Etsy, Inc. (ETSY) Q4 2025 Earnings Call Transcript

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Overview

Etsy shows solid growth in revenue and GMS, driven by AI and marketing strategies. Despite concerns about AI agent competition, management's focus on personalization and app engagement is promising. Positive outlook on cash usage and shareholder returns further supports a positive sentiment.

Key Financial Performance

Consolidated GMS $3.6 billion, up 2.4% year-over-year, excluding Reverb. This was above the midpoint of our guidance range and up 1.3% year-over-year on a currency-neutral basis.

Consolidated Revenue $882 million, up 6.6%, excluding Reverb, a new quarterly record.

Adjusted EBITDA $222 million, representing a consolidated adjusted EBITDA margin of 25.2%. The year-to-year contraction in consolidated adjusted EBITDA margin was primarily due to the decision to accelerate brand marketing investment at Depop.

Etsy Marketplace Adjusted EBITDA Margin Slightly above 30% in the fourth quarter, though slightly lower year-over-year, primarily due to higher cost of revenue as well as higher G&A expense.

Etsy Marketplace GMS Up 0.1% year-over-year in the fourth quarter, marking the first positive comparison since Q3 2023. On a currency-neutral basis, Etsy GMS was down 1% year-to-year, which is a 220 basis point improvement from the third quarter's currency-neutral comparison.

U.S. Buyer GMS Grew 0.3% year-over-year, marking the first quarter of positive growth in 4 years.

Mobile App GMS Contribution Reached 46% in Q4, 5 percentage points higher than at the end of 2023.

Active Buyers Largely flat sequentially at 86.5 million. The year-to-year rate of decline in active buyers improved for the first time in over a year.

Gross Additions (New and Reactivated Buyers) 17.2 million, up 2.7% year-over-year and growing again for the first time in over 2 years.

Habitual Buyers 5.9 million, down 8.6% year-to-year, though the sequential quarter-to-quarter decline was a more modest 1.4%.

Trailing 12-Month GMS Per Active Buyer $121, marking the third consecutive quarter of stable to improving trends and moving above the trough hit in the first quarter of 2025.

Active Sellers 5.6 million, up 1.5% sequentially, reflecting an increase in both U.S. and international sellers.

Depop GMS $300 million in Q4 2025, up nearly 38% year-over-year. In the U.S., Depop's largest market, GMS grew 60% year-over-year.

Services Revenue Grew 9.9% year-over-year.

Marketplace Revenue Grew 0.8% year-over-year.

Consolidated Take Rate 24.5%, in line with guidance and expanded by 170 basis points year-over-year.

Cash, Cash Equivalents, and Investments $1.8 billion as of December 31, 2025.

Adjusted EBITDA for 2025 $735 million, converting approximately 87% of that to free cash flow and returning more than 100% of free cash flow to shareholders.

Share Repurchases $777 million for the year, reducing the outstanding share count by approximately 14.4 million shares.

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Operating Highlights

Depop Sale: Etsy signed a definitive agreement to sell Depop to eBay for $1.2 billion in cash. This transaction allows Etsy to focus on its core marketplace.

AI and Agentic Shopping: Etsy expanded partnerships with Microsoft Copilot, Google, and Stripe for agentic shopping. Traffic from agentic shopping increased 15x year-over-year, with higher-value orders and re-engagement of lapsed buyers.

U.S. Buyer Growth: Etsy's U.S. buyer GMS grew for the first time in 4 years, with a 0.3% year-over-year increase in Q4 2025.

Depop Growth: Depop's GMS grew nearly 38% year-over-year in Q4 2025, with U.S. GMS up 60%.

Organizational Restructuring: Etsy reorganized around customer outcomes, consolidating product and engineering teams, unifying trust and safety with customer support, and realigning marketing to focus on customer outcomes like frequency and lifetime value.

App Engagement: Etsy's app GMS grew 6.6% year-over-year in Q4 2025, with app users contributing 46% of total GMS.

Focus on Core Marketplace: Etsy is prioritizing its core marketplace by selling Depop and reinvesting proceeds into Etsy's operations.

AI and Personalization: Etsy is leveraging AI to enhance buyer discovery and seller automation, aiming to make commerce more human and differentiated.

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Risk or Challenges

Core Marketplace Performance: Etsy has faced challenges in translating its value proposition consistently through the customer experience. Buyer perceptions of differentiation have softened, and there is a need to improve how buyers are matched with the right items and how the human story behind sellers is made visible.

Demographic Shifts: Etsy's buyer demographics are aging, with older users growing faster than younger ones. There is a gap in engaging and acquiring younger shoppers, which could impact long-term growth.

Customer Retention and Frequency: Frequency and retention among the most valuable buyers have not been at desired levels. The company has under-invested in creating reasons for customers to return, focusing more on conversion rather than long-term engagement.

Investment Allocation: A disproportionate share of investment has gone toward core e-commerce fundamentals like conversion and shipping, limiting the ability to fully capture demand for unique commerce and differentiate Etsy.

AI and Agentic Shopping: While AI and agentic shopping present opportunities, they are still a small part of Etsy's traffic and GMS. The rapid emergence of this channel requires significant investment and adaptation to ensure it contributes meaningfully to growth.

Depop Sale: The sale of Depop to eBay, while providing cash for reinvestment, also represents a strategic shift that could impact Etsy's diversification and growth in the fashion resale market.

Macroeconomic Conditions: Etsy's performance is sensitive to macroeconomic conditions, particularly those affecting consumer discretionary spending, which could impact growth projections.

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Guidance & Outlook

First Quarter 2026 GMS: Expected to be in the range of $2.38 billion to $2.43 billion, representing year-over-year growth of approximately 2% to 4%.

First Quarter 2026 Take Rate: Anticipated to be approximately 25.5%.

First Quarter 2026 Adjusted EBITDA Margin: Expected to be between 28% and 30%.

Full Year 2026 GMS: Expected to achieve slight growth for 2026, with positive year-over-year GMS comparisons in each quarter of the year.

Full Year 2026 Take Rate and Adjusted EBITDA Margin: Expected to be roughly consistent with the first quarter view.

Macroeconomic Conditions Assumption: Assumed to remain stable relative to present conditions.

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Shareholder Return Plan

Dividend Program: Etsy did not explicitly mention any dividend program in the transcript. However, the company discussed its financial performance and capital allocation approach, which includes share repurchases and investments in the Etsy marketplace.

Share Repurchase Program: Etsy repurchased a total of $133 million in stock during the fourth quarter of 2025, bringing total share repurchases for the year to $777 million. This reduced the outstanding share count by approximately 14.4 million shares over the course of the year. The company plans to continue share repurchases using proceeds from the sale of Depop to eBay.

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Key Q&A

Q:What changed in 4Q regarding gross buyer adds, reactivated buyers, and declines in new buyers? How durable is this improvement?

A:The improvement is attributed to investments in product experience, app usage, personalized marketing, and social media channels. These efforts have cumulatively improved comparisons over time. Social media channels have been effective in reactivating buyers, and the app experience has been used to drive frequency and retention. Management believes these trends are sustainable.

Q:What are the key drivers of sustaining GMS growth through 2026, and when will product and marketing flywheels impact GMS growth beyond 1Q?

A:The drivers include discovery, matching, loyalty, and differentiation, which work as a system to improve the ecosystem. AI and machine learning advancements are being leveraged for personalization and matching. Early traction is seen in discovery and matching, with app home screen clicks up 14% year-over-year. Loyalty and human connection are earlier in development but show encouraging signs. Management expects these efforts to build over time and contribute to durable growth.

Q:How are consumers from AI platforms behaving, and what does it mean for Etsy's on-site ads business?

A:Traffic from AI platforms is growing (15x year-over-year but still less than 1% of total traffic). These consumers show higher intent and average order value, and the traffic flows through to Etsy for further engagement. Management believes Etsy's differentiated inventory and early participation in agentic platforms are advantageous. They see opportunities to optimize Etsy Ads and adapt to evolving advertising models in agentic platforms.

Q:What are the plans for acquiring younger buyers and reengaging lapsed buyers?

A:Etsy plans to leverage mobile apps and social channels like TikTok (spending doubled this quarter) to attract younger buyers. For lapsed buyers, there are over 100 million, and efforts focus on reactivating them through social media and personalized marketing. Management sees significant opportunities in both areas.

Q:How does Etsy ensure its on-site search and discovery experience remains superior to agentic platforms?

A:Etsy leverages AI to deeply understand buyer intent and inventory, aiming to offer a richer experience. Management is focused on integrating conversational interfaces and using AI capabilities to enhance personalization and discovery on Etsy's platform.

Q:What are Etsy's plans for cash usage given its strong cash position?

A:Etsy plans to continue investing in its business, particularly in product development and AI capabilities. Excess cash will likely be returned to shareholders through share buybacks, as seen in recent years. Management remains open to high-return investment opportunities but currently prioritizes internal investments.

Q:How does the sale of Depop impact Etsy's strategy and outlook for 2026?

A:The sale allows Etsy to focus more on its core marketplace. Depop required brand awareness investments, while Etsy's focus is on improving product experience and personalization. Management sees opportunities to invest in AI and machine learning to enhance Etsy's platform.

Q:What are the learnings from agentic traffic, and how does Etsy plan to integrate AI native experiences?

A:Agentic traffic shows higher intent and order value, supporting its potential as a discovery channel. Etsy is exploring conversational interfaces and leveraging AI to enhance on-site experiences. Management is focused on using both proprietary and open-source AI models to improve buyer and seller experiences.

Q:How does Etsy plan to accelerate growth on its website compared to its app?

A:The app is prioritized due to its higher user lifetime value (40% higher than non-app users). Management sees significant headroom for app growth, with only 46% of GMS currently coming from the app. Investments focus on personalization and discovery-oriented content to drive app engagement.

Q:What is Etsy's response to concerns about AI agents disrupting its business model?

A:Management believes Etsy's differentiated inventory and early adaptation to agentic platforms position it well. They acknowledge the uncertainty but emphasize their ability to adapt to changes. Early indicators suggest agentic platforms can be incremental discovery channels rather than direct competitors.

Q:Can Etsy's buyer frequency increase structurally with product and marketing improvements?

A:Management believes there is potential for higher buyer frequency as product and marketing investments improve personalization, retention, and loyalty. They see no structural barriers to increasing frequency over time.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the potential risks of AI agents disrupting Etsy's take rates or business model. They acknowledged the uncertainty but did not provide specific strategies or data to mitigate these risks.

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Etsy, Inc. (ETSY) Q4 2025 Earnings Call Transcript