Etsy, Inc. (ETSY) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights strong financial performance, strategic product development, and positive market strategy, especially with AI and app improvements. While there are concerns about profitability and vague management responses, the optimistic guidance and loyalty program enhancements suggest a positive outlook. The lack of market cap data limits precise prediction, but overall sentiment leans positive.

Key Financial Performance

GMS (Gross Merchandise Sales) for Etsy and Depop combined Returned to year-over-year growth, with further sequential improvement expected. Etsy marketplace GMS improved approximately 300 basis points sequentially to $2.43 billion, down 2.4% year-over-year. Depop's GMS grew 39.4% year-over-year to $292 million, driven by new user growth and buyer conversion improvements.

Consolidated GMS $2.72 billion, exceeding the top end of guidance. Excluding Reverb, consolidated GMS grew 0.9% year-over-year.

Consolidated Revenue $678 million, up 6.1% year-over-year excluding Reverb. Growth driven by services revenue and Onsite Ad revenue at both Etsy and Depop.

Adjusted EBITDA $172 million, representing a consolidated adjusted EBITDA margin of 25.4%. Etsy marketplace margin was just shy of 30%.

Active Buyers 86.6 million on a trailing 12-month basis, down 5% year-over-year and 0.8% sequentially. New and reactivated buyers totaled 11.4 million for the quarter.

GMS per Active Buyer $121 in the third quarter, stable year-to-date. Improvements seen since April 2025 with higher average item values and improving purchase frequency.

Mobile App GMS Accelerated to mid-single-digit year-over-year growth in the third quarter. App's contribution to total GMS increased to 46% from 42.8% a year ago.

Active Sellers Grew 1.7% sequentially in the third quarter, leading to a moderation in the year-over-year decline. New sellers with sales saw strong double-digit year-over-year growth.

Take Rate Improved to 24.9%, up 90 basis points sequentially and 220 basis points year-over-year, reflecting growth in services and ads revenue.

Free Cash Flow $200 million in the quarter and $635 million in the trailing 12 months.

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Operating Highlights

AI Integration: Etsy partnered with OpenAI to enable instant checkout through ChatGPT, allowing users to buy items directly via chat. This integration is designed to enhance buyer experience and drive incremental growth.

App Improvements: Etsy redesigned its app home screen, improved navigation, and introduced a new discovery feed powered by advanced machine learning. These changes led to a 20% year-over-year growth in app home GMS.

AI-Powered Seller Tools: Etsy launched AI tools to help sellers generate listing titles and draft buyer messages, improving seller satisfaction scores by over 10 percentage points.

Depop Expansion: Depop's GMS grew 39.4% year-over-year to $292 million, with 59% growth in U.S. GMS. Depop also launched its largest brand campaign in the U.S. to raise awareness.

Marketing Shift: Etsy reallocated brand marketing spend from linear TV to social video and streaming, focusing on engagement and inspiration.

Financial Performance: Etsy's consolidated GMS was $2.72 billion, exceeding guidance. Revenue grew 6.1% year-over-year to $678 million, and adjusted EBITDA was $172 million with a margin of 25.4%.

Buyer and Seller Metrics: Active sellers grew 1.7% sequentially, and new sellers saw double-digit growth. Active buyers were 86.6 million, with GMS per active buyer stable at $121.

Leadership Transition: Josh Silverman will transition to Executive Chair, and Kruti Patel Goyal will become CEO effective January 1, 2026. Kruti has already redefined strategic priorities and operational approaches.

Focus on AI and Personalization: Etsy is entering a new phase focused on leveraging AI to personalize and transform the shopping experience.

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Risk or Challenges

Leadership Transition: The transition of CEO leadership from Josh Silverman to Kruti Patel Goyal could pose risks related to strategic continuity and execution. Leadership changes often bring uncertainty, and there may be challenges in maintaining the momentum of current initiatives.

Economic Uncertainty: The company acknowledges a higher-than-normal degree of uncertainty about consumer spending, particularly during the holiday season, which could impact revenue and growth.

Regulatory and Trade Challenges: The expiration of the de minimis exemption and pressures on U.S. import trade routes have created headwinds. These regulatory changes could disrupt supply chains and increase costs for sellers and buyers.

Competitive Pressures: The company faces competitive pressures in the e-commerce and resale markets, particularly as it reallocates marketing spend and invests in brand awareness for Depop.

Operational Challenges: Efforts to improve the Etsy app and integrate AI-powered tools require significant investment and execution. Any delays or inefficiencies in these initiatives could impact user experience and growth.

Seller Retention and Satisfaction: While seller satisfaction scores have improved, retaining and supporting sellers remains critical. Any decline in seller satisfaction could impact the availability and quality of inventory on the platform.

Macroeconomic Factors: Consumer discretionary spending trends, particularly among lower-income buyers, remain a concern. Economic pressures could affect buyer behavior and overall GMS.

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Guidance & Outlook

GMS (Gross Merchandise Sales): Etsy and Depop combined returned to year-over-year growth in Q3 2025, with further sequential improvement expected at the midpoint of Q4 guidance. Depop's GMS grew 39.4% year-over-year to $292 million, with 59% year-over-year growth in Depop's U.S. GMS.

Revenue: Consolidated revenue grew 6.1% year-over-year to $678 million in Q3 2025. Q4 consolidated GMS is expected to be between $3.5 billion and $3.65 billion, representing further quarter-over-quarter improvement.

Adjusted EBITDA Margin: Consolidated adjusted EBITDA margin for Q4 is expected to be approximately 24%, reflecting stable profitability for Etsy marketplace and increased brand marketing investment at Depop.

Take Rate: Q4 consolidated take rate is expected to be approximately 24.5%, reflecting some seasonality.

Depop Growth: Depop's U.S. GMS grew nearly 60% year-over-year, with the business now at an annualized run rate of $1 billion+. Significant sequential increase in brand marketing investment planned for Q4 to capitalize on growth opportunities in the apparel resale market.

AI and Machine Learning: Advancements in AI and machine learning are central to Etsy's strategy, with improvements in buyer and item understanding driving double-digit increases in engagement metrics and measurable conversion gains.

Etsy App: Mobile app GMS accelerated to mid-single-digit year-over-year growth in Q3 2025, with app's contribution to total GMS increasing to 46%. App downloads grew 9% year-over-year, with faster growth among new buyers.

Holiday Season Marketing: Significant reallocation of brand marketing spend away from linear TV to upper funnel channels like social video and streaming, aimed at sparking engagement and inspiration during the holiday season.

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Shareholder Return Plan

Dividend Program: No mention of a dividend program was made in the transcript.

Share Buyback Program: The company repurchased 2.1 million shares of Etsy stock at a total cost of roughly $120 million. Over the longer term, the company has reduced its share count by 17% since December 2023 through its stock buyback program, delivering significant value to shareholders.

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Key Q&A

Q:Is the OpenAI integration available to all U.S. sellers, and how are listings prioritized?

A:The OpenAI integration is available to the substantial majority of Etsy's products. OpenAI scrapes Etsy listings organically, and Etsy provides a data feed to OpenAI for buyers to complete transactions within OpenAI. Transactions still go through Etsy's payment rails, and Etsy pays a success-based transaction fee to OpenAI.

Q:How should investors think about the performance fee since Etsy is covering it?

A:The performance fee is similar to what Etsy would pay to an influencer or affiliate, as it is a CPA-based transaction fee. Currently, Etsy is not passing this fee to sellers, and it is not part of the offsite ads program.

Q:What improvements have been made to the Etsy app, and how are they impacting engagement?

A:Etsy has reshaped the home screen to enable better discovery, including a central hub for personalized recommendations and a discovery-focused feed powered by new ML models. These changes have led to a meaningful uplift in engagement on the home screen. App users visit 5x more often and view 3x as many pages compared to web-only users.

Q:How are these app improvements influencing product development plans for next year?

A:The improvements are encouraging and align with Etsy's four strategic priorities to drive discovery, engagement, and connection. Etsy plans to continue investing in these priorities to accelerate marketplace growth.

Q:What is Etsy's outlook for Q4 GMS, and how is the company approaching the holiday season?

A:Etsy expects sequential improvement in year-over-year growth rates for Q4 GMS, assuming consumer health remains stable. The company has planned a holiday campaign emphasizing Etsy's humanity and integrated Gift Mode into the core experience for better recommendations.

Q:Is there an opportunity to invest more to reignite growth faster, or is it important to preserve profitability?

A:Etsy remains disciplined in its investments and sees profitability as a strength. The company is willing to make deeper investments where there is significant opportunity, as demonstrated by its approach to Depop.

Q:How is Kruti Goyal planning to drive sustained GMS growth as the new CEO?

A:Kruti Goyal plans to focus on strengthening Etsy's value proposition for buyers and sellers through its four strategic priorities, which aim to drive discovery, engagement, and connection. The company is encouraged by early traction but sees significant potential for further growth.

Q:What are the key learnings from Etsy's loyalty program, and what changes are being made?

A:The initial loyalty program drove adoption and increased engagement and purchasing frequency. The new version focuses on frequent buyers, offering benefits like shipping discounts and Etsy credit on every purchase to drive adoption and retention.

Q:What is the GMS opportunity attached to loyalty over the long term?

A:Etsy sees a significant opportunity to increase GMS per buyer, which currently averages $120 annually. The loyalty program aims to increase purchase frequency and engagement, driving long-term growth.

Q:How does Etsy balance traffic from GenAI platforms versus direct/mobile traffic?

A:Etsy views GenAI platforms as complementary to direct/mobile traffic. Agentic commerce can increase consideration for Etsy by presenting its unique offerings, while the app remains a key channel for engagement and personalization.

Q:What are the planned investments for Depop in Q4, and are they structural or temporary?

A:Etsy plans to invest in a brand campaign for Depop to expand awareness, which will compress margins in Q4 and continue into the first half of next year. The investment is aimed at long-term growth and can be adjusted based on performance.

Q:What are the early insights from the OpenAI partnership?

A:The partnership has shown a spike in purchases, albeit from a small base. Traffic from agents has higher intent and conversion rates, but it is still early to draw definitive conclusions.

Q:How does Etsy evaluate the risk/reward of the OpenAI partnership?

A:Etsy believes its brand and value proposition will remain prominent in agentic commerce, instilling buyer confidence. The company sees agentic commerce as complementary to its app and a way to increase consideration for Etsy.

Q:What are Etsy's thoughts on M&A and capital allocation?

A:Etsy is focused on its core brands, Etsy and Depop, and sees significant long-term value in them. The company has been buying back stock and is open to M&A opportunities if they align with its strategic goals.

Q:Review of Unclear Management Responses

A:Management avoided providing specific data or clarity on the exact impact of the OpenAI partnership on metrics like conversion rates and average selling price, citing the early stage of the initiative. Additionally, while discussing Depop investments, management did not provide detailed metrics or timelines for assessing the success of the brand campaign.

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Earnings Word Cloud

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Etsy's earnings call reveals strong financial health with significant share repurchases and free cash flow generation. Product and app enhancements, along with AI initiatives, drive user engagement and spending. Despite a slight decline in GMS, positive guidance and strategic investments suggest future growth. The Q&A section highlights improved spending, margin management, and successful marketing strategies. While management was vague on some specifics, overall sentiment is positive, expecting a 2% to 8% stock price increase.

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