Online marketplace Etsy (NASDAQ: ETSY) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 2.4% year on year to $678 million. Its GAAP profit of $0.60 per share was 16.2% above analysts’ consensus estimates.

Is now the time to buy ETSY? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Etsy’s third quarter results were met with a significant negative market reaction, despite exceeding Wall Street expectations for revenue and profit. Management pointed to the continued decline in active buyers as a central concern, with CEO Josh Silverman acknowledging, “we're not satisfied with any decline in Etsy GMS.” The company emphasized progress in app engagement and AI-driven personalization, but also discussed ongoing headwinds, such as the expiration of the de minimis exemption on imports and persistent pressure on consumer discretionary spending. Notably, the upcoming leadership transition—with Kruti Patel Goyal taking the CEO role—was framed as a pivotal moment for the company’s next phase.

Looking forward, Etsy’s outlook is shaped by investments in AI-powered discovery, a renewed focus on app-centric engagement, and increased marketing for its Depop platform. Kruti Patel Goyal, incoming CEO, stressed that the company’s four strategic priorities—discovery, personalization, loyalty, and seller empowerment—will remain central as Etsy navigates consumer uncertainty and competitive pressures. She noted, “there is so much more we need to do,” highlighting plans to deepen loyalty programs and leverage buyer data for targeted growth, while CFO Lanny Baker cautioned about persistent margin pressures from discretionary investments and macroeconomic volatility.

Key Insights from Management’s Remarks

Management attributed Etsy’s quarterly performance to improved app engagement, strategic investments in AI, and early results from marketing shifts, while highlighting ongoing challenges in buyer growth and macroeconomic uncertainty.

• Leadership transition announced: Josh Silverman will step down as CEO, to be succeeded by Kruti Patel Goyal, Etsy’s current President and Chief Growth Officer, effective January 1. Leadership described this as a planned shift to guide Etsy’s next phase of growth.

• AI-driven personalization: Management highlighted the rollout of advanced machine learning and large language model (LLM) features in the Etsy app, which have increased engagement metrics and improved listing recommendations. Early results showed double-digit gains in engagement on the app’s home screen and higher conversion rates from both search and ads.

• OpenAI partnership: Etsy became the first e-commerce partner for OpenAI’s instant checkout feature, allowing users to purchase directly through ChatGPT. Management described the integration as providing a new, high-intent channel, with CEO Josh Silverman noting that agentic visits, while currently small, show higher purchase intent than traditional search.

• Buyer and seller trends: While active buyers declined year over year, management noted sequential improvements in gross merchandise sales (GMS) per buyer and highlighted growth among high-income buyers. On the seller side, new sellers with sales grew at double-digit rates, and overall seller satisfaction improved, partly due to new AI-powered tools and enhanced live support.

• Marketing strategy shift: Etsy reallocated brand marketing spend away from traditional TV toward digital channels such as social video and streaming, aiming to target inspiration-seeking buyers. The company also increased discretionary marketing investment in Depop, its apparel resale platform, to capitalize on strong user growth and momentum in the U.S. market.

Drivers of Future Performance

Looking ahead, Etsy’s management expects AI-driven platform enhancements, marketing investments, and evolving consumer behavior to shape revenue growth and margin trends.

• AI and personalization expansion: The company believes that ongoing enhancements to its recommendation engine and app experience will drive higher engagement and purchase frequency, particularly as buyers increasingly use mobile and agentic platforms for discovery.

• Depop marketing investment: Management is allocating additional marketing resources to accelerate Depop’s awareness and user base expansion, especially in the U.S. While this is expected to compress margins in the near term, management views it as a key lever for long-term growth and profitability.

• Consumer uncertainty and tariffs: Etsy remains cautious about macroeconomic headwinds, including potential impacts from tariffs and shifts in consumer discretionary spending, especially during the holiday season. Management noted that further changes in trade policy or consumer sentiment could affect both top-line growth and expense discipline.

Catalysts in Upcoming Quarters

As we look to future quarters, the StockStory team will closely track (1) the impact of new AI-powered discovery features and recommendation models on buyer engagement and frequency, (2) the effectiveness of increased marketing investments and loyalty program enhancements in stabilizing or growing the active buyer base, and (3) the progress in scaling Depop’s U.S. footprint and sustaining double-digit growth. Any changes in trade policies or consumer spending trends will also be critical to monitor.

Etsy currently trades at $65.15, down from $74.80 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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