Etsy Inc.

04/29/2026 | Press release | Distributed by Public on 04/29/2026 06:19

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and with the audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 19, 2026 (the "Annual Report"). This discussion, particularly information with respect to our outlook, key trends and uncertainties, our plans and strategy for our business, and our performance and future success, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, particularly in Part II, Item 1A, "Risk Factors." We also believe that our performance and future success depend on a number of factors that present significant opportunities for us, as discussed in Part I, Item 1, "Business," in our Annual Report, which we incorporate by reference.
Overview
Business
Etsy operates two-sided online marketplaces that connect millions of creative entrepreneurs with buyers around the world.
The Etsy marketplace is the global destination for unique, creative goods from independent sellers, connecting artisans with thoughtful consumers seeking items that reflect their tastes and values.
On February 15, 2026, we entered into a Sale and Purchase Agreement (the "Purchase Agreement") with eBay Inc. ("eBay") for eBay to purchase Depop Limited ("Depop"), our fashion resale marketplace, for $1.2 billion in cash, subject to certain adjustments as set forth in the Purchase Agreement. The sale is currently expected to close by the end of the third quarter of 2026, subject to regulatory approval and certain other closing conditions as set forth in the Purchase Agreement. We will continue to own and operate Depop through such time as the transaction is completed, with Depop's assets and liabilities, results of operations, and related cash flows presented as discontinued operations in the Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, and Condensed Consolidated Statements of Cash Flows, respectively, for all periods presented. Unless otherwise noted, all financial results and other metrics discussed in this report are for continuing operations only. In keeping with our current capital allocation approach, we plan to utilize the proceeds from this transaction for general corporate purposes, continued share repurchases, and investment in the Etsy marketplace.
On June 2, 2025, we completed the sale of Reverb Holdings, Inc. ("Reverb"), our musical instrument marketplace. The results of Reverb, until its sale on June 2, 2025, are included in all financial results and other metrics discussed in this report, unless otherwise noted.
We generate 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, which include on-site advertising and shipping labels.
Key Operating and Financial Metrics
We collect and analyze operating and financial data to evaluate the health and performance of our business and allocate our resources (such as capital, people, and technology investments). Our key operating and financial metrics are presented on a continuing operations basis in the table below for all periods presented, since Depop is presented as a discontinued operation due to its pending sale. Due to the sale of Reverb on June 2, 2025, continuing operations includes Reverb and Etsy marketplaces for the three months ended March 31, 2025, but the three months ended March 31, 2026 reflects the Etsy marketplace only. This makes year-over-year continuing operations results not directly comparable. To provide investors with a meaningful basis for comparing our results year-over-year, we have presented Etsy marketplace results for the three months ended March 31, 2025. Our calculation of trailing twelve months free cash flow includes activity for combined continuing and discontinued operations. See "Non-GAAP Financial Measures" for more information regarding our use of Etsy marketplace financial metrics, Adjusted EBITDA, Adjusted EBITDA margin, and free cash flow, and reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure.
Our key operating and financial metrics are (in thousands, except percentages):
Three Months Ended
March 31, 		% (Decline)
Growth
Y/Y for Continuing Operations 		% Growth (Decline) Y/Y for the Etsy Marketplace (Non-GAAP) (1)
2026 2025
Continuing Operations Continuing Operations Etsy Marketplace
(Non-GAAP)
GMS (2) $ 2,460,195 $ 2,559,821 $ 2,331,462 (3.9) % 5.5 %
Revenue $ 631,277 $ 612,204 $ 586,557 3.1 % 7.6 %
Revenue take rate (3) 25.7 % 23.9 % 25.2 % 180 bps 50 bps
Marketplace revenue $ 432,773 $ 428,236 $ 406,965 1.1 % 6.3 %
Services revenue $ 198,504 $ 183,968 $ 179,592 7.9 % 10.5 %
Gross profit $ 455,598 $ 444,403 $ 432,168 2.5 % 5.4 %
Operating expenses $ 335,752 $ 448,276 $ 329,015 (25.1) % 2.0 %
Net income (loss) $ 104,662 $ (35,087) $ 71,491 (398.3) % 46.4 %
Net income (loss) margin 16.6 % (5.7) % 12.2 % 2,230 bps 440 bps
Adjusted EBITDA (Non-GAAP) $ 184,711 $ 173,521 $ 170,649 6.4 % 8.2 %
Adjusted EBITDA margin (Non-GAAP) 29.3 % 28.3 % 29.1 % 100 bps 20 bps
Active sellers (4) 5,563 5,602 5,386 (0.7) % 3.3 %
Active buyers (5) 86,618 89,230 88,472 (2.9) % (2.1) %
(1)% growth (decline) Y/Y for the Etsy marketplace is the change in continuing operations for the three months ended March 31, 2026, which represents activity for the Etsy marketplace only, compared to the Etsy marketplace excluding Reverb for the three months ended March 31, 2025, as Reverb was sold in the second quarter of 2025.
(2)Excluded from the table above is gross merchandise sales ("GMS") for Depop, which was $348.9 million and $233.5 million for the three months ended March 31, 2026 and 2025, respectively. GMS is the dollar value of items sold in our marketplaces, excluding shipping fees and net of refunds, within the applicable period. GMS does not represent revenue earned by us.
(3)Revenue take rate is revenue divided by GMS.
(4)An active seller is a seller who has had a charge or sale in the last 12 months. A seller is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple seller accounts and can count as a distinct active seller in each of our marketplaces. As part of our commitment to integrity and transparency, we continuously monitor, and from time to time adjust, the criteria for disqualifying a seller as an active seller.
(5)An active buyer is a buyer who has made at least one purchase in the last 12 months. A buyer is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple buyer accounts and can count as a distinct active buyer in each of our marketplaces.
As of March 31, % Decline Y/Y
2026 2025
Continuing and Discontinued Operations Continuing and Discontinued Operations
Net cash provided by operating activities - trailing twelve months $ 724,973 $ 732,619 (1.0) %
Free cash flow - trailing twelve months (Non-GAAP) $ 671,155 $ 684,924 (2.0) %
We disclose key operating metrics because they provide meaningful insight into the performance and health of our business. GMS, active sellers, and active buyers each reflect core drivers of our business-seller success, buyer engagement, and the overall scale of our platforms. We believe these measures help investors and management evaluate our growth potential and the underlying strength of our marketplace.
GMS
GMS from continuing operations decreased by $99.6 million to $2,460.2 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025, reflecting a decrease of $228.4 million from the sale of Reverb, partially offset by an increase of $128.7 million from the Etsy marketplace. Etsy marketplace year-over-year GMS growth, which excludes Reverb from the prior year period, was up 5.5%, driven by progress against our strategic priorities, which are beginning to translate into underlying improvements across our marketplace, as well as from foreign exchange tailwinds. We also benefited from softer performance in the prior year comparable period. The Etsy marketplace GMS per active buyer on a trailing twelve month basis increased 1.5% year-over-year to $122, partially offset by a year-over-year decline of 2.1% of active buyers on the Etsy marketplace to 86.6 million.
U.S. buyer GMS is GMS from transactions in which the shipping address entered by the buyer at the time of sale is in the U.S., net of refunds. GMS from transactions in which the shipping address entered by the buyer at the time of sale is not in the U.S, net of refunds is non-U.S. buyer GMS. Percent U.S. buyer GMS for the periods presented below are as follows:
Three Months Ended
March 31,
2026 2025
Percent U.S. Buyer GMS - Continuing operations 74 % 76 %
Percent U.S. Buyer GMS - Etsy marketplace 74 % 75 %
There is considerable uncertainty regarding macroeconomic conditions, including geopolitical conflicts and the evolving tariff landscape, how recent changes to de minimis exemptions may play out, and the impact any of the foregoing might have on consumer demand and discretionary wallet share. Any circumstances that reduce consumer demand or hinder our sellers' cross-border trade may adversely affect our business. See Part II, Item 1A, "Risk Factors" for further detail.
Currency-Neutral GMS
We calculate currency-neutral GMS by translating current period GMS for goods sold that were listed in non-U.S. dollar currencies into U.S. dollars using prior year foreign currency exchange rates.
As reported and currency-neutral GMS (decline) growth for the periods presented below are as follows:
Three Months Ended
March 31,
2026 2025
As Reported Currency-Neutral FX Impact As Reported Currency-Neutral FX Impact
GMS - Continuing operations (3.9) % (5.7) % 1.8 % (8.9) % (8.2) % (0.7) %
GMS - Etsy marketplace 5.5 % 3.6 % 1.9 % (8.9) % (8.1) % (0.8) %
Results of Operations
Comparison of Three Months Ended March 31, 2026 and 2025
Revenue
Three Months Ended
March 31, 		Change
(in thousands, except percentages)
2026 2025 $ %
Revenue:
Marketplace $ 432,773 $ 428,236 $ 4,537 1.1 %
Percentage of total revenue 68.6 % 69.9 %
Services $ 198,504 $ 183,968 $ 14,536 7.9 %
Percentage of total revenue 31.4 % 30.1 %
Total revenue $ 631,277 $ 612,204 $ 19,073 3.1 %
Revenue increased primarily driven by an increase in services revenue, and, to a lesser extent, an increase in marketplace revenue.
Services revenue increased primarily due to a $14.4 million increase in advertising revenue, primarily driven by an increase in average price per click on Etsy Ads.
Marketplace revenue increased primarily due to an $11.5 million increase in Etsy payments revenue and a $9.7 million increase in Etsy transaction fee revenue, both driven by an increase in Etsy marketplace GMS. These increases in marketplace revenue were partially offset by a decrease of $21.3 million related to the sale of Reverb on June 2, 2025.
Costs and Operating Expenses
Cost of Revenue
Three Months Ended
March 31, 		Change
(in thousands, except percentages)
2026 2025 $ %
Cost of revenue $ 175,679 $ 167,801 $ 7,878 4.7 %
Percentage of total revenue 27.8 % 27.4 %
The increase in cost of revenue was primarily driven by an increase in cost of refunds, payments fees, and cloud-related hosting and bandwidth costs, partially offset by the sale of Reverb on June 2, 2025.
Marketing
Three Months Ended
March 31, 		Change
(in thousands, except percentages)
2026 2025 $ %
Marketing $ 174,239 $ 171,857 $ 2,382 1.4 %
Percentage of total revenue 27.6 % 28.1 %
Marketing expenses increased primarily due to targeted shifts in portfolio mix, in which strong returns in specific channels supported incremental spend. Marketing expenses also increased due to increased stock-based compensation, mainly resulting from forfeitures related to an executive departure in the three months ended March 31, 2025 that did not recur in the three months ended March 31, 2026. These increases were partially offset by the sale of Reverb on June 2, 2025. Paid GMS was 21% of overall GMS for the three months ended March 31, 2026 compared to 23% for the three months ended March 31, 2025.
Product development
Three Months Ended
March 31, 		Change
(in thousands, except percentages)
2026 2025 $ %
Product development $ 99,052 $ 100,810 $ (1,758) (1.7) %
Percentage of total revenue 15.7 % 16.5 %
Product development expenses decreased primarily due to the sale of Reverb on June 2, 2025, offset by increased Etsy marketplace employee compensation-related expenses.
General and administrative
Three Months Ended
March 31, 		Change
(in thousands, except percentages)
2026 2025 $ %
General and administrative $ 62,461 $ 73,906 $ (11,445) (15.5) %
Percentage of total revenue 9.9 % 12.1 %
General and administrative expenses decreased, primarily due to the reversal of previously recognized Canadian digital services tax ("DST") expense in the first quarter of 2026, following the repeal of the DST in Canada in March 2026. Additionally, general and administrative expenses decreased due to the sale of Reverb on June 2, 2025.
Asset impairment charge
Three Months Ended
March 31, 		Change
(in thousands, except percentages)
2026 2025 $ %
Asset impairment charge
$ - $ 101,703 (101,703) (100.0) %
Percentage of total revenue - 16.6 %
Asset impairment charge was $101.7 million in the three months ended March 31, 2025, related to the impairment of the goodwill of Reverb. See Part I, Item 1, "Note 6-Goodwill" for more information. There was no asset impairment charge in the three months ended March 31, 2026.
Other Income (Expense), net
Three Months Ended
March 31, 		Change
(in thousands, except percentages)
2026 2025 $ %
Other income (expense), net $ 9,414 $ (10,714) $ 20,128 (187.9) %
Percentage of total revenue 1.5 % (1.8) %
Other income, net increased from other expense, net, primarily driven by changes in exchange rates that impact our non-functional currency cash and intercompany balances, which resulted in a gain for the three months ended March 31, 2026 as compared to a loss for the three months ended March 31, 2025.
Provision for Income Taxes
Three Months Ended
March 31, 		Change
(in thousands, except percentages)
2026 2025 $ %
Provision for income taxes $ (24,598) $ (20,500) $ (4,098) 20.0 %
Percentage of total revenue (3.9) % (3.3) %
The primary driver of our income tax provision for the three months ended March 31, 2026 was tax expense on income before income taxes.
The primary drivers of our income tax provision for the three months ended March 31, 2025 were tax expense on income before income taxes excluding the impairment charge and tax deficiencies from stock-based compensation due to a lower stock price at vesting of restricted stock units compared to the stock price upon grant.
Loss on Discontinued Operations
Three Months Ended
March 31, 		Change
(in thousands, except percentages)
2026 2025 $ %
Loss on discontinued operations
$ (34,982) $ (17,009) $ (17,973) 105.7 %
Loss on discontinued operations for the three months ended March 31, 2026 and 2025 was $35.0 million and $17.0 million, respectively, reflecting operating results from Depop. See Part I, Item 1, "Note 2-Discontinued Operations" for more information.
Non-GAAP Financial Measures
Other Key Financial Metrics
Given the pending sale of Depop, Etsy results are presented on a continuing operations basis, while Depop results are reported as discontinued operations across all periods presented. Due to the sale of Reverb on June 2, 2025, continuing operations for the three months ended March 31, 2025 includes Reverb and Etsy marketplaces, but the three months ended March 31, 2026 reflects the Etsy marketplace only. This makes year-over-year continuing operations results not directly comparable.
To provide investors with a meaningful basis for comparing our ongoing operating results year-over-year, we have presented certain Etsy marketplace financial measures for the three months ended March 31, 2025 in this Quarterly Report. These measures include the following non-GAAP financial measures for the three months ended March 31, 2025 where we exclude the impact of Reverb: (1) Revenue and Revenue take rate, (2) Marketplace revenue, (3) Services revenue, (4) Gross profit, (5) Operating expenses, (6) Net (loss) income and Net (loss) income margin, and (7) Adjusted EBITDA and Adjusted EBITDA margin.
Management believes that presenting these Etsy marketplace non-GAAP financial measures is useful to investors because they:
•provide a clearer, normalized baseline to evaluate the organic growth, financial performance, and underlying trends of our remaining Etsy marketplace business;
•facilitate more direct year-over-year comparisons of our continuing operations by removing the impact of the divested Reverb marketplace; and
•align with how management evaluates the performance of the business, allocates resources, and sets internal operational targets moving forward.
These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for, financial information prepared in accordance with GAAP. Furthermore, our calculation of these non-GAAP measures may differ from similarly titled measures reported by other companies. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is provided in the following tables below (in thousands, except percentages):
Three Months Ended March 31, 2025
Continuing Operations
(As Reported) 		Less: Reverb Marketplace Etsy Marketplace (Non-GAAP)
Revenue $ 612,204 $ 25,647 $ 586,557
Revenue take rate 23.9 % 11.2 % 25.2 %
Marketplace revenue $ 428,236 $ 21,271 $ 406,965
Services revenue $ 183,968 $ 4,376 $ 179,592
Gross profit $ 444,403 $ 12,235 $ 432,168
Operating expenses $ 448,276 $ 119,261 $ 329,015
Net (loss) income $ (35,087) $ (106,578) $ 71,491
Net (loss) income margin (5.7) % (415.6) % 12.2 %
Adjusted EBITDA
Adjusted EBITDA represents our net income (loss) adjusted to exclude: stock-based compensation expense and related payroll taxes; depreciation and amortization expense; provision (benefit) for income taxes; interest and other non-operating (income) expense, net; foreign exchange (gain) loss; acquisition, divestiture, and corporate structure-related expenses; asset impairment charge; restructuring and other exit costs; and retroactive non-income tax income. The following table reflects the reconciliation of net income (loss) from continuing operations to Adjusted EBITDA from continuing operations and the Etsy marketplace. The table also reflects the calculation of Adjusted EBITDA margin from continuing operations and the Etsy marketplace for each of the periods indicated (in thousands, except percentages):
Three Months Ended
March 31,
2026 2025
Continuing Operations Continuing Operations
(As Reported) 		Less: Reverb Marketplace Etsy Marketplace (Non-GAAP)
Net income (loss) $ 104,662 $ (35,087) $ (106,578) $ 71,491
Excluding:
Stock-based compensation expense and related payroll taxes 55,537 57,639 4,083 53,556
Depreciation and amortization expense 15,315 17,189 4,112 13,077
Provision (benefit) for income taxes 24,598 20,500 (443) 20,943
Interest and other non-operating (income) expense, net (6,956) (4,902) 220 (5,122)
Foreign exchange (gain) loss (2,448) 15,616 (225) 15,841
Acquisition, divestiture, and corporate structure-related expenses 39 1,263 - 1,263
Asset impairment charge - 101,703 101,703 -
Restructuring and other exit income - (400) - (400)
Retroactive non-income tax income (6,036) - - -
Adjusted EBITDA $ 184,711 $ 173,521 $ 2,872 $ 170,649
Divided by:
Revenue $ 631,277 $ 612,204 $ 25,647 $ 586,557
Adjusted EBITDA margin 29.3 % 28.3 % 11.2 % 29.1 %
Free Cash Flow
Free cash flow represents our net cash provided by operating activities, reduced by purchases of property and equipment and website and app development that are included in cash flows from investing activities. The following table reflects the reconciliation of operating activities to free cash flow for combined continuing and discontinued operations on a trailing twelve month basis (in thousands):
As of March 31,
2026 2025
Continuing and Discontinued Operations Continuing and Discontinued Operations
Net cash provided by operating activities $ 724,973 $ 732,619
Purchases of property and equipment (13,677) (15,199)
Website and app development (40,141) (32,496)
Free cash flow $ 671,155 $ 684,924
Liquidity and Capital Resources
Cash and cash equivalents and short-term investments were $1.4 billion as of March 31, 2026. Additionally, we have $150.6 million in long-term investments, a majority of which we can liquidate at short notice and with minimal penalties if needed. We also have the ability to draw down on our $400.0 million senior secured revolving credit facility (the "2023 Credit Agreement"). As of March 31, 2026, we had net working capital from continuing operations of $520.3 million and in the three months ended March 31, 2026, we had positive operating cash flows of continuing operations of $102.5 million. We believe that this capital structure, as well as the nature and framework of our business, will allow us to meet all debt covenants, sustain our business operations, and be able to react to changing macroeconomic conditions.
As of March 31, 2026, a majority of our cash and cash equivalents, short-term, and long-term investments balance was held in the United States. Our cash and cash equivalents are held for future investments, working capital funding, and general corporate purposes. We fund our non-U.S. operations from our funds held in the United States on an as-needed basis.
We typically invest in short- and long-term instruments, which are intended to allow us to preserve our principal, maintain the ability to meet our liquidity needs, deliver positive yields across a balanced portfolio, and continue to provide us with direct fiduciary control. In accordance with our investment policy, all investments, other than investments made through our Impact Investment Fund, have maturities no longer than 37 months, with the average maturity of these investments maintained at 12 months or less.
Sources of Liquidity
We have the ability to draw down on the 2023 Credit Agreement. See Part I, Item 1, "Note 10-Debt" for more information on the 2023 Credit Agreement.
Upon completion of the Purchase Agreement for eBay to purchase Depop, which is expected to close by the end of the third quarter of 2026, we anticipate receiving approximately $1.2 billion in cash, net of certain purchase price adjustments. See Part I, Item 1, "Note 2-Discontinued Operations" for more information on the Purchase Agreement.
We believe that our existing cash and cash equivalents and short- and long-term investments, together with cash generated from operations, will be sufficient to meet our anticipated operating cash needs for at least the next 12 months. While this belief is based on our current expectations and assumptions, in light of current macroeconomic conditions, our future capital requirements and the adequacy of available funds will depend on many factors, including those described in Part II, Item 1A, "Risk Factors" in this Quarterly Report.
Cash Flows
Three Months Ended
March 31,
(in thousands)
2026 2025
Cash provided by (used in):
Operating activities of continuing operations $ 102,536 $ 49,816
Investing activities of continuing operations (13,319) (18,964)
Financing activities (158,446) (204,782)
Net Cash Provided by Operating Activities of Continuing Operations
Our cash flows from continuing operations are largely dependent on revenue generation and net income from continuing operations, as well as working capital movements and non-cash items. Non-cash working capital at any specific point in time is subject to many variables, including variability in the timing of cash receipts and payments (including payment of taxes), and vendor payment terms. The increase in the three months ended March 31, 2026 of $52.7 million, compared to the same period in 2025, was primarily due to a $28.8 million increase in the change in working capital less cash and an increase of $24.0 million in net income, excluding non-cash items.
Net Cash Used in Investing Activities of Continuing Operations
Net cash used in investing activities of continuing operations results from purchases and maturities of investments and capital expenditures, including investments in website and app development and purchases of property and equipment to support our business initiatives. The decrease in the three months ended March 31, 2026 of $5.6 million, compared to the same period in 2025, was primarily due to a decrease in net purchases of investments.
Net Cash Used in Financing Activities
Net cash used in financing activities primarily consists of cash outflows for stock repurchases and payment of tax obligations on vested equity awards. The decrease in the three months ended March 31, 2026 of $46.3 million, compared to the same period in 2025, was primarily due to a decrease in stock repurchases.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. We continue to monitor the effects of global macroeconomic and geopolitical factors on our results of operations, cash flows, and financial position. We believe we have used reasonable estimates and assumptions in preparing the condensed consolidated financial statements. Our actual results could differ from these estimates.
There have been no significant changes to our critical accounting policies and estimates included in our Annual Report.
Recent Accounting Pronouncements
See Part I, Item 1, "Note 1-Basis of Presentation and Summary of Significant Accounting Policies" for information regarding recently adopted and recently issued accounting pronouncements.
Etsy Inc. published this content on April 29, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on April 29, 2026 at 12:19 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]