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ETSY INC

ETSY
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Business Summary

Etsy operates two-sided online marketplaces connecting creative entrepreneurs with buyers globally, with a mission to "Keep Commerce Human" by balancing people, planet, and profit. The company's total consolidated Gross Merchandise Sales (GMS) for 2025 was $11,916.9 million . The Etsy marketplace, its primary platform, accounted for $10,460.7 million or 87.8% of total GMS, while Depop contributed $1,074.9 million or 9.0% . The company recently completed the sale of Reverb Holdings, Inc. on June 2, 2025, and Elo7 Serviços de Informática S.A. on August 10, 2023, to focus on its core Etsy and Depop marketplaces.

Etsy's core business model revolves around connecting sellers and buyers, enabling transactions, and earning fees for its services, which are then reinvested into core business drivers like innovative technology, marketing, community support, and talent development. The company generates revenue primarily from marketplace activities, including transaction fees (inclusive of offsite advertising), payments processing fees, and listing fees, as well as from optional seller services such as on-site advertising and shipping labels. The asset-light operating model allows for flexibility in investments in response to market dynamics.

Marketplace revenue, which includes transaction fees, offsite advertising fees, payments processing fees, and listing fees, decreased by $13.580 million or 0.7% year-over-year to $2,007.164 million in 2025. This decline was primarily due to a $47.1 million decrease related to the sale of Reverb and a $16.8 million decrease in transaction fee revenue from the Etsy marketplace, partially offset by an increase in Depop GMS and a $27.0 million increase in payments revenue. Services revenue, derived from optional seller services like on-site advertising and shipping labels, increased by $88.749 million or 11.3% year-over-year to $876.337 million in 2025, primarily driven by a $62.2 million increase in advertising revenue due to higher average price per click on Etsy Ads.

For the fiscal year ended December 31, 2025, total revenue increased by 2.7% to $2,883.501 million from $2,808.332 million in 2024. Gross profit was $2,065.701 million , a 1.6% increase from $2,033.778 million in 2024, resulting in a gross margin of 71.6% . Operating expenses rose by 8.8% to $1,799.491 million from $1,653.570 million in 2024. Net income decreased significantly by 46.3% to $162.982 million from $303.281 million in 2024, with a net income margin of 5.7% . Diluted EPS was $1.39 in 2025, down from $2.35 in 2024. Adjusted EBITDA decreased by 6.0% to $734.511 million , with an Adjusted EBITDA margin of 25.5% . The company generated $693.414 million in net cash from operating activities and $638.750 million in free cash flow. As of December 31, 2025, cash and cash equivalents stood at $1,395.836 million , with total debt (net carrying value) of $2,982.238 million .

Year-over-year, consolidated GMS decreased by 5.3% to $11,916.9 million in 2025, primarily due to the sale of Reverb and a decline in Etsy marketplace GMS, partially offset by a 36.3% increase in Depop GMS to $1,074.9 million . Etsy marketplace GMS declined 4% to $10.5 billion , but showed improving momentum in the latter half of 2025. Active buyers on the Etsy marketplace decreased by 3% to 86.5 million , and GMS per active buyer declined modestly by 0.5% to $121 . However, reactivated buyers increased by 4% to 30.0 million . Active sellers across all marketplaces increased by 7.7% to 8,762 thousand , though Etsy marketplace active sellers declined year-over-year to 5.6 million due to the intentional impact of a seller set-up fee introduced in 2024.

Significant operational developments in 2025 included the realignment of product and marketing organizations to focus on customer outcomes, leading to four strategic initiatives: increasing Etsy's presence across discovery channels, improving matching through machine learning, strengthening loyalty of valuable customers, and amplifying human connection. The company also introduced an updated beta version of Etsy Insider, a loyalty program, and launched AI-powered tools for shop management. The sale of Reverb was completed on June 2, 2025, and the company entered into an agreement on February 15, 2026, to sell Depop to eBay Inc. for $1.2 billion in cash, expected to close in the second quarter of 2026. In December 2025, Etsy's Board of Directors approved a new $750 million stock repurchase program, with $973.2 million remaining available under approved plans as of December 31, 2025.

Business Outlook

Etsy plans to utilize the proceeds from the Depop transaction for general corporate purposes, continued share repurchases, and investment in the Etsy marketplace. The sale of Depop is expected to close in the second quarter of 2026, subject to regulatory approval and other closing conditions. Beginning in the first quarter of fiscal year 2026, Depop's financial results will be classified as discontinued operations on Etsy's consolidated financial statements for all periods presented.

The company believes the e-commerce industry continues to offer meaningful long-term growth opportunities, with global e-commerce revenue in its core geographies estimated to grow by a compounded annual growth rate of 7% through 2029. Etsy estimates the online market size across relevant retail categories for the Etsy marketplace within its core geographies to be approximately $600 billion , and approximately $2 trillion when including offline sales. Given that Etsy marketplace GMS in 2025 represented approximately 2% of that online opportunity, there is substantial potential for market share capture. The company also notes that approximately 17% of adults in the U.S. and U.K. shopped on Etsy at least once in 2025, with penetration of approximately 30% among women and 10% among men, indicating significant opportunity for expansion, especially in international markets where penetration is approximately one fifth as high as in the U.S. and U.K.

Near-term growth initiatives focus on increasing purchase frequency and overall spend per buyer, particularly as roughly half of active buyers currently shop on Etsy only once per year. These initiatives include showing up where shoppers discover, matching people with content through machine learning, strengthening loyalty and retention of valuable customers, and amplifying human connection. The company has established partnerships with technology platforms to surface seller items within AI-enabled shopping experiences, leveraging differentiated inventory and machine learning capabilities.

In terms of operational outlook, the company's Impact strategy focuses on advancing positive environmental and social outcomes while supporting long-term business objectives. This includes a Net Zero goal to achieve a 50% reduction in absolute Scope 1 & 2 greenhouse gas emissions from a 2020 base year by year-end 2030, and a 90% reduction by year-end 2040. For Scope 3 greenhouse gas emissions, the target is a 52% reduction from a 2020 base year by year-end 2030, and a 97% reduction by year-end 2040. In 2025, Scope 1 and 2 emissions exceeded the 2030 annual target trajectory, driven partly by below-average temperatures in Brooklyn, prompting exploration of longer-term building upgrades. The company also aims to maintain best-in-class sustainable operations, including sourcing 100% renewable energy for offices, remote work, and Google Cloud usage, and achieving "Zero Waste" certification for 100% of offices open for more than 24 months by year-end 2025.

Planned capital allocation includes continued share repurchases, with $973.2 million remaining available under approved programs as of December 31, 2025. The company repurchased 14.4 million shares of its stock during 2025 at a total cost of $777.1 million . In December 2025, a new $750 million stock repurchase program was approved. The company also made approximately $3.4 million in philanthropic donations in 2025 and provided a $3 million loan from its Impact Investment Fund to support energy-efficiency and clean energy projects.

Management explicitly flagged several structural headwinds and execution risks to the growth plan. These include the persistently dynamic macroeconomic environment, ongoing pressure on consumer discretionary spending, and evolving buyer behavior. The decline in Etsy marketplace GMS in 2025 reflects these challenges. The company also notes considerable uncertainty regarding the evolving tariff landscape, how recent changes to de minimis exemptions may play out, and the impact higher tariffs might have on consumer demand and discretionary wallet share. The One Big Beautiful Bill Act (OBBBA) enacted on July 4, 2025, eliminates the global de minimis exemption for commercial goods imported into the United States beginning in July 2027, and the exemption was suspended by an executive order effective August 29, 2025, impacting certain Etsy orders.

Risk Factors

Etsy faces numerous risks, including macroeconomic and geopolitical uncertainties such as inflation, interest rates, recessionary factors, foreign exchange rate volatility, tariffs, and other trade barriers, which can cause significant stock price fluctuations and impact consumer discretionary spending. Operational risks include potential technology disruptions, security breaches, and software errors, especially with frequent code releases and increasing reliance on AI-enabled systems, which could lead to data loss, liability, and reputational damage. The company's payments systems also carry operational and compliance risks, including dependence on third-party providers. Strategic risks involve intense competition from various online and offline venues, the need to keep pace with rapid technological changes, and challenges in effectively executing global growth strategies, particularly with the imposition of international trade barriers like the elimination of the global de minimis exemption for commercial goods imported into the U.S. beginning in July 2027. Regulatory, compliance, and legal risks are significant, stemming from evolving global laws on privacy, data protection, AI, and intellectual property, which can lead to costly compliance measures, fines, and litigation. The company is regularly involved in litigation and regulatory matters, including claims of intellectual property infringement and liability for seller content, which are expensive and time-consuming. Furthermore, the proposed sale of Depop is subject to various risks and uncertainties, including regulatory approval and closing conditions, and a delayed or failed sale could be disruptive, impact investor confidence, and result in significant costs, including a potential termination fee of $90 million or an additional $70 million under certain circumstances.

Management Priorities

Management's overall tone emphasizes a commitment to the mission of "Keep Commerce Human" and a focus on strategic initiatives to reignite growth, particularly for the core Etsy marketplace. The leadership transition, with Kruti Patel Goyal appointed CEO effective January 1, 2026, and Josh Silverman transitioning to Executive Chair, is framed as providing both continuity and evolutionary thinking to serve future customer needs. Management highlights the importance of disciplined marketing investments and technology enhancements, including machine learning and AI, to improve search, discovery, trust, and safety. They are focused on four customer-centric strategic initiatives: increasing Etsy's presence across diverse discovery channels, leveraging machine learning for better content matching, strengthening loyalty and retention of valuable customers, and amplifying human connection by making seller stories more visible. The company plans to utilize the $1.2 billion in cash proceeds from the pending sale of Depop for general corporate purposes, continued share repurchases, and investment in the Etsy marketplace, with $973.2 million remaining available for repurchases under approved plans as of December 31, 2025.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — About our Company
  2. [2] Item 1, Business — About our Company
  3. [3] Item 1, Business — About our Company
  4. [4] Item 1, Business — About our Company
  5. [5] Item 1, Business — About our Company
  6. [6] Item 7, MD&A — Revenue
  7. [7] Item 7, MD&A — Revenue
  8. [8] Item 7, MD&A — Revenue
  9. [9] Item 7, MD&A — Revenue
  10. [10] Item 7, MD&A — Revenue
  11. [11] Item 7, MD&A — Revenue
  12. [12] Item 7, MD&A — Revenue
  13. [13] Item 7, MD&A — Revenue
  14. [14] Item 7, MD&A — Revenue
  15. [15] Item 7, MD&A — Revenue
  16. [16] Item 7, MD&A — Key Operating and Financial Metrics
  17. [17] Item 7, MD&A — Key Operating and Financial Metrics
  18. [18] Item 7, MD&A — Key Operating and Financial Metrics
  19. [19] Item 7, MD&A — Key Operating and Financial Metrics
  20. [20] Item 7, MD&A — Key Operating and Financial Metrics
  21. [21] Item 7, MD&A — Key Operating and Financial Metrics
  22. [22] Item 7, MD&A — Key Operating and Financial Metrics (Calculated as Gross Profit / Revenue: $2,065,701 / $2,883,501 = 0.7164)
  23. [23] Item 7, MD&A — Key Operating and Financial Metrics
  24. [24] Item 7, MD&A — Key Operating and Financial Metrics
  25. [25] Item 7, MD&A — Key Operating and Financial Metrics
  26. [26] Item 7, MD&A — Key Operating and Financial Metrics
  27. [27] Item 7, MD&A — Key Operating and Financial Metrics
  28. [28] Item 7, MD&A — Key Operating and Financial Metrics
  29. [29] Item 7, MD&A — Key Operating and Financial Metrics
  30. [30] Item 8, Consolidated Statements of Operations
  31. [31] Item 8, Consolidated Statements of Operations
  32. [32] Item 7, MD&A — Key Operating and Financial Metrics
  33. [33] Item 7, MD&A — Key Operating and Financial Metrics
  34. [34] Item 7, MD&A — Key Operating and Financial Metrics
  35. [35] Item 7, MD&A — Key Operating and Financial Metrics
  36. [36] Item 7, MD&A — Key Operating and Financial Metrics
  37. [37] Item 8, Consolidated Balance Sheets
  38. [38] Item 8, Note 12 — Debt
  39. [39] Item 7, MD&A — Key Operating and Financial Metrics
  40. [40] Item 7, MD&A — Key Operating and Financial Metrics
  41. [41] Item 1, Business — The Depop Marketplace
  42. [42] Item 1, Business — The Depop Marketplace
  43. [43] Item 1, Business — 2025 Performance Recap
  44. [44] Item 1, Business — 2025 Performance Recap
  45. [45] Item 1, Business — Key Buyer Metrics
  46. [46] Item 1, Business — Key Buyer Metrics
  47. [47] Item 1, Business — Key Buyer Metrics
  48. [48] Item 1, Business — Key Buyer Metrics
  49. [49] Item 1, Business — Key Buyer Metrics
  50. [50] Item 1, Business — Key Buyer Metrics
  51. [51] Item 7, MD&A — Key Operating and Financial Metrics
  52. [52] Item 7, MD&A — Key Operating and Financial Metrics
  53. [53] Item 7, MD&A — Key Operating and Financial Metrics
  54. [54] Item 1, Business — About our Company
  55. [55] Item 1, Business — How We Make Money
  56. [56] Item 1, Business — How We Make Money
  57. [57] Item 1, Business — Growth Opportunity
  58. [58] Item 1, Business — Growth Opportunity
  59. [59] Item 1, Business — Growth Opportunity
  60. [60] Item 1, Business — Growth Opportunity
  61. [61] Item 1, Business — Growth Opportunity
  62. [62] Item 1, Business — Growth Opportunity
  63. [63] Item 1, Business — Growth Opportunity
  64. [64] Item 1, Business — Environmental
  65. [65] Item 1, Business — Environmental
  66. [66] Item 1, Business — Environmental
  67. [67] Item 1, Business — Environmental
  68. [68] Item 1, Business — Sustainable Operations
  69. [69] Item 1, Business — Sustainable Operations
  70. [70] Item 7, MD&A — Material Cash Requirements
  71. [71] Item 1, Business — How We Make Money
  72. [72] Item 1, Business — How We Make Money
  73. [73] Item 1, Business — How We Make Money
  74. [74] Item 1, Business — Our Impact Strategy, Goals, & Progress
  75. [75] Item 1, Business — Creative Community
  76. [76] Item 1A, Risk Factors — The closing of the proposed sale of Depop is subject to various risks and uncertainties, may not be completed in accordance with expected plans or on the currently contemplated timeline, or at all, and the pending sale may be disruptive to Etsy or create loss in value to stockholders.
  77. [77] Item 1A, Risk Factors — The closing of the proposed sale of Depop is subject to various risks and uncertainties, may not be completed in accordance with expected plans or on the currently contemplated timeline, or at all, and the pending sale may be disruptive to Etsy or create loss in value to stockholders.
  78. [78] Item 1, Business — About our Company
  79. [79] Item 1, Business — How We Make Money

Analysis on 5/22/2026