Etsy, Inc. (ETSY) Earnings

Management highlights

• Overall Business & Marketplace Fundamentals - Q2 2026 GMS and revenue growth accelerated sequentially, with flow-through of revenue to adjusted EBITDA remaining healthy, proving the strength of Etsy's business model - Active buyers grew 350,000 sequentially to 87 million, remaining stable year-over-year, while gross buyer additions accelerated; habitual and repeat buyer cohorts posted sequential growth for the first time since 2023 - Trailing 12-month GMS per active buyer grew 2.8% year-over-year to $124, driven by both higher seller listing prices and improved curation of higher-quality inventory - The year-over-year decline in purchase frequency moderated from Q1 2026, an early positive signal of improving customer experience - Mobile app GMS growth accelerated to 12.5% year-over-year, with both visits per monthly active user and orders per visit increasing year-over-year - The seller base remains healthy, with year-over-year active seller growth and improved retention of prior-year active sellers • Strategic Progress & Younger Buyer Outreach - Investments in discovery, matching, and personalization have created a growth flywheel: richer buyer profiles now cover over 65 million buyers, improving personalization for repeat visits - The company has shifted marketing investment to social channels (YouTube/TikTok) and other venues where younger buyers discover products, driving a fivefold increase in visits from millennial and Gen Z audiences in H1 2026; high-profile partnerships like the Olivia Rodrigo collaboration further boost reach to this segment • Organizational Restructuring - Etsy announced a restructuring focused primarily on product and engineering, reducing total headcount by ~220 employees (11% of total workforce), leaving a total headcount of ~1,600 post-restructuring - The restructuring is framed as a focused re-alignment, not a pure cost-cutting move: it reduces organizational silos, creates flatter faster teams, and reorients talent mix toward strategically critical capabilities, particularly machine learning - The company expects to incur ~$35 million in largely cash severance and transition costs, with substantially all restructuring completed by the end of Q3 2026 • Capital Allocation - As of June 30 2026, Etsy held $1.3 billion in cash, cash equivalents, and investments; it received an additional $1.4 billion in cash proceeds from the sale of Depop completed at the end of July 2026 - In Q2 2026, Etsy repurchased ~$250 million in stock (70% higher than Q1 2026), reducing outstanding shares by 3.9 million - The company announced a new $2 billion share repurchase authorization to return excess capital to shareholders following the Depop sale

Guidance

- Q3 2026: Etsy Marketplace GMS is projected to be between $2.53 billion and $2.58 billion, representing 4% to 6% year-over-year growth. Take rate is expected to be ~26%, with adjusted EBITDA margin projected in the 28% to 30% range. - Full year 2026: GMS growth is now expected to land in the mid single-digit range, an upward revision from prior guidance that reflects stronger than expected second half momentum. Full year take rate is expected to be roughly equal to first half 2026 levels. The full year adjusted EBITDA margin guidance is tightened upward to 29% to 30%, incorporating expected cost savings from the restructuring. - Post-restructuring, Etsy plans to reinvest freed-up resources into strategic priorities: deepening machine learning expertise, exploring additional R&D for new product capabilities, expanding marketing initiatives, investing in customer trust, and pursuing international growth to accelerate 2026 learnings that will inform 2027 plans. The company remains committed to maintaining its current attractive profit margin profile.

Segment performance

The only continuing operating segment following the sale of Depop and Reverb is the Etsy Marketplace. In Q2 2026, Etsy Marketplace GMS was $2.6 billion, growing 7.5% year-over-year. Total segment revenue was $668 million, growing 9.3% year-over-year on a standalone basis, with 8.4% year-over-year growth for core marketplace revenue and 11.2% year-over-year growth for services revenue. The overall take rate for the segment was 25.9%, up 130 basis points year-over-year (80 basis points of this gain comes from the Reverb divestiture). Adjusted EBITDA for the segment was $195 million, representing a 29.2% adjusted EBITDA margin. 100% of the company's continuing operations revenue and GMS is contributed by the Etsy Marketplace segment.

Risks & headwinds

No material new risks or operational failures were explicitly discussed during the call. Management noted that restructuring decisions impact employee livelihoods and were not made lightly, but framed the changes as necessary to position the company for long-term growth. The only potential external risks referenced were consumer sensitivity to fluctuating gas prices and EU de minimis rule changes, but management stated there has been no material impact from these factors to date, and do not expect significant impact going forward.

Analyst Q&A

• Q: What are the key drivers of improved Q2 GMS growth, and what early progress has been made targeting younger buyers?

  A: Improved growth comes from coordinated execution across strategic priorities rather than isolated initiatives. More efficient marketing, including improved performance in PLAs via better segmentation and strong organic SEO, brings in higher quality buyers, while on-site product improvements to search personalization, recommendations and home feed relevance create a better experience. Richer buyer profiles create a personalization flywheel that improves engagement over time, with the app serving as clear proof point of this combined effort. For younger buyers, Etsy has shifted marketing to social and OTT channels where this audience discovers products, created relevant content and high-profile partnerships like the Olivia Rodrigo collab, and has seen strong traction with a fivefold increase in YouTube/TikTok visits from millennial and Gen Z in H1 2026.

• Q: How sustainable are recent AOV increases, and what drove the stabilization of repeat buyer growth?

  A: Recent AOV increases have been driven by three main factors: durable seller price adjustments following new tariffs and the expiration of de minimis, minor foreign currency translation tailwinds, and a new shift to surfacing higher-quality, higher-priced items that match buyer intent better. Management expects most of the price increases to remain durable, though the pace of year-over-year increases will likely slow. The stabilization of repeat buyer growth comes from broad end-to-end product improvements that make the experience more relevant and personal, driving higher loyalty. Etsy is currently seeing a healthy dynamic of faster new buyer acquisition at the top of the funnel and early growth among the most valuable repeat buyers at the bottom of the funnel.

• Q: Why is the workforce reduction concentrated in product and engineering, while you are simultaneously deepening investments in ML? What work is being deprioritized?

  A: The restructuring is designed to simplify the organization, eliminate overlapping work by combining teams around shared strategic priorities, and reshape the talent mix around the capabilities needed for the next phase of growth. The change is not about cutting investment, but about concentrating talent and resources in the highest impact areas, particularly discovery, matching, personalization and machine learning. Flatter, less siloed teams will be able to move faster to deliver improved customer experiences at scale, rather than slowing execution via unnecessary handoffs between fragmented teams.

• Q: What is the current status of AI and ML investments, and how do these tie to agentic commerce partnerships?

  A: ML investments are focused on deepening work on existing high-impact priorities: discovery, matching and personalization, which is where AI will deliver the most long-term value for Etsy's unique human-centered marketplace by helping more sellers get discovered and improving personalization for buyers. For off-platform agentic commerce, Etsy continues to partner with major AI platforms to learn and establish a presence as consumer behavior evolves; agentic traffic remains less than 1% of total traffic, but continues to show higher intent and higher average order value. Etsy is also experimenting with AI-native shopping experiences directly on its platform, such as the conversational gifting assistant, to learn how this new interface can improve buyer experience.