10-K: Etsy Navigates Macro Headwinds, Sells Depop, Shifts Leadership

Etsy reports a decline in core marketplace GMS and net income for 2025 amidst macroeconomic pressures, while announcing the sale of Depop and a CEO transition to focus on its flagship platform.

Summary

• Consolidated Gross Merchandise Sales (GMS) decreased by 5.3% to $11,916.9 million in 2025, primarily due to the sale of Reverb and a decline in Etsy marketplace GMS.
• Etsy marketplace GMS declined 4% to $10.5 billion in 2025, though performance improved sequentially from Q1 to Q4, with Q4 showing slight year-over-year growth.
• Depop generated $1,074.9 million in GMS, up 36.3% year-over-year, providing a tailwind to consolidated GMS results.
• Total revenue increased by 2.7% to $2,883.5 million in 2025, driven by an 11.3% increase in services revenue, largely from Etsy Ads improvements.
• Net income significantly decreased by 46.3% to $162.982 million in 2025, with net income margin falling to 5.7% from 10.8% in 2024.
• Adjusted EBITDA decreased by 6.0% to $734.511 million, and Adjusted EBITDA margin declined to 25.5% from 27.8% in 2024.
• Etsy announced the sale of Depop to eBay Inc. for $1.2 billion in cash, expected to close in Q2 2026, with proceeds to be used for general corporate purposes, share repurchases, and investment in the Etsy marketplace.
• A leadership transition occurred, with Kruti Patel Goyal appointed CEO effective January 1, 2026, succeeding Josh Silverman, who became Executive Chair through December 31, 2026.
• The company repurchased 14.4 million shares of its stock during 2025 at a total cost of $777.1 million and approved a new $750 million stock repurchase program in December 2025.
• Active buyers on the Etsy marketplace declined 3.4% to 86.5 million, and GMS per active buyer declined 0.5% to $121.
• Reactivated buyers reached 30.0 million, a 4% year-over-year increase, showing effectiveness of personalized marketing.
• An asset impairment charge of $101.7 million was recorded in 2025 related to the goodwill of Reverb, which was sold in Q2 2025.
• Etsy continues to invest in its 'Right to Win' strategy for the core marketplace, focusing on unique items, search and discovery, human connections, and a trusted brand.
• The company maintains a strong balance sheet with $1.4 billion in cash and cash equivalents at year-end 2025.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with a cautious sentiment. While strategic divestitures and growth in services revenue are positive, the significant decline in core Etsy GMS, active buyers, and net income indicates underlying operational challenges and macroeconomic headwinds that outweigh these strategic adjustments in the short term.

Positives

• Depop's GMS grew significantly by 36.3% year-over-year to $1,074.9 million in 2025, demonstrating strong momentum in the fashion resale market.
• Total revenue increased by 2.7% to $2,883.5 million, primarily driven by an 11.3% increase in services revenue, notably from improvements in Etsy Ads.
• Reactivated buyers increased by 4% to 30.0 million, indicating effective personalized marketing and a valuable segment with 40% higher first-year lifetime value than new buyers.
• The company repurchased 14.4 million shares for $777.1 million in 2025 and approved a new $750 million stock repurchase program, signaling confidence in future value and commitment to shareholder returns.
• Etsy's strategic initiatives, including realigning product and marketing, began to positively influence performance in 2025, with Etsy marketplace GMS improving by nearly nine percentage points from Q1 to Q4.
• The sale of Reverb and planned divestiture of Depop allow for a sharpened focus and investment in the core Etsy marketplace, with $1.2 billion in cash proceeds from Depop sale.
• Etsy maintains a strong cash position with $1.4 billion in cash and cash equivalents and $638.8 million in consolidated free cash flow in 2025.
• The company achieved 100% renewable energy sourcing for offices and Etsy marketplace Google Cloud usage in 2025.
• Etsy's Brooklyn office headquarters received Zero Waste certification for the seventh consecutive year, and the Dublin office also achieved certification.

Negatives

• Consolidated GMS decreased by 5.3% year-over-year to $11,916.9 million in 2025.
• Etsy marketplace GMS declined 4% in 2025 to $10.5 billion, trailing overall e-commerce growth and reflecting persistent macroeconomic pressure on consumer discretionary spending.
• Net income decreased significantly by 46.3% to $162.982 million in 2025, and net income margin fell from 10.8% to 5.7%.
• Adjusted EBITDA decreased by 6.0% to $734.511 million, and Adjusted EBITDA margin declined by 230 basis points to 25.5%.
• Active buyers on the Etsy marketplace declined 3% year-over-year to 86.5 million, reflecting continued pressure on buyer retention.
• GMS per active buyer on the Etsy marketplace declined modestly by 0.5% year-over-year to $121.
• New buyer additions declined 10% year-over-year to 21.2 million in 2025.
• Habitual buyers (spending $200+ and purchasing 6+ times) declined 9% year-over-year, with many shifting to the repeat buyer category due to slightly lower frequency or spend.
• An asset impairment charge of $101.7 million was recorded in 2025 related to the goodwill of the Reverb reporting unit.
• Foreign exchange loss of $40.428 million in 2025 compared to a gain of $13.391 million in 2024 negatively impacted other income.
• Scope 1 and 2 emissions exceeded the 2030 annual target trajectory in 2025, partly due to below-average temperatures at headquarters.

Risks

• Quarterly operating results and key metrics may continue to fluctuate due to macroeconomic conditions (inflation, interest rates, recessionary factors, foreign exchange volatility, tariffs, supply-chain disruptions, consumer spending pressure, geopolitical uncertainties, public health crises, competitive retail environment, employment levels).
• Failure to meet publicly announced guidance or other expectations about business and future operating results could cause stock price to decline.
• Inability to maintain and expand trust and safety in marketplaces, or to attract and retain active and engaged communities of buyers and sellers, could adversely affect the business.
• Inaccuracies in internally tracked operational metrics (active buyers, active sellers, GMS) or reliance on unverified third-party data could adversely affect business and reputation.
• Technology disruptions, loss of information, misuse/disclosure of personal data, or inability to protect against software/hardware vulnerabilities, service interruptions, cyber-related events, or security breaches could lead to liability, expenses, and reputational damage.
• Dependence on continued use of and unimpeded access to third-party technology, services, platforms, and infrastructure (e.g., Google Cloud, Amazon Web Services, mobile/social/search/advertising solutions) poses operational risks.
• Payments systems have operational and compliance risks, including in-house execution risk and dependence on third-party service providers, which could lead to service outages, increased costs, or legal liability.
• Inability to recruit and retain a talented and broadly diverse group of employees, or significant attrition/turnover, could impact business growth.
• Intense competition from online and offline retailers, other marketplaces, and social commerce channels may hinder effective competition.
• Enforcement of marketplace policies (e.g., prohibiting certain items, fraud detection) may negatively impact brands, reputation, or financial performance due to errors, inconsistencies, or negative stakeholder perception.
• Failure to keep pace with technological changes, including advances in AI, and enhance/develop new offerings could harm business, financial performance, and growth.
• Continued imposition of barriers to international trade (tariffs, changes to de minimis exemptions, additional regulations) could harm global growth strategy and cross-border transactions.
• Future impairment charges on goodwill or other long-term assets could negatively impact operating results.
• Engaging in acquisitions, dispositions, or strategic partnerships may divert management's attention and/or prove unsuccessful.
• The closing of the proposed sale of Depop is subject to various risks and uncertainties, may not be completed as expected, or at all, and the pending sale may be disruptive or create loss in value to stockholders.
• Risks related to environmental, social, and governance (ESG) activities and disclosures, including heightened scrutiny, failure to meet goals, and compliance with evolving regulations.
• Significant amount of convertible debt and potential for additional debt in the future, with risks related to cash flow for repayment and refinancing.
• Failure to deal effectively with fraud or other illegal activity (including those amplified by AI) could harm business, reputation, and financial performance.
• Regular involvement in litigation, arbitration, and regulatory matters that are expensive, time-consuming, and may require changes to strategy or operations.
• Compliance with evolving global legal and regulatory requirements (privacy, data protection, tax, product liability, AI regulations, intellectual property) may materially impact time, resources, and ability to grow.
• Exposure to intellectual property or other claims, which could be costly to defend, damage brands, or limit technology use.
• Reliance on open-source software may impair ability to adequately protect some intellectual property or introduce security risks.
• Fluctuations in tax obligations and effective tax rate due to changes in tax law, regulations, or business operations.
• Inability to maintain effective internal controls over financial reporting could lead to investor loss of confidence and stock price decline.
• Volatility in common stock price and potential for securities litigation.
• Future sales and issuances of common stock or rights to purchase common stock, including upon conversion of convertible senior notes, could result in additional dilution and cause stock price to decline.
• Stock repurchases are discretionary and may not achieve desired objectives or mitigate dilution.
• Exclusive forum provision in certificate of incorporation could limit stockholders' ability to obtain a favorable judicial forum.
• Actions of activist stockholders could adversely affect business, disrupt operations, or cause stock price fluctuations.
• Anti-takeover provisions in charter documents and Delaware law could make an acquisition more difficult, limit management changes, and depress stock price.

Future Outlook

Etsy anticipates continued pressure on consumer discretionary spending and e-commerce generally, but expects to reignite buyer activity and drive sustainable growth by deepening retention and engagement, reactivating lapsed buyers, and attracting new buyers through its four strategic initiatives. The company plans to utilize proceeds from the Depop sale for general corporate purposes, continued share repurchases, and investment in the Etsy marketplace. Etsy also expects certain provisions of the OBBBA tax act to favorably change the timing of cash tax payments in the near term, but not materially impact the provision for income taxes. The company will continue to evolve its Impact strategy and reporting as regulations mature.

Management Comments

• "Keep Commerce Human reflects our belief that creativity and connection set us apart in an increasingly automated world."
• "We see lasting value in businesses that balance people, planet, and profit, and we strive to align our growth strategy with this principleusing our platform to foster entrepreneurship and sustainable economic impact."
• "We believe this series of transitions will provide both continuity and evolutionary thinking about how to best serve future customer needs." (referring to leadership changes)
• "Our strategy centers on strengthening our Right to Win four qualities of our marketplace which we believe are core to our efforts to gain sustainable competitive advantages: our sellers unique items, best-in-class search and discovery, authentic human connections, and a trusted brand that inspires confidence and loyalty."
• "This result reflects a persistently dynamic macroeconomic environment, including ongoing pressure on consumer discretionary spending and evolving buyer behavior." (regarding Etsy marketplace GMS decline)
• "We believe these initiatives demonstrate our ability to drive value for our sellers and enhance the buyer experience, while simultaneously generating incremental revenue for Etsy." (regarding Etsy Ads improvements)
• "Depop's distinctive blend of marketplace functionality, social discovery, and brand energy positioned it to capture momentum in the fast-growing resale apparel market, while its listings of affordable, fashionable, pre-loved merchandise resonated with value-conscious consumers."
• "We believe that our existing cash and cash equivalents and shortand long-term investments, together with cash generated from operations, will be sufficient to meet our anticipated operating cash needs for at least the next 12 months."

Industry Context

StockSavvy.ai notes that Etsy's performance in 2025 reflects broader trends in the e-commerce sector, where discretionary spending remains pressured by macroeconomic uncertainty. While the core Etsy marketplace experienced GMS declines, the strong growth of Depop highlights the increasing consumer interest in the fashion resale market, a trend also observed with competitors like ThredUp and Poshmark. The strategic divestiture of Depop, similar to the earlier sale of Reverb, indicates a move to streamline operations and focus on the flagship platform, a common strategy among diversified tech companies seeking to optimize resource allocation. The emphasis on AI-enabled search and personalized experiences aligns with industry-wide efforts to enhance user engagement and conversion in competitive online retail.

Comparison to Industry Standards

• Etsy marketplace GMS declined 4% in 2025, trailing overall e-commerce growth, which Euromonitor International Ltd. estimates to grow by a compounded annual growth rate of 7% through 2029 in Etsy's core geographies. This suggests Etsy is underperforming the broader online retail market.
• Depop's GMS grew 36.3% year-over-year, significantly outpacing the general e-commerce growth rate and demonstrating strong performance within the niche fashion resale market, comparable to the growth seen by leading resale platforms.
• Etsy's penetration rate of approximately 17% among adults in the U.S. and U.K. (30% among women, 10% among men) suggests substantial untapped market opportunity compared to more mature e-commerce platforms with higher overall market penetration.
• The company's Net Zero goal, approved by the Science Based Targets Initiative (SBTi) in 2022, aligns with leading global corporate sustainability commitments, although Scope 1 and 2 emissions exceeding the 2030 target trajectory in 2025 indicates a challenge in meeting these ambitious environmental benchmarks.

Management Changes

Corporate Governance

Legal Proceedings

• Regularly involved in litigation, arbitration, and regulatory matters related to intellectual property, consumer protection, product liability, product safety, regulatory compliance, security and privacy, and commercial matters.
• Subject to heightened regulatory scrutiny, inquiries, or investigations, including broad, industry-wide concerns such as antitrust, product liability, and privacy.
• Regularly receives claims alleging that items listed by sellers on marketplaces are counterfeit, infringing, unlawful, harmful, or otherwise violate policies.
• The company manages and mitigates certain legal risks through House Rules, policies, and other terms of use, including informal dispute resolution and individual arbitration.

Stakeholder Impact

• **Shareholders:** The decline in GMS and net income, coupled with the asset impairment charge, could negatively impact shareholder value. However, the Depop sale and share repurchase programs aim to return capital and focus on core value creation. The CEO transition and governance provisions (anti-takeover) could influence long-term strategic direction and shareholder control.
• **Employees:** The 2023 restructuring plan included an 11% workforce reduction for the Etsy marketplace. The company emphasizes attracting, developing, and retaining diverse talent, offering competitive compensation and benefits. Leadership changes may impact employee morale and strategic direction.
• **Sellers:** The decline in active sellers (though stabilized in Q2 2025) and GMS for the Etsy marketplace indicates challenges. The introduction of a seller set-up fee in 2024 was intentional to encourage higher commitment. Investments in tools, marketing (Etsy Ads), and community support aim to help sellers grow their businesses. The divestiture of Depop means a more focused support system for Etsy sellers.
• **Buyers:** Declining active buyers and GMS per active buyer on the Etsy marketplace suggest challenges in retention and engagement. Efforts to improve search and discovery, personalized experiences, and loyalty programs (Etsy Insider beta) are aimed at reigniting buyer activity and trust. The focus on unique, handcrafted, and vintage items continues to cater to specific buyer preferences.
• **Customers (Depop):** The sale of Depop to eBay will transfer the customer base to a new owner, potentially impacting their experience depending on eBay's integration and strategy for the platform.
• **Suppliers/Vendors:** The company is promoting a diverse and ethical supply chain, with $39 million spent with diverse-owned suppliers in 2025. Efforts to ensure fair labor practices and climate resilience for sellers (who are also suppliers) are ongoing.

Next Steps

• Close the sale of Depop to eBay Inc. in the second quarter of 2026, subject to regulatory approval and other closing conditions.
• Utilize proceeds from the Depop transaction for general corporate purposes, continued share repurchases, and investment in the Etsy marketplace.
• Continue to test, learn, and evolve the Etsy Insider loyalty program in 2026.
• Conduct the next biennial pay equity analysis in 2026.
• Continue to assess and monitor the impact of the One Big Beautiful Bill Act (OBBBA) on consolidated financial statements.
• Josh Silverman will serve as Executive Chair through December 31, 2026, and then transition to a non-executive board member and senior advisor until April 1, 2027.
• Kruti Patel Goyal will receive an annual equity award commencing in 2027, subject to Board/Compensation Committee approval.
• Etsy will continue to evolve its Impact strategy and related reporting as additional government regulations may require and as the broader industry matures.

Key Dates

Recommendation

Etsy's 2025 performance presents a mixed picture, warranting a 'hold' recommendation for seasoned investors. While the significant decline in net income and core Etsy marketplace GMS is concerning, reflecting persistent macroeconomic headwinds and competitive pressures, the strategic divestiture of Depop for $1.2 billion provides substantial cash for reinvestment and share repurchases. The leadership transition to a new CEO, Kruti Patel Goyal, and the sharpened focus on the core Etsy marketplace's 'Right to Win' strategy (improving search, personalization, and seller tools) offer potential for future stabilization and growth. However, the effectiveness of these initiatives in reversing negative buyer and GMS trends remains to be seen. The company's strong cash position and ongoing share repurchase programs provide a floor, but the underlying operational challenges in its primary business segment suggest that a 'buy' would be premature without clearer signs of sustained recovery and improved profitability. Investors should monitor the execution of the new strategy and the impact of the Depop sale on future financial performance.

Keywords

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