Etsy Q1 Earnings Call Highlights

Key Points

• Q1 financials beat expectations: Marketplace GMS was $2.5 billion (up 5.5% YoY), revenue $631 million with a 25.7% take rate, and adjusted EBITDA of $185 million (29.3% margin), while active buyers rose sequentially for the first time in two years.
• Product and AI-led strategy driving engagement: Management is prioritizing discovery, matching, loyalty and human connection—the Etsy app grew 11.2% and now represents ~47% of GMS (app users have ~40% higher LTV)—and the company is rolling out ML/AI features and agentic experiments (including integrations with OpenAI/ChatGPT) to improve relevance and seller tools.
• Balance sheet, capital returns and outlook: Etsy has $1.6 billion in cash, agreed to sell Depop to eBay for $1.2 billion, repurchased $145 million of stock this quarter with $828 million remaining authorization, and guided Q2 GMS of $2.48–2.53 billion and full-year GMS growth in the low single digits with a 28–30% adjusted EBITDA margin target.

Etsy NYSE: ETSY reported first-quarter 2026 results that management said show early progress in a multi-priority effort to improve the customer experience and strengthen marketplace fundamentals. The company also introduced a revised earnings format centered on a shareholder letter, with fewer prepared remarks and more time for analyst questions.

First-quarter results and marketplace trends

CEO Kruti Patel Goyal, in her first quarter leading the company after more than 15 years at Etsy, said key performance indicators “came in at or ahead of our expectations,” highlighting Etsy marketplace gross merchandise sales (GMS) of $2.5 billion, up 5.5% year-over-year. Etsy reported revenue of $631 million on a take rate of 25.7%, and adjusted EBITDA of $185 million, representing a 29.3% adjusted EBITDA margin.

Goyal pointed to early shifts in customer behavior, including sequential active buyer growth “for the first time in two years,” year-over-year growth in new buyers and active sellers, and GMS per active buyer rising year-over-year “for the first time since 2022.” She also said momentum in the mobile app “continued to strengthen.”

CFO Lanny Baker added that the 5.5% Etsy marketplace GMS increase represented a 540-basis-point improvement versus the fourth quarter of 2025. On a currency-neutral basis, GMS growth was 3.6%. Baker said the quarter benefited from foreign exchange tailwinds and an easier prior-year comparison, alongside what he described as progress in product development and marketing translating into “underlying improvements across marketplace fundamentals.”

Strategic priorities: discovery, matching, loyalty, and human connection

Goyal reiterated Etsy’s strategy across four priorities: “showing up where shoppers discover,” improving matching and relevance, retaining and rewarding high-value buyers and sellers, and “amplifying human connection.” She described these efforts as interconnected, designed to rebuild purchase frequency over time.

She said the clearest progress is in discovery and matching, with the Etsy app “the centerpiece of this transformation.” Management reported app GMS grew 11.2% year-over-year in the quarter and now represents about 47% of total GMS, up 240 basis points year-over-year. Goyal said app users are more valuable, later noting in Q&A that app users have “40% higher LTV than non-app users” due to higher engagement and conversion.

On matching, Goyal said Etsy is moving away from systems that prioritized immediate conversion—often favoring popular items—toward a “personalized, relevance-driven approach” powered by machine learning and AI. She said early tests are showing improvements in add-to-cart rates and conversion. Etsy also introduced “AI-generated buyer profiles” to broaden category exploration and inspire purchases, and is refining push and email messaging via owned channels to improve engagement.

Goyal said the company is also working to deepen buyer loyalty through personalization, targeted offers, and programs such as “Etsy Insider Beta,” while expanding internal ownership of loyalty initiatives across teams. On the seller side, she said Etsy plans to build on AI-powered tools to simplify listing and shop management, and to strengthen trust through improvements to Etsy Purchase Protection and support for top customers.

On “human connection,” Goyal said Etsy has early evidence that making seller identity and stories more visible can deepen engagement and increase buyer confidence, and said Etsy expects to integrate these elements more directly into the shopping experience this year.

AI initiatives and “agentic” commerce experiments

Management described multiple AI-related efforts, including partnerships and on-site product tests. Goyal said Etsy has seen “early engagement and traffic signals” from integrations with OpenAI, Microsoft, and Google, and said the company “recently developed an integrated Etsy app for ChatGPT,” while also testing conversational AI experiences directly on Etsy.

She said Etsy built two agents in the quarter: one designed to help buyers find gifts, and another to provide sellers with insights and resources to reduce operational friction. In response to a question about the cost of deploying AI at scale, Baker said Etsy intends to “embrace and experiment” while applying “very rigorous ROI discipline,” framing compute costs against impacts on GMS growth, user growth, and frequency, while managing for “long-term profitability.”

Asked about AI-driven referral traffic and OpenAI’s shift toward discovery, Goyal clarified that “the app has not launched yet,” but said the broader shift reinforces Etsy’s view that agentic shopping could become a meaningful discovery channel over time. She described the traffic as high-intent but still “a fraction of a percent” of total traffic.

Buyer and seller metrics show stabilization, with marketing and product levers

Baker said trailing 12-month active buyers were 86.6 million, marking the first sequential increase in two years. Combined gross buyer additions (new plus reactivated) were 11.9 million, up 4.8% year-over-year. GMS per active buyer reached $122 on a trailing 12-month basis, rising year-over-year for the first time since 2022.

He said purchase frequency remained “modestly lower” than the prior year while average order value (AOV) increased. Baker attributed higher AOV to several factors, including foreign exchange tailwinds, the expiration of the de minimis tariff exemption and resulting seller listing price increases, and product changes that surface “higher quality, more relevant and differentiated inventory.” He said the FX and de minimis-related benefits are expected to moderate as the year progresses.

Repeat and habitual buyers remained down year-over-year but showed sequential stabilization, Baker said. He added that habitual-buyer declines often reflect buyers falling below a purchase-frequency threshold rather than leaving the platform, and that Etsy aims to bring them back above that threshold through product improvements.

On the seller side, Baker said Q1 2026 was the first period of year-over-year growth in total seller count since Etsy introduced a seller setup fee. Active sellers rose 3.3% to 5.6 million. Goyal said Etsy is shifting more focus toward improving seller experience going forward, particularly around reducing time spent on shop management and listings, including through AI tools such as listing assistance and “shop management assistance.”

In response to a question about non-app performance, Baker said both product changes and marketing contributed. He cited more efficient spending and mix optimization, competitive dynamics in paid search, and what he described as helpful changes in Google’s algorithms. He also said Etsy’s owned channels—push and email—continue to drive GMS at double-digit rates year-over-year, alongside SEO gains.

Depop sale, capital allocation, and outlook

Baker reminded investors that Etsy agreed on Feb. 15 to sell Depop to eBay for $1.2 billion. He said regulatory clearance has been received in the U.S. and Germany, with reviews “in progress and on track” for other markets including the U.K. and Australia. Etsy expects the transaction to close by the end of the third quarter of 2026. Given the pending sale, Etsy’s results are presented as continuing operations, while Depop is reflected in discontinued operations. Baker also noted that Reverb, sold in June of last year, is included in Q1 2025 continuing operations, making year-over-year comparisons less directly comparable.

Etsy ended the quarter with $1.6 billion in cash, cash equivalents, and investments. Net cash provided by operating activities of continuing operations was $102.5 million. Baker said Etsy converted 50% of adjusted EBITDA to free cash flow, “more than twice” the conversion rate in the year-ago quarter. Etsy repurchased $145 million of stock, reducing share count by about 2.7 million shares, and had $828 million remaining under current authorization as of March 31.

Baker said Etsy’s capital allocation framework prioritizes maintaining financial strength for organic investment, preserving strategic flexibility, managing financial commitments, and enhancing returns to equity holders. He said the pending Depop sale will allow Etsy to “further accelerate the direct return of capital to shareholders via repurchases.”

For the second quarter, Etsy expects marketplace GMS of $2.48 billion to $2.53 billion, representing year-over-year growth of about 3% to 5%. The company expects Q2 take rate of about 25.7% and adjusted EBITDA margin of 27% to 29%. For the full year, Etsy now expects GMS growth in the low single digits, an improvement from commentary provided in mid-February, and continues to expect year-over-year GMS growth in each quarter of 2026. Full-year adjusted EBITDA margin guidance remains 28% to 30%, with take rate expected to be roughly equal to that of the first half.

About Etsy NYSE: ETSY

Etsy, Inc operates two-sided online marketplaces that connect buyers and sellers primarily in the United States, the United Kingdom, Germany, Canada, Australia, France, and India. Its primary marketplace is Etsy.com that connects artisans and entrepreneurs with various consumers. The company also offers Reverb, a musical instrument marketplace; Depop, a fashion resale marketplace; and Elo7, a Brazil-based marketplace for handmade and unique items. In addition, it offers various seller services, including Etsy Payments, a payment processing service; Etsy Ads, an advertising platform; and Shipping Labels, which allows sellers in the United States, Canada, the United Kingdom, Australia, and India to purchase discounted shipping labels.

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