8-K: Etsy Reports Mixed Q2 2025 Results Amid Reverb Sale and Marketplace Shifts

Etsy, Inc. announced second quarter 2025 financial results, showing revenue growth and strong Depop performance despite a decline in consolidated GMS and net income, while also completing the sale of Reverb and raising $700 million in convertible notes.

Summary

• Consolidated GMS was $2.8 billion, a 4.8% year-over-year decrease (5.8% currency-neutral). Excluding Reverb, consolidated GMS was $2.7 billion, down 2.6% year-over-year.
• Revenue increased by 3.8% year-over-year to $672.7 million, driven primarily by the performance of on-site ads and payments for both Depop and Etsy.
• Net income was $28.8 million, a 45.6% year-over-year decrease, reflecting a non-cash foreign exchange loss of $25.4 million.
• Non-GAAP Adjusted EBITDA was $169.0 million, with a consolidated non-GAAP Adjusted EBITDA margin of approximately 25.1%.
• Etsy marketplace GMS was $2.4 billion, down 5.4% year-over-year, but showed more favorable trends across the remainder of the quarter after a softer start, improving 3.5 percentage points compared to the first quarter of 2025.
• Depop continued strong top-line growth, with second quarter 2025 GMS of $249.6 million, up 35.3% year-over-year, and 54% year-over-year growth in the United States.
• Active buyers decreased 4.6% year-over-year to 87.3 million, though 6.5 million buyers were reactivated in the quarter, a 2.8% increase from the prior year.
• The company completed a private placement of convertible notes, raising approximately $700 million in cash, and repurchased approximately $335 million, or 6.4 million shares, of its common stock.

Sentiment

Score: 7

Explanation: While consolidated GMS and net income declined, the underlying Etsy marketplace showed improving trends, Depop delivered strong growth, and the company significantly strengthened its balance sheet with a successful convertible notes offering and substantial stock repurchases. Management's outlook for Q3 suggests continued sequential improvement and healthy profitability, indicating a positive trajectory despite current headwinds.

Positives

• Revenue increased by 3.8% year-over-year to $672.7 million, driven by on-site ads and payments.
• Depop continued strong top-line growth, with GMS up 35.3% year-over-year to $249.6 million, and U.S. growth at 54%.
• Etsy marketplace GMS trends improved significantly over the quarter, showing a 3.5 percentage point improvement compared to Q1 2025.
• GMS on the Etsy App grew year-over-year and sequentially, representing approximately 45% of Etsy marketplace GMS.
• Reactivated buyers increased by 2.8% year-over-year to 6.5 million.
• Successfully completed a private placement of convertible notes, raising approximately $700 million in cash, strengthening the balance sheet.
• Repurchased approximately $335 million, or 6.4 million shares, of common stock, demonstrating high conviction in long-term opportunities.
• Q2 2025 GMS and revenue came in ahead of expectations.
• Adjusted EBITDA was in line with guidance, maintaining healthy margins.

Negatives

• Consolidated GMS decreased by 4.8% year-over-year to $2.8 billion (5.8% currency-neutral).
• Net income decreased by 45.6% year-over-year to $28.8 million, largely due to a non-cash foreign exchange loss of $25.4 million.
• Consolidated net income margin declined to 4.3% from 8.2% in the prior year.
• Active buyers decreased by 4.6% year-over-year to 87.3 million.
• GMS per active buyer on a trailing twelve-month basis declined 2.9% year-over-year to $120.
• Consolidated non-GAAP Adjusted EBITDA decreased by 5.8% year-over-year to $169.0 million.

Risks

• Macroeconomic, geopolitical, and other events outside of control.
• The level of demand for services or products sold in marketplaces.
• The importance of marketplace trustworthiness and the ability to attract and retain active and engaged communities of buyers and sellers.
• Any real or perceived inaccuracies in operational metrics.
• Inability to protect against technology vulnerabilities, service interruptions, security breaches, or other cyber incidents.
• Dependence on continued and unimpeded access to third-party services, platforms, and infrastructure.
• Operational and compliance risks related to payments systems.
• The global scope of the business.
• Ability to recruit and retain employees.
• Ability to compete effectively.
• Ability to enhance current offerings and develop new offerings to respond to the changing needs of sellers and buyers.
• Risks related to environmental, social, and governance activities and disclosures.
• Barriers to international trade and efforts to grow the marketplace globally.
• Acquisitions, dispositions, or strategic partnerships that may prove unsuccessful or divert management attention.
• Ability to deal effectively with fraud or other illegal activity.
• Litigation and evolving global legal and regulatory requirements, including privacy and data protection laws, tax laws, product liability laws, laws regulating speech and platform moderation, antitrust laws, and intellectual property and counterfeiting regulations.

Future Outlook

For the third quarter of 2025, Etsy forecasts consolidated GMS between $2.6 billion and $2.7 billion, a take rate of approximately 24.5%, and an Adjusted EBITDA margin of approximately 25%. Management expects compounding impacts from Etsy marketplace product and marketing investments to drive sequential improvement in GMS growth rates and continued strong profitability for the core Etsy business.

Management Comments

• "We are encouraged by our second quarter performance, which reflects tangible progress in our key investment areas. These efforts are designed to strengthen customer relationships on the Etsy marketplace, deepen buyer engagement, and reignite GMS growth." Josh Silverman, CEO.
• "We're seeing early success in our efforts to build a more browsable shopping experience, particularly on our App, amplified by more personalized marketing and emergent AI technologies. We believe this is creating a significant runway for growth, as well as an opportunity to generate sustainable value for our stakeholders by capitalizing on what makes Etsy special." Josh Silverman, CEO.
• "Second quarter GMS and revenue came in ahead of expectations, and adjusted EBITDA was in line with our guidance, as we are managing the business to invest in future growth while also delivering very healthy margins." Lanny Baker, CFO.
• "Our take rate was very strong, at 24%, primarily driven by the expansion of Etsy Ads revenue from continued improvements to our bidding algorithms, as well as some benefit from payments." Lanny Baker, CFO.
• "We also strengthened our balance sheet through a highly successful convertible notes offering and repurchased approximately $335 million of Etsy stock, in line with our high conviction in Etsys long-term opportunities." Lanny Baker, CFO.
• "With approximately $1.5 billion in cash and cash equivalents and shortand long-term investments at the end of the period, and expectations for continued strong free cash flow generation, we are very confident in Etsy's financial flexibility to continue stock repurchases, manage our debt balance, and make ongoing investments in Etsy and Depop." Lanny Baker, CFO.
• "Getting the Etsy marketplace back to GMS growth in the near term is our number one priority, and we have four strategic initiatives designed with this in mind: showing up where shoppers discover, matching shoppers with the right content through better machine learning, retaining and rewarding our most valuable customers, and further amplifying the human connection that makes Etsy unique." Josh Silverman, CEO.
• "With Depop now at a $1 billion dollar annualized GMS run rate, we are working to further capitalize on its momentum. We're accelerating marketing investments designed to reach and engage an expanded U.S. audience via a broader channel mix and more robust community-led programs." Josh Silverman, CEO.
• "We are pleased to see compounding impacts from Etsy marketplace product and marketing investments as we head into the second half of the year, and that our third quarter consolidated GMS guidance represents a quarter-over-quarter improvement in the apples-to-apples growth rate at the midpoint." Lanny Baker, CFO.

Industry Context

Etsy operates in the highly competitive e-commerce and online marketplace sectors, specializing in unique, handmade, and vintage goods, as well as fashion resale through Depop. The mixed results reflect broader trends in consumer spending and online retail, where growth has moderated post-pandemic. The strong performance of Depop highlights the continued demand for resale and sustainable fashion, a growing segment within e-commerce. Etsy's focus on personalized marketing, AI-powered discovery, and app experience aligns with industry efforts to enhance user engagement and combat platform fatigue.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results for direct industry benchmarking.
• Etsy's strategic focus on improving app experience, leveraging AI for discovery, and personalized marketing aligns with best practices seen in leading e-commerce platforms like Amazon and eBay, which continuously invest in technology to enhance user experience and drive sales.
• Depop's 35.3% GMS growth significantly outpaces many general e-commerce platforms and indicates strong performance within the niche of fashion resale, potentially outperforming competitors focused solely on new goods.

Stakeholder Impact

• Shareholders are impacted by stock repurchases (reducing share count), convertible notes issuance (potential dilution upon conversion, but provides capital), and mixed financial results (revenue growth, GMS decline, net income decline). The company's financial flexibility and confidence in long-term opportunities are positive.
• Buyers are impacted by efforts to improve browsing experience, search quality, AI-powered discovery, and personalized marketing, aiming for deeper engagement and better matching with content.
• Sellers are impacted by new seller tools to simplify shop operations and marketing initiatives designed to grow GMS, potentially leading to more sales.

Next Steps

• Accelerate the customer relationship flywheel.
• Reignite GMS growth on the Etsy marketplace.
• Continue efforts to build a more browsable shopping experience, particularly on the App.
• Advance search quality by testing more signals in algorithms.
• Grow AI-powered discovery experience with additional themes.
• Release new seller tools to simplify shop operations.
• Grow GMS through more personalized retention and engagement strategies.
• Optimize product listing ad data feeds.
• Continue brand investments to amplify Etsy's differentiation.
• Further capitalize on Depop's momentum.
• Accelerate marketing investments for Depop to reach and engage an expanded U.S. audience via a broader channel mix and more robust community-led programs.
• Continue stock repurchases.
• Manage debt balance.
• Make ongoing investments in Etsy and Depop.

Key Dates

Recommendation

While Etsy's Q2 2025 results showed a decline in consolidated GMS and net income, the underlying trends for the core Etsy marketplace are improving, and Depop continues to exhibit strong growth. The company's proactive measures, including significant stock repurchases and a successful convertible notes offering, demonstrate financial strength and management's confidence. However, the overall GMS decline and decrease in active buyers indicate ongoing challenges in a competitive e-commerce landscape. The Q3 guidance suggests stabilization and sequential improvement, but a 'buy' recommendation would require more consistent GMS growth across the entire platform. Given the mixed performance and strategic investments aimed at future growth, a 'hold' position is prudent for investors to observe the effectiveness of these initiatives in the coming quarters.

Keywords

Etsy, ETSY, e-commerce, online marketplace, Depop, Reverb, financial results, Q2 2025, GMS, revenue, net income, Adjusted EBITDA, convertible notes, stock repurchase, active buyers, sellers, handmade goods, vintage items, resale fashion, digital services tax