based metrics file on our IR website. This provides historical data for both financial information and KPIs that may be helpful as investors are researching the company. Please feel free to let me know if you have any feedback on this document. Moving on, certain statements we make today may constitute forward-looking statements and information within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including, without limitation, statements regarding our future results of operations and financial position, growth strategy and plan, and objectives of management for future operations, including onboarding new merchants, expanding our offerings and introducing and integrating new solutions are forward-looking statements. These forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including those set forth in the section titled Risk Factors in our annual report on Form 20-F filed with the SEC on March 27, 2025, and other documents subsequently filed with or furnished to the SEC. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this call. You should not put undue reliance on any forward-looking statements. Except as required by applicable law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. Please refer to our press release issued today, February 18, 2026, for additional information. In addition, certain metrics we will discuss today are non-GAAP metrics. The presentation of this financial information is not intended to be considered in isolation from, as a substitute for or superior to the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. For more information on these non-GAAP financial measures, please see the reconciliation tables provided in our press release issued today. Throughout this call, we will provide a number of key performance indicators used by our management and often used by competitors in our industry. These and other KPIs are discussed in more detail in our press release issued today. I will now turn the call over to Amir, our Co-Founder and CEO. Amir, please go ahead.

Amir Schlachet, Co-Founder and CEO

Thanks, Alan, and welcome, everyone, to our fourth quarter and full year 2025 earnings call. 2025 was another record-breaking year for Global-E, in which we surpassed our guidance, both for the fourth quarter and on an annual level across all parameters from top-line revenue down to adjusted EBITDA. 2025 was a very successful first year of our multiyear strategic plan, which we laid in front of you at our Investor Day in March as we continue to execute on our strategy and further solidify our leadership position in the global e-commerce enablement space. We believe that our outstanding results in 2025, coupled with the guidance we are providing today for 2026, showing acceleration in revenue growth from 27.8% in 2025 to close to 30% in 2026, in parallel to significant bottom line margin expansion driving our adjusted EBITDA margin to 21.9%, are all a testament to the durability of our business model and to our confidence in our ability to uphold our long-term strategic goals. Furthermore, as we look beyond 2026 to the subsequent years of our multiyear strategic plan, given the enormous opportunity that lies ahead of us with a massive TAM that is still mostly greenfield and the increase in demand for our services due to the growing complexity in the global tariff landscape, we believe that our business momentum, our market and product leadership position and our various business development vectors will enable us to continue to deliver against our multiyear financial targets in the years to come across all parameters. In fact, given the strong ending to 2025 and the forward-looking outlook that we are laying out today, we believe we are slightly ahead of our multiyear plan with lots of room for growth ahead of us. Back to last quarter's results. Our merchants had a very strong holiday sales period, including the Black Friday and Cyber Monday weekend, and we achieved our first-ever $1 billion GMV month in November of 2025. When I think about the fact that our total annual GMV for 2020, just 5 years ago, was $774 million, transacting over $1 billion in a single month is quite an achievement. It is a tribute to the tireless efforts and meticulous execution of all our amazing team members here at Global-E. Looking at the full quarter, Q4 was our strongest quarter ever and came in well above our guidance ranges on all metrics. We finished Q4 with a record $2.36 billion in GMV, with GMV growth accelerating to over 37% year-on-year. Revenue growth accelerated as well to 28% year-on-year, totaling $337 million in the quarter. In terms of profitability, our non-GAAP gross profit margin for Q4 was 46.8%, up 80 basis points from the same quarter of last year. And our Q4 adjusted EBITDA was $87.2 million, up 53% year-on-year for a 25.9% margin, and almost 420 basis points increase compared to the same quarter last year. In terms of the full year, 2025 was, first and foremost, another year of fast growth. GMV for the year came in at approximately $6.57 billion, up 35% with revenues for the full year at $962 million, up 28% and with adjusted EBITDA at $198.5 million, representing a 41% growth rate and a 20.6% margin for the full year. Our strong profitability growth was driven by the strong top line growth and operational leverage, partly as a result of AI deployment across different functions and processes within Global-E, coupled with our commitment to and track record of cost control and utilization of efficiencies of scale throughout the various parts of our business model. 2025 was also our first full year of GAAP profitability with a GAAP EPS of $0.39. This is another incredible milestone for us as a company, and we expect to remain GAAP profitable in future years as well. We continue to be a highly cash-generative business. We are reinvesting this cash to drive growth both organically and through strategic acquisitions as well as returning excess cash to shareholders via our share buyback program, as part of which we have already completed $72 million in share repurchases within Q4 of 2025. Moving on and before I go through our recent merchant launches, I would like to provide you with a few key updates regarding our business and our offering. First, we are seeing good initial traction with the launch of Shopify Managed Markets version 2.0, the new iteration of our white label self-service merchant of record solution on Shopify. With this exciting new build, managed markets is now fully integrated into Shopify Payments, enabling much more harmonization between global and domestic financial and operational flows, along with faster payouts, enhanced control over global product availability and compliance and more. The product is working as expected, and both us and Shopify are pleased with the progress to date. I'm also happy to say that we are working with Shopify to expand the offering to additional countries in the coming quarters as well as on many exciting new features and enhancements. With the 2.0 build out there and starting to gain traction, we believe that trading volumes on this new and innovative offering will pick up throughout the year. Second, on our Q3 call, I discussed our duty drawback offering, an important value-added service designed to enable merchants to potentially reclaim import duties on goods that are exported outside their home base as well as reclaim certain tariffs paid on return goods, depending on the sales parameters. With the rapidly changing tariff environment in the U.S. and Europe as well as in other areas of the world, we are now doubling down on this offering, which provides crucial pricing and profitability advantages for our merchants. Last quarter, we got the permit to offer import duty drawback to our U.S.-based merchants for goods that are exported out of the U.S. to international customers, further supporting them in optimizing their cost of trade in times of change. This attractive new offering is now made available for all eligible U.S.-based merchants. During the fourth quarter, we continued to make good progress also on our borderfree.com offering. We saw further growth in shopper sign-ups as well as a significant increase to the share of merchant sales attributable to the borderfree.com channel, which stands now at over 6% for merchants that are utilizing borderfree.com. Lastly, as discussed last quarter, we continue to view AI as a meaningful lever for growth, service level enhancements and efficiencies across our business. There continues to be a lot of focus across the organization on identifying and deploying use cases for AI-driven platform enhancements, restructuring some of our services and building additional ones to provide faster, better and more efficient services for the benefit of our merchants. Overall, given our unique merchant of record business model that combines trade compliance solutions and licenses, a unique data asset, robust global payments infrastructure, physical fulfillment frameworks and post-purchase services, all at scale, we view AI as a very positive factor for our business and as a driver of durable value creation over time. Let me provide you with a few examples on how we are already integrating AI into our operating model, how it's beginning to influence our sales and merchant acquisition efforts and what we are seeing as agentic commerce continues to emerge. Internally, we are leveraging AI across the organization to drive efficiencies and optimize the impact of our resources. We're seeing faster turnaround times in R&D with entire features and in some cases, even entire subsystems already designed, developed, tested and deployed through Vibe coding, speeding up time to market for new features and enhancing the efficiency of our R&D. These efficiencies are already evident in our numbers as 2025 saw around 70 basis points of reduction in our R&D spend as a percentage of revenue. We plan to continue on this path and as such, intend for all our massive growth in activity planned for 2026 to be carried out by the existing R&D team without any meaningful increase in headcount. LLM-based tools are also helping us day in and day out to speed up and automate daily tasks as well as to organize, update and deploy know-how and business information across different departments in the organization like was never possible before. A good example of this would be our internally developed and highly successful customer service chatbot. For more than 2 years now, this chatbot has been handling larger and larger portions of our incoming customer inquiries in near real time to the satisfaction of the end customers and without a need for human escalation. We are also relying on AI in our newly launched full-site localization offering. This in-house developed LLM-based value-added service allows merchants to easily and seamlessly translate the entire content of their website into different languages, including language and pricing embedded on graphic content, while ensuring full coherency across the entire customer journey throughout the browsing, checkout and post-purchase phase. We are just launching the first 2 merchants on this new service and believe more will join in the coming quarters. Another area in which we are increasingly deploying AI-based capabilities is around product classification and restrictions management. Our proprietary LLM-based tool can now classify large product catalogs, assigning the correct customs HS code to products faster with built-in iterative learning feedback loops, achieving constantly growing levels of accuracy. Such improved processes across R&D and G&A should help us to manage and optimize spend, which in turn would contribute to the adjusted EBITDA margin expansion we expect to see through 2028. We are also applying AI to significantly enhance our sales efforts, and I believe this is a particularly compelling use case. As a reminder, our consultative sales approach requires an understanding of merchant-specific value drivers, product nuances and geographic priorities, among other things, in order to deliver the conversion improvements we are known for. Until recently, each prospect opportunity required expert research, qualification and enrichment by our BDE team before any reach out is made by a salesperson. Seeking to greatly expedite this process, during the fourth quarter, our internal innovations team developed and refined a proprietary agent built in-house from the ground up that uses AI and a broad set of data sources and signals to support these efforts. Based on a large set of factors such as site traffic, vertical, product mix, average order value, current global e-commerce poster, and more, the system is able to identify these prospect merchants and qualify opportunities with immediate high confidence value. With the system operating at scale, we are now able to fill the top of the sales funnel at a combination of speed and quality that was unimaginable prior to the AI revolution. As such, we are already seeing a meaningful increase in the number of demos run per month, which is expected to rise even further after we field the next evolution of the system, which the team is already working on. This next iteration will add an AI agent that will automate the initial recharge process with a highly tailored and customized approach. While still early, we're encouraged by the initial results and excited about the potential impact on our new merchant acquisition pipeline. Lastly, on AI. In terms of the e-commerce market dynamics, we are seeing a steep increase in traffic originating from AI-based chats, albeit from a low base. We expect to see AI-based chats continuing to grow over time as a discovery channel for our brands, and we are working through our various e-commerce platform integrations to provide seamless support for our merchants' global discovery efforts through this increasingly important channel. We have also made sure that through our integrations to the different e-commerce platforms, we are geared to support agentic commerce transactions utilizing our platform capabilities behind the scenes and have already seen a small number of transactions done utilizing these capabilities. The same holds for the newly released UCP or Universal Commerce Protocol co-created by our partners at Shopify together with Google. We view all these developments as additive to our opportunity set, supporting our merchants trading through more D2C channels everywhere around the world. As merchants look to extend agentic workflows into cross-border commerce, the underlying complexity of their global transactions increases materially, making our merchant of record services ever more valuable for them. Besides these many exciting developments, in Q4, we also saw many new brands joining the platform and going live across all geographies. In North America, we launched with prominent brands such as Nadine Merabi, Laura Geller, PopSockets, and Parcel. In Europe, we launched all three iconic brands of the French SMCP Group - Sandro, Maje, and Claudie Pierlot - as well as other leading French brands such as Maison Alaia from Richemont Group, Satisfy Running, and Jerome Dreyfuss. We launched Stella McCartney and Amina Muaddi in Italy; Food Arc, Dunhill, and Graff in the U.K.; multiple Scandinavian brands such as Softwood from Sweden and FITJEANS from Norway; and also went live with Prusa, the largest maker of 3D printers in Europe, which is based in the Czech Republic. In APAC, too, we launched with many brands during the quarter, including Tuttio, a seller of high-performance e-bikes out of Hong Kong, J&Co from Singapore, Verish and K-EDO from South Korea, and VESTIRSI from Australia. We also went live with multiple Japanese brands such as Remy, Danton, and Sanyo, probably best known for its Hello Kitty character. Besides new merchant launches, Q4 also saw the expansion of our business with a number of brands, including Logitech, which became the first to launch on a new integration with the TikTok Shop marketplace; Zimmermann, the iconic Australian high-end women's fashion brand, which now uses Global-E also into the EU and the U.S.; and Karl Lagerfeld, Pokemon, Tom Ford, Soeur, and Marc Cain, all of which added support for additional lanes during the quarter. One of the main topics, which were and continue to be top of mind for all merchants is the issue of global tariffs and the challenges posed by them. In 2025, we have witnessed tremendous changes in the global tariff landscape, mainly driven by changes in the U.S. tariffs and changes to personal import de minimis. As expected, this created some pressure on trading volumes in the short term, especially concerning trading into the U.S. However, as we anticipated, this had a positive effect on our pipeline and subsequently on our growth in the midterm as reflected in our Q4 2025 growth figures and in our strong outlook into 2026. As the tariff landscape is expected to remain dynamic, most notably with the EU de minimis removal and tariff changes, we believe our platform, especially with regards to its merchant of record trade compliance and optimization capabilities, is making our offering even more critical for merchants into the future. Ofer will go through our detailed results and our financial outlook for 2026 in a moment. But before that, as we wrap up 2025, I do want to take a minute to acknowledge the tremendous performance from our team despite the challenges and uncertainties in the global consumer markets that we all faced throughout 2025. We believe this truly speaks to the resiliency of our model. Our performance over the past 12 months has proven once again that our business brings incredible value to our merchants and that we have a huge opportunity ahead of us. I will now hand it over to Ofer to take us through the quarterly numbers in more depth and lay out our Q1 and 2026 full year guidance.

Ofer Koren, Chief Financial Officer

Thank you, Amir, and thank you all for joining us today for our earnings call. As Amir just mentioned, we achieved another quarter of strong profitable growth in Global-E and finished the year at or above the high end of our guidance in all key metrics. Our excellent performance on both the top and bottom lines led to record free cash flows, and Q4 continued to exceed the Rule of 40. We are reaffirming the multiyear targets we shared at our Investor Day earlier this year, and we believe our solid results for 2025, together with the 2026 guidance I will discuss, clearly show we are on track with our strategy to achieve our high-growth and profitability targets over several years. Before diving into the quarter's details, I want to highlight that in addition to our GAAP results, I will also cover some non-GAAP results. Our GAAP financial results and the reconciliation with non-GAAP results are available in our earnings release issued today. In 2025, we experienced another year of robust growth, driven by new merchant launches and existing merchant relationships. GMV and revenue increased by 35% and 28% year-over-year, respectively. Our non-GAAP gross profit also rose by 28%, resulting in a non-GAAP gross margin of 46.3% for the year. Adjusted EBITDA grew by 41% to $198.5 million, achieving an adjusted EBITDA margin of 20.6% for the year. Additionally, 2025 was a record year for free cash flow generation, totaling $281 million and reflecting a free cash flow margin of 29%. Throughout 2025, merchants on our platforms continued to trust us and grow with us, as evidenced by an annual NDR rate of 122% and a GDR rate of 96%. Focusing on Q4, we delivered another quarter of rapid growth and strong cash generation. GMV growth accelerated in the quarter, reaching $2.36 billion, which is a 38% year-over-year increase. This growth was propelled by strong consumer demand and some favorable foreign exchange tailwinds that supported robust same-store sales performance. The trading volumes of new merchants launched in 2025 also contributed to this growth. In Q4, our total revenue reached $337 million, an increase of 28% year-over-year. Service fee revenue was $160.9 million, up 37%, while fulfillment services revenue rose 21% to $175.7 million. The service fee take rate was 6.82%, remaining stable compared to last quarter and Q4 of 2024 as expected. The fulfillment take rate was 7.44%, slightly below expectations, driven by a higher-than-expected average order value contributing to the strong GMV. Looking at our income statement, Q4 non-GAAP gross profit was $157.5 million, up 30% year-over-year, representing a gross margin of 46.8%, compared to 46% in the same quarter last year. GAAP gross profit was $154.8 million, which corresponds to a margin of 46%. Regarding operational expenses, in Q4, we continued to invest in enhancing our platform and expanding our services while focusing on efficiency. Our R&D expense in Q4, excluding stock-based compensation, was $28.5 million, or 8.5% of revenue, compared to $24.1 million, or 9.2% of revenue, in the same period last year. Total R&D spending in Q4 was $33.1 million. We also invested in sales and marketing to support future growth. Sales and marketing expenses, excluding certain amortization expenses and stock-based compensation, were $31.7 million, or 9.4% of revenue, versus $29.8 million, or 11.3% of revenue, in the same quarter last year. Q4 sales and marketing expenses already reflect the updated 3P Shopify revenue share. Shopify warrant-related amortization expense was $8 million, which will be removed from the P&L in January 2026. Total sales and marketing expenses for the quarter were $43.8 million. General and administrative expenses, excluding stock-based compensation, were $10.8 million, or 3.2% of revenue, compared to $10.7 million or 4.1% of revenue in the same quarter last year. Total G&A spending in Q4 was $14.7 million. Adjusted EBITDA for the quarter was $87.2 million, yielding a 25.9% adjusted EBITDA margin, which is a 53% increase from $51.7 million or a 21.7% margin in the same period last year. I will discuss our 2026 guidance metrics shortly, but we are positioned well to see continued adjusted EBITDA margin expansion in 2026 in line with our long-term plan. As Amir indicated, in 2025, we achieved GAAP profitability for the full year due to our rapid growth and the significant reduction in Shopify warrants-related amortization expenses. Our net profit for the quarter was $62.5 million compared to a net profit of $1.5 million last year, with GAAP EPS at $0.35. Starting this quarter, we will also present a new non-GAAP net profit metric as detailed in our earnings release. Non-GAAP net profit for the quarter was $85.8 million compared to $52.9 million in the same quarter last year. Non-GAAP net profit per share was $0.49 on a fully diluted basis, up from $0.30 in the prior year. Moving to our balance sheet and cash flow statement, we ended 2025 with $623 million in cash and cash equivalents, including short-term deposits and marketable securities. Cash generation accelerated in Q4, with operating cash flow amounting to $216 million, compared to $129 million the previous year. For 2025, we had a solid cash generation year with free cash flow totaling $280.7 million, a 68% increase from 2024. Operating cash flow for the full year was $283.8 million. It's important to highlight that our operating and free cash flows for the quarter and the year were positively impacted by one-time favorable working capital dynamics related to a few large merchants. Generally, we expect annual free cash flows to be driven by adjusted EBITDA and typically also influenced by favorable working capital dynamics at the year-end. As Amir mentioned, by the end of Q4, we had repurchased 1.8 million shares for $72 million in the quarter and had $128 million of capacity remaining on our repurchase plan. We have continued to make progress on our repurchase plan in Q1 of 2026. Regarding our financial outlook and guidance for Q1 and the full year 2026, we expect 2026 to bring another year of strong growth for Global-E. For Q1 2026, we anticipate GMV to be between $1.705 billion and $1.745 billion. At the midpoint, this indicates a growth rate of 38.8% compared to Q1 of 2025. We expect Q1 revenue to fall between $247 million and $254 million, equating to a growth rate of 32% compared to Q1 of 2025. Lastly, for adjusted EBITDA, we project a profit between $46.5 million and $49.5 million, representing a 19.2% margin at the midpoint. For the full year 2026, we estimate GMV to be in the range of $8.45 billion to $8.80 billion, reflecting an annual growth rate exceeding 31% at the midpoint. We expect GMV growth to remain robust throughout the year. Recent months, especially the first half of Q1, showed strong same-store sales. Our guidance anticipates that same-store sales growth will return to a more normalized level for the remainder of 2026, influenced partly by subsiding FX tailwinds. However, if these growth conditions persist, we could achieve results at or even exceed the high end of our guidance range. Revenue for the full year is projected between $1.21 billion and $1.27 billion, signifying a growth rate acceleration to 29% at the midpoint. Based on this outlook, 2026 will mark our first year achieving over $1 billion in revenue, a significant milestone for any company. We are particularly thrilled that we are witnessing a reacceleration of growth at scale. We expect adjusted EBITDA and margins to expand due to our enhanced efficiencies and operating leverage. For 2026 adjusted EBITDA, we foresee a range of $259 million to $284 million, translating to nearly 37% growth at the midpoint and a margin of 21.9%. Our 2026 guidance indicates an acceleration in revenue as well as an expansion of our adjusted EBITDA margin, which is projected to place us above the Rule of 50. In summary, we are on track to meet the targets we set at our Investor Day last March, with our 2025 results and 2026 outlook positioning us slightly ahead of our multiyear plan. We anticipate strong same-store sales growth, merchant expansions, a healthy pipeline of new logos, and exciting new services that attract interest across the e-commerce sector. We look forward to another strong year in 2026. Amir, Nir, Alan, and I are now available to answer any questions you may have.

Operator, Operator

Your first question comes from the line of Will Nance with Goldman Sachs.

William Nance, Analyst

Very nice results. I wanted to maybe ask about some of the outperformance that you guys saw in the fourth quarter. It sounded like from the prepared remarks, there's an element of both stronger same-store sales as well as FX, and it sounds like that has continued into the first quarter. And I heard the assumption about assuming that the same-store sales component doesn't continue. Maybe could you drill down a bit and help kind of just delineate between sort of the FX-driven impacts versus same-store sales? I think our understanding is that the FX-related impacts fall off starting in the second quarter. So any color you can give on just help digging apart those pieces?

Ofer Koren, Chief Financial Officer

Will, it's Ofer. Thank you for the question. We have seen very strong GMV results in Q4. And as I mentioned also in the beginning of Q1. And as you mentioned, it's driven by multiple factors. Initially, we are very happy with the new merchants that they've launched during '25, and especially in the second half of 2025, we have seen very strong results with some of the larger merchants. So I think they are satisfied, and we are very satisfied. On top of that, same-store sales have been very strong, well above our multiyear averages. This was partially driven by strong demand and also some of the large merchants that are doing very well on their business, but also from some FX tailwinds because last year, or I should say, towards the end of '24, the USD has strengthened versus most currencies. This has continued into Q1 and then started to decline, and it's pretty low right now. So we do see some FX tailwinds out of that. When we look at Q1 and the entire 2026, we assume that we would still enjoy some of the FX tailwinds, and we see higher same-store sales regardless in Q1. But we also assume that this will normalize for the rest of the year, for the remaining of the year. However, if this continues, as I mentioned, we might see some upside.

William Nance, Analyst

Got it. That's great. And just maybe to focus on some of the other growth drivers of the business, you've given commentary in the past around pipeline. I was just wondering if you could talk through kind of any dependencies for the outlook over the course of the year in terms of customer implementations. And then just any color on sort of large versus small merchants or geographies and timing as we think about the cadence of the year. And nice results again.

Nir Debbi, Co-Founder and President

Thank you, Will. It's Nir. The booking pipeline is looking strong, even more so than during the same period in 2025. The contribution from new business in 2025 was already a record in terms of growth contribution. We anticipate that this momentum will continue, as the pipeline is filling up quickly. We are starting to see the effects of the AI-led sales tool mentioned by Amir, which is significantly increasing the number of deals and demos at the top of our funnel. We expect to see this impact throughout the year. Additionally, we are noticing a rise in demand, as we had anticipated and communicated in previous quarters, driven by the increased complexity due to global tariff changes throughout 2025 in the U.S., along with the upcoming removal of de minimis in Europe.

Operator, Operator

And your next question comes from the line of Brian Peterson with Raymond James.

Brian Peterson, Analyst

Maybe for Amir or Nir, you have a very strong value proposition, and you've been able to approach merchants who see an uplift in their cross-border GMV. I'm curious about what changes you think could occur in an AI world. If that's something you can enable with new merchants, how should we consider providing that functionality to your existing merchants, which currently represent a very large GMV base?

Nir Debbi, Co-Founder and President

I believe our value proposition is quite complex. It involves a combination of robust infrastructure across trade compliance and payments with more than 40 legal entities globally. Additionally, Global-E possesses a unique data asset that allows AI to enhance our capabilities by training on exclusive data to optimize our merchants' trading. This is complemented by our fulfillment capabilities and the scale that Global-E offers, enabling us to create more efficient trading models regarding duty drawbacks and local registrations. The synergy of all these elements will benefit from AI as a driving force, and we do not see AI replacing any parts of it. We are very confident in this approach and are already experiencing positive momentum being developed and implemented, which is benefiting our customers' trading activities.

Ofer Koren, Chief Financial Officer

Service fees have remained stable for the past four or five quarters, and we anticipate this stability to continue into 2026. Unlike service fees, which are calculated as a percentage of GMV, fulfillment is derived from a per-transaction model. Our multi-local business is expanding at a faster rate than our traditional cross-border model, which influences total fulfillment take rates over time. For 2026, we expect overall revenue growth to be slightly lower than GMV growth. We do not anticipate significant changes in the service fee take rate, although there may be some quarterly fluctuations, and we expect fulfillment take rates to decrease slightly. While there may be some volatility, overall, we project they will be lower than in previous years.

Operator, Operator

And your next question comes from the line of James Faucette with Morgan Stanley.

James Faucette, Analyst

I want to follow up on the service fee take rate commentary. You're clear that you expect that to be relatively stable through '26, the service fee component. Can you just talk about how much benefit you got from maybe Marks & Spencer coming back online versus value-added services? And I'm also curious, given that if we look at the spread between your expected GMV and revenue growth in 2026, it looks to be narrower than the medium-term framework you gave at the beginning of last year. Can you just talk about what's driving that to be a bit better than you had thought a year ago?

Nir Debbi, Co-Founder and President

Thanks for the question. In terms of the service fee take rates, we have seen them stabilize over the past few quarters, and we anticipate this trend will continue. Marks & Spencer did not impact this; it’s more about the product mix, which has not changed significantly. This stability in service fee take rates is expected to persist. Looking ahead to next year, the narrowing of the gap between GMV growth and service fee can be partly attributed to our pipeline. We have good visibility on client launches in the upcoming quarters, and the anticipated mix appears to align closely with our current model, potentially leaning slightly more towards multi-local. This is contributing to the narrowing gap between our GMV growth and revenue growth. Overall, we believe the share of multi-local will stabilize, which is aiding in closing that gap. Additionally, as noted, we are beginning to see some traction with the value-added services we have rolled out, such as those on borderfree.com and trade compliance, which have started to generate revenue. The combination of these factors allows us to provide a solid forecast for revenue growth.

Amir Schlachet, Co-Founder and CEO

Sure. James, it's Amir. I'll start with the mechanics, and then I'll let Ofer give you some color about the guide. But basically, there are quite a few changes and upgrades in this new iteration of managed markets. But I would say, overwhelmingly, the biggest change that drives that harmonization that you mentioned is the fact that this new build actually integrates all the services, all the financial flows and the operational flows to go through Shopify Payments versus the previous iteration, which kind of stood on a separate set of payment rails. So that really allows merchants that go onto managed markets to keep on operating their store and selling just like they do in their home store using the same processes and the same familiar ways of conducting their business without a need to learn the workings of a completely different store. And there are many other changes in terms of their visibility and control over what can be sold, where, and so on. But I would say, mechanically, that's the biggest change, and that was the big uplift on both sides, from our side and from Shopify side in order to enable this major upgrade.

Ofer Koren, Chief Financial Officer

In terms of contribution in 2026, we expect managed market to still weigh a bit on growth in the first few months of the year as it hasn't been pushed in recent months. We do expect to see contribution for it to grow above our average rate in the back half of the year. We were still a bit cautious when we were budgeting and remains to be seen what the actual results would be, but we are cautiously optimistic.

Operator, Operator

And your next question comes from the line of Samad Samana with Jefferies.

Samad Samana, Analyst

First one, maybe, Amir, when you were talking about the agentic commerce components where you're starting to see some early transactions, I know you said it's still small, but can you help us think through what early observations you have there? Is there a certain type of product that's getting purchased through the agentic channel? Is it a certain average order value? Just something that we can think about what it might signal for down the road, especially as consumers get more comfortable? And I guess, along that line, is there a certain geography where you're seeing it already deployed? And then I have a follow-up question.

Nir Debbi, Co-Founder and President

Samad, it's Nir. We do believe that agentic AI or agentic commerce is a great opportunity for our merchants. Starting at the top of the funnel as a discovery channel, where we have already seen a significant increase in the share of traffic that gets to our platform and our brands from AI chats. We expect to see AI-based chats continue to grow over time as a discovery channel for our brands. And this has grown dramatically, as I said, although from a small base, but still have grown significantly. We have also started to see in small numbers yet, agentic commerce transaction. And as part of it, we did make sure that through our integration to the different platforms, we will natively support it for cross-border transactions. So all in all, on the discovery, we already see it getting to scale. On the agentic commerce as a both transactions, we have seen a small number of transactions to date. But what we made sure is that our infrastructure and our integration and our ecosystem will be able to support it for cross-border.

Amir Schlachet, Co-Founder and CEO

And I'll just add, Samad, that I think these are still very low numbers. So it's still a bit early to draw conclusions. I think we're seeing much more experimentation now from early adopter brands. And so I think it's a little bit too early, but we are certain that this will continue to grow over time as it becomes more widely adopted, and then we'll probably see some emerging themes. But anyhow, as Nir said, we are there to support all of them on their global transactions. We'll probably see the market shape over the next few quarters and years.

Samad Samana, Analyst

The Excel file with the metrics was very helpful. So thank you to the team for putting that together. So the net dollar retention actually accelerated from '24 to '25, going to 122%. I was wondering a couple of things. Could you, one, help us understand, was that a function of lapping the Ted Baker comp? Or is that an organic acceleration in NRR? And if so, maybe what drove that? And how are you thinking about what's embedded in the '26 guidance from an NRR perspective?

Ofer Koren, Chief Financial Officer

Samad, it's Ofer. Thank you for the question. We had a very solid and healthy year in terms of net dollar retention and gross dollar retention. Actually, we've been able to improve our GDR from the previous year. As you mentioned, we lost at Baker in the previous year. And above that, we've seen healthy trading with some of our leading merchants. So all in all, it was a good year in terms of net dollar retention. We expect 2026 to be a continuation of 2025. So we don't expect any material changes. And again, it might be impacted over the year from changes in same-store sales.

Operator, Operator

And your next question comes from the line of Chris Zhang with UBS.

Chao Zhang, Analyst

My first question is on your investment priorities for 2026. Can you share with us or any new areas you're looking at that you didn't perhaps have enough investment dollars before that you wanted to highlight?

Nir Debbi, Co-Founder and President

So I think there are multiple things that we are prioritizing into 2026. I think first to mention is our trade compliance infrastructure as we see more and more countries around the world take action, increasing their tariffs, removing their de minimis exemptions, which actually makes the cost of trade in global e-commerce higher. We see a huge benefit for us to continually invest in reducing those costs for our clients with advanced trading models, with the ability to do duty drawback on goods that are exported for the import duties, to do duty drawback in different countries for goods that are returned from final shopper. So a lot of investment and focus is going into reducing the cost for trade given the circumstances, and this brings us a lot of demand as well as increased retention with our brands. The second is, of course, AI. We spoke quite a lot about it, but we see continuous investment in AI in almost, I would say, every field of our activities from better utilization of our data asset in order to better optimize our clients trading and drive a faster same-store sales into our own pipeline, top-of-funnel demand generation and from there even down to an outreach agent and the outreaches in order to be able to do it at scale and going into optimizing different elements around the company from value-added services such as translation services, down to allowing chats to our clients on examining their data and their comparable data from Global-E to allow them to take better decisions and all the way into optimizing our R&D spend, marketing spend, and other places that AI can drive. So that would be the second area where we're going to focus quite dramatically. And also, we are planning to continue and invest heavily in optimizing our fulfillment networks in order to offer best-in-class services to our clients with different price points more efficiently than we have even today, in order to allow them again to trade with a cost-effective structure given the changes in the global landscape.

Chao Zhang, Analyst

Awesome. Just a follow-up. I wanted to hear any update on one metric you shared at the Investor Day, which was the multi-local GMV. I understand it was a one-off disclosure made back in March of last year, and that was expected to be $900 million in 2025. But can you talk directionally to how the year trended versus that initial expectation and what you're seeing that going to 2026? Again, this is on the multi-local GMV.

Ofer Koren, Chief Financial Officer

Yes. So 2025 traded pretty close to our initial expectations with regards to multi-local, and we are at approximately 15% of GMV. Looking into 2026, we expect multi-local to continue to grow, but we don't think it will outgrow the entire business by a lot. So that's what we see for now. We are very happy, and we think that this provides us a competitive advantage, and it's a great offering for our clients.

Operator, Operator

And your next question comes from the line of Koji Ikeda with Bank of America.

Koji Ikeda, Analyst

Just one question from me here. I wanted to ask on GAAP EPS earnings. And so congratulations on being GAAP EPS profitable for the full year. And so how should we be thinking about GAAP EPS growth from here on out, especially with factors like efficiency gains that you're seeing with AI and the R&D organization?

Ofer Koren, Chief Financial Officer

Thank you for the question. We have achieved GAAP profitability, which we are very excited about, and we anticipate maintaining this profitability in the upcoming periods. We will also continue to provide a non-GAAP net income and EPS figure, which we consider a crucial metric. Generally, there isn't a significant difference between adjusted EBITDA and this non-GAAP net income. We expect this figure to grow in line with adjusted EBITDA, although there may be some variations. Overall, this is a good way to think about it.

Operator, Operator

And your next question comes from the line of Billy Fitzsimmons with Piper Sandler.

William Fitzsimmons, Analyst

As I think about the prepared remarks and the focus on leaning into AI tools internally and automated workflows, if we look at that adjusted EBITDA guidance midpoint for 2026, can you maybe break down the expected margin expansion from simply structural scale in the business versus some of those AI-driven efficiencies that were outlined? And then secondly, any additional anecdotes or examples you could share on some of the specific ways you've increased R&D velocity with AI recently?

Nir Debbi, Co-Founder and President

Nir mentioned that when looking at the expected growth in our EBITDA margins leading into 2026 and beyond, we anticipate continued improvement as outlined in our multiyear plan. A large portion of this growth will stem from advancements in AI. Our research and development capabilities allow us to create new services that support business growth, and as Amir pointed out, our R&D team has not been expanding headcount significantly, thanks to the efficiencies provided by AI. We are seeing benefits in areas such as coding, product storytelling, and quality assurance. A notable amount of this is driven by AI. Moreover, we're experiencing advantages in sales and marketing growth. While AI will not replace a consultative sales manager's role with enterprise clients, it significantly enhances our lead generation efforts, allowing us to boost both input and output without increasing staff, as our AI tools handle most of the prospecting and outreach tasks. Additionally, in all the aspects that Global-E manages, including fraud detection, product classification, compliance, and finance reconciliations, AI is providing substantial leverage. Although not all benefits will be realized by 2026, we have a lot planned for development this year, and a significant portion of what we have projected for 2026 is AI-driven.

Amir Schlachet, Co-Founder and CEO

And Billy, it's Amir. I want to emphasize that scale and AI are not at odds with each other. In fact, they are highly interdependent. AI has many capabilities, but extracting real value from it relies heavily on data. Data is the core factor that drives AI, and our extensive and unique data asset, which continues to grow rapidly as we expand the business, is what enables the AI models to deliver that value. Therefore, scale and AI work together seamlessly.

Operator, Operator

And your next question comes from the line of Patrick Walravens with Citizens.

Patrick Walravens, Analyst

Congratulations, everyone. Amir, could we explore further the point you were beginning to make about industry concerns regarding AI disruption? What are the protective measures in place for your business against potential AI applications? You mentioned data; what else is involved?

Nir Debbi, Co-Founder and President

Pat, it's Nir. Thank you for the question. So there are 4 things that will continue to differentiate us and would make it virtually impossible for any model to replace what Global-E is actually doing. The first and foremost is scale. Then it's expertise and know-how, then it's trade compliance, and then it's our overall infrastructure across legal entities in more than 40 jurisdictions, coupled with infrastructure on payments, all embedded into one. So if we speak just to the first thing about our scale, this allows us to access actually Tier 1 pricing and working with the best partners and getting the best service from those partners across fulfillment, across payments, across trade compliance, and it gives us a huge pricing moat that is coming from a true differentiated cost structure that even if you develop a beautiful tool on LLM, you will not have access to, not to some of the partners for sure and definitely not to the pricing. The second we spoke about is expertise and the data asset. I think that in order to enjoy the benefits of AI, it needs to be trained on relevant data for what you're trying to do. And if what you were seeking is optimization of your trading per market across 200 markets worldwide, according to your specific dynamics to train a tool, you need to have the data, and this is unique data that Global-E has and at scale that no one else has access to. The third is our infrastructure and our MoR model. This is a heavy lifting model with a significant level of built-in compliance and risk requirement across dozens of legal entities around the world, allowing us to do business in more than those 200 markets worldwide efficiently. This includes securing and managing licenses from various governments and regulators, providing aftersales capabilities in which we need to work with multiple parties establishing a solution across trade compliance and logistics, and continue to that into our payments infrastructure with multiple PSPs working with us in best-in-class rates with a sophisticated system, allowing us to do reroutes, domestic acquiring, etc., across multiple destinations. All of it is business logic capabilities, set of agreements, know-how, expertise that AI, however good the LLM is, does not have the ability to do.

Operator, Operator

And your next question comes from the line of Scott Berg with Needham.

Scott Berg, Analyst

Super nice quarter here. I guess just one question for me, and it's on the duty clawback that Amir noted was released here in the quarter. I guess what are you hearing on initial feedback from U.S.-based customers on that solution? I'm in the belief that there's almost no reason why most of them don't adopt this at a relatively quick nature at least. And then how do we think about the impact in fiscal '26 guidance, if any?

Nir Debbi, Co-Founder and President

We have received positive feedback from clients regarding the capability. We obtained the license, as mentioned, and we deployed the solution in proof of concept mode early this year. Now we are rolling it out to all our clients. The initial feedback has been very encouraging, showing a significant impact on the cost of trading for our U.S. client base. We anticipate a high level of adoption as we streamline the process to extend the offering to all our clients. In the first group we contacted, the adoption rate has been very high. We have incorporated it into our guidance to some degree, although we approached it with some caution given that it is a new solution. However, we do expect it to contribute to our revenue by 2026.

Alan Katz, Head of Investor Relations

Thank you, everyone, for joining the call today. We look forward to speaking with many of you during the quarter and providing our next update on our Q1 call in May. Hope everyone has a great day.

Operator, Operator

Thank you. And ladies and gentlemen, this now concludes today's conference call. Thank you all for joining. You may now disconnect.