Etsy Inc. Earnings Call Highlights Cautious Turnaround

Etsy Inc ((ETSY)) has held its Q4 earnings call. Read on for the main highlights of the call.

Etsy Inc.’s latest earnings call struck a tone of cautious optimism, pairing record revenue and robust cash generation with frank acknowledgment of lingering growth challenges. Management highlighted improving gross merchandise sales momentum, a stronger app business, and a sizable Depop divestiture, while stressing that a return to durable, high‑quality growth will require disciplined execution over several quarters.

Depop Sale Brings Cash and Strategic Focus

Etsy announced a definitive agreement to sell its Depop resale business to eBay for $1.2 billion in cash, with closing expected in the second quarter of 2026 pending approvals. The deal removes a lower‑margin unit that generated $1.1 billion in 2025 GMS and $187 million in revenue, freeing both capital and management attention to reinforce the core marketplace and support shareholder returns.

Record Quarterly Revenue and Strong Profitability

The company delivered record fourth‑quarter consolidated revenue of $882 million, up 6.6% year over year excluding Reverb and underscoring the resilience of its fee model. Adjusted EBITDA reached $222 million for the quarter, translating into a 25.2% consolidated margin, while the Etsy marketplace alone posted an adjusted EBITDA margin slightly above 30%, signaling solid underlying profitability.

Improving Marketplace GMS Momentum

Consolidated gross merchandise sales climbed to $3.6 billion in the fourth quarter, an increase of 2.4% year over year excluding Reverb and 1.3% on a currency‑neutral basis as trends slowly improved. On the core Etsy marketplace, GMS was essentially flat but finally positive at 0.1% growth, with U.S. buyer GMS inching up 0.3%, marking the first positive comparison since the third quarter of 2023.

App and Personalization Driving Engagement

Etsy’s mobile app continued to stand out as a growth engine, with app GMS expanding 6.6% in the quarter and pushing app share of total GMS to 46%, up five points from the end of 2023. Enhanced personalization features helped, with homepage clicks per visit up 14% and push and e‑mail clicks rising 25% year over year, even as the company kept message volumes in check.

Buyer Acquisition and Reactivation Progress

The marketplace added 6.8 million new buyers and reactivated 10.4 million lapsed buyers in the quarter, for 17.2 million gross additions, a 2.7% year‑over‑year increase. Trailing 12‑month active buyers held roughly flat at 86.5 million with a modest U.S. uptick, while trailing 12‑month GMS per active buyer stabilized at $121 and improved for the third straight quarter, pointing to early traction in engagement efforts.

Early Success in Agentic and A.I. Discovery

Management spotlighted emerging “agentic” and A.I.‑driven discovery channels, citing expanded partnerships with Microsoft Copilot, Google, and Stripe. While these sources represented less than 1% of total traffic, agentic traffic was roughly fifteen times last year’s level, and early buyers arriving through channels such as ChatGPT showed higher intent, larger average order values, and meaningful follow‑through to on‑site purchases.

Strong Cash Generation and Shareholder Returns

Etsy closed the year with $1.8 billion in cash and investments and underscored its ability to turn earnings into cash, converting about 87% of 2025 adjusted EBITDA of $735 million into free cash flow. The company returned more than 100% of that free cash flow to investors in 2025, including $133 million of share repurchases in the fourth quarter and $777 million for the year, which reduced the share count by around 14.4 million.

Marketplace Frequency and Retention Challenges

Despite progress in acquisition and reactivation, shopping frequency remained slightly lower than a year ago and the number of habitual buyers slipped to 5.9 million, down 8.6% year over year and 1.4% sequentially. Executives conceded they had under‑invested in giving customers reasons to return and are now elevating loyalty and retention work as one of the marketplace’s highest priorities.

Etsy Core Buyer Count Still Down Year over Year

Sequential stabilization has not yet translated into overall growth in the buyer base, with total active buyers still down by “three‑plus percent” versus the prior year. That backdrop underscores the challenge facing management, which must convert improved engagement and marketing programs into consistent year‑over‑year gains in active buyers to support a more durable growth profile.

Modest Marketplace GMS Growth and FX Pressure

The headline return to positive GMS growth masks that underlying expansion remains modest, with Etsy marketplace GMS up just 0.1% year over year in the quarter. On a currency‑neutral basis, marketplace GMS was still down 1%, an improvement from the prior quarter but a reminder that the business remains sensitive to foreign‑exchange moves and difficult comparisons.

Depop’s Margin Drag Prior to Divestiture

Management detailed how Depop had been a profit headwind, with its lower take rate and negative adjusted EBITDA margins reducing consolidated take rate by about 80 basis points in 2025. Depop also created roughly a 350 basis point drag on consolidated adjusted EBITDA margin, driven largely by heavier brand marketing spend, suggesting the sale should mechanically lift profitability metrics once completed.

Website GMS Decline Versus App Strength

The strength of the app business contrasted with weakness on the website, where implied web and desktop GMS fell roughly 5% as shoppers increasingly favored mobile experiences. This shift highlights a channel mix issue for Etsy, which is leaning on app‑led engagement to drive growth but must still address softness in web traffic and conversion to fully unlock its marketplace potential.

Guidance Signals Conservative, Gradual Growth Outlook

For the first quarter of 2026, Etsy guided to GMS of $2.38 billion to $2.43 billion, implying roughly 2% to 4% growth, a take rate near 25.5%, and an adjusted EBITDA margin between 28% and 30% for continuing operations. For full‑year 2026 the company expects only slight GMS growth with margins broadly in line with the first quarter and suggested that the first quarter could prove the strongest period, assuming FX and macro conditions remain stable.

Etsy’s earnings call painted a picture of a marketplace at an inflection point, with record revenue, strong cash returns, and a strategic portfolio cleanup balanced by ongoing buyer and frequency pressures. Investors are likely to view the story as a cautiously constructive one, hinging on Etsy’s ability to convert app strength, A.I. initiatives, and a sharper focus post‑Depop into sustained, broad‑based growth over the coming years.