10-Q: Etsy Reports Q1 2026 Results, Depop Sale Nears Completion

Etsy, Inc. announced its first quarter 2026 financial results, highlighting revenue growth driven by services and marketplace improvements, while continuing to prepare for the divestiture of Depop.

Summary

• Etsy reported revenue of $631.3 million for the first quarter ended March 31, 2026, an increase of 3.1% compared to the same period in 2025.
• Gross profit increased by 2.5% to $455.6 million.
• Net income from continuing operations was $104.7 million, a significant improvement from a net loss of $35.1 million in the prior year's quarter.
• The company is proceeding with the sale of Depop to eBay, expected to close by the end of Q3 2026, with Depop's financials presented as discontinued operations.
• Etsy marketplace GMS (Gross Merchandise Sales) increased by 5.5% year-over-year, excluding Reverb from the prior year's comparison.
• Active buyers on the Etsy marketplace decreased by 2.9% to 86.6 million, while GMS per active buyer increased by 1.5% to $122.
• Adjusted EBITDA increased by 6.4% to $184.7 million, with an Adjusted EBITDA margin of 29.3%.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, with strong improvements in profitability and core marketplace GMS growth, despite a slight dip in active buyers. The strategic divestiture of Depop is progressing, which is expected to strengthen the company's financial position.

Positives

• Revenue increased by 3.1% to $631.3 million, driven by growth in services revenue (up 7.9%) and marketplace revenue (up 1.1%).
• Net income from continuing operations turned positive, reaching $104.7 million compared to a loss of $35.1 million in Q1 2025.
• Etsy marketplace GMS grew by 5.5% year-over-year, indicating positive momentum in the core business.
• Adjusted EBITDA increased by 6.4% to $184.7 million, demonstrating improved profitability.
• The company has a strong liquidity position with $1.4 billion in cash and short-term investments.
• The sale of Depop for $1.2 billion is progressing, expected to close by Q3 2026, providing significant capital.

Negatives

• Active buyers on the Etsy marketplace decreased by 2.9% year-over-year to 86.6 million.
• GMS from continuing operations decreased by 3.9% to $2,460.2 million, primarily due to the sale of Reverb.
• Cost of revenue increased by 4.7% to $175.7 million.
• The company reported a net loss from discontinued operations (Depop) of $35.0 million.

Risks

• Continued macroeconomic and geopolitical uncertainty may impact consumer demand and discretionary spending.
• Failure to attract and retain active buyers and sellers could adversely affect GMS and revenue.
• Technology disruptions, data security breaches, or other cyber-related events could harm the business and reputation.
• Intense competition in the e-commerce marketplace could impact market share and profitability.
• The pending sale of Depop is subject to risks and uncertainties and may not be completed on the expected timeline or at all.
• Changes in search engine algorithms or social media platform policies could impact marketing effectiveness and traffic.
• Evolving global privacy, data protection, AI, and information security regulations pose compliance challenges and risks.
• Potential for future impairment charges on long-lived assets.
• The company has a significant amount of convertible debt, which could lead to dilution if converted.

Future Outlook

The company anticipates utilizing proceeds from the Depop sale for general corporate purposes, continued share repurchases, and investment in the Etsy marketplace. While specific forward-looking financial guidance is not detailed in this excerpt, the company's strategy focuses on growth initiatives, investments in AI, and attracting/retaining buyers and sellers.

Management Comments

• The company plans to utilize proceeds from the Depop transaction for general corporate purposes, continued share repurchases, and investment in the Etsy marketplace.
• Management believes that presenting Etsy marketplace non-GAAP financial measures is useful to investors to provide a clearer, normalized baseline to evaluate organic growth, financial performance, and underlying trends of the remaining Etsy marketplace business.

Industry Context

StockSavvy.ai notes that Etsy's performance in Q1 2026 reflects the ongoing trends in the e-commerce sector, with a focus on core marketplace growth and strategic divestitures. The increase in services revenue highlights a potential shift towards higher-margin offerings, while the slight decline in active buyers warrants close monitoring against competitive pressures and broader consumer spending trends.

Comparison to Industry Standards

• Etsy's revenue growth of 3.1% in Q1 2026 is moderate compared to the broader e-commerce sector, which has seen varied growth rates depending on segment and company strategy. For instance, larger platforms like Amazon have reported different growth trajectories based on their diverse business segments.
• The Adjusted EBITDA margin of 29.3% is strong and generally above the average for many online retail platforms, indicating efficient operations within its niche.
• The decline in active buyers (2.9%) is a concern, especially when compared to platforms that have maintained or grown their user base through aggressive marketing or expansion into new categories. However, the increase in GMS per active buyer suggests improved engagement from the remaining customer base.

Legal Proceedings

• The company is regularly involved in litigation, arbitration, and regulatory matters that are expensive and time-consuming and may require changes to its strategy, platform features, or business operations. However, the company currently believes the final outcome of these matters will not have a material adverse effect.

Stakeholder Impact

• Shareholders: Potential for increased value through improved profitability, share repurchases funded by Depop sale proceeds, and continued investment in the core Etsy marketplace. Dilution risk exists from convertible notes.
• Sellers: Continued focus on marketplace improvements and services revenue growth. Potential impact from policy enforcement and fee structures.
• Buyers: Ongoing efforts to enhance marketplace trustworthiness and user experience. Potential impact from policy enforcement and product availability.
• Employees: Continued focus on attracting and retaining talent, with potential impacts from compensation strategies and evolving work models.

Next Steps

• Continue to drive growth in the Etsy marketplace through strategic priorities.
• Complete the sale of Depop to eBay, expected by the end of Q3 2026.
• Utilize proceeds from the Depop sale for general corporate purposes, share repurchases, and investment in the Etsy marketplace.
• Continue to invest in artificial intelligence and other growth initiatives.

Key Dates

Recommendation

Etsy demonstrates solid operational improvements with positive net income and strong Adjusted EBITDA. The core Etsy marketplace is showing growth, and the Depop sale provides a significant financial boost. However, the decline in active buyers and ongoing macroeconomic uncertainties warrant a cautious 'hold' recommendation, pending sustained buyer growth and clearer economic outlook.

Keywords

Etsy, 10-Q, Quarterly Report, E-commerce, Marketplace, Financial Results, Depop Sale, GMS, Revenue, Net Income, Adjusted EBITDA, Active Buyers, Active Sellers, SEC Filing