Etsy's Financial Report Shows Modest Advancement
In a recent financial report, Etsy, the popular online marketplace for unique and handmade goods, announced its Q2 2025 results and outlined its strategy to revive Gross Merchandise Sales (GMS) growth and retain valuable customers.
Etsy's revenue for Q2 2025 reached $672.7 million, marking a 4% increase from the same period last year. The company also reported a solid free cash flow of nearly $150 million for the first six months of 2025.
Despite these positive financial figures, Etsy missed analyst expectations for earnings. However, the company's take rate for Q2 2025 was 24%, a 2 percentage point increase from the same period last year. Shares of Etsy were up around 5% in premarket trading on Wednesday, suggesting investor confidence in the company's growth strategy.
Etsy's strategy centres on enhancing its mobile app, improving search and discovery via AI, personalized retention and engagement marketing, simplifying seller tools, and amplifying human connection.
The mobile app, which now accounts for about 45% of total marketplace GMS, has been made more intuitive, browsable, and inspiring. This supports deeper buyer exploration and discovery, helping to foster engagement and loyalty.
Etsy is also moving beyond its previous search-ranking models to incorporate generative AI and large language models (LLMs), allowing the company to better understand user preferences and listings, and offer more diverse, curated, and personalized recommendations to shoppers.
Personalized retention and engagement marketing efforts include strong performance in paid social channels, optimized product listing ads, and shifting brand media spend from linear TV to streaming and influencer partnerships.
To improve seller efficiency and inventory quality, Etsy is simplifying seller tools and shop operations, supporting overall marketplace health and customer satisfaction.
Etsy is also blending staff curation with machine learning to scale meaningful recommendations and preserve its differentiated creative ethos.
Looking ahead, Etsy is guiding for gross merchandise sales of $2.6 billion to $2.7 billion for the third quarter. The company expects its take rate to be approximately 24.5% for the third quarter. There will be no contribution from Reverb in the third quarter.
In terms of growth, Depop, Etsy's fashion marketplace, grew GMS by 35.3% year over year in Q2 2025, reaching $249.6 million. Depop is now on a $1 billion annual GMS run rate as of Q2 2025.
Etsy acquired 4.8 million new buyers during Q2 2025, despite an overall decline in buyer activity. The number of active sellers on Etsy in Q2 2025 was 8.1 million, a 7.8% decrease from Q2 2024. The number of active buyers on Etsy in Q2 2025 was 93.3 million, a 3.4% decrease from Q2 2024.
The earnings miss was largely due to currency, with Etsy's earnings per share for Q2 2025 being $0.25, a 39% decrease from Q2 2024. Etsy is taking steps to stop the exodus of buyers and sellers on its platform, aiming to strengthen customer relationships, deepen buyer engagement, and reignite GMS growth on a sustainable basis.
In summary, Etsy's strategy to resume GMS growth and retain its valuable customers centres on a better, AI-enhanced app experience combined with more personalized, multi-channel marketing and seller tools to foster discovery, customer loyalty, and operational efficiency. With Depop's growth and the company's focus on enhancing its platform, Etsy is well-positioned for future growth.
- Etsy aims to invest in technology, particularly AI, to improve search and discovery, personalize retention and engagement marketing, and enhance its mobile app, all part of its strategy to boost Gross Merchandise Sales (GMS) and retain valuable customers.
- To strengthen customer relationships and prevent the exodus of buyers and sellers on its platform, Etsy is planning to use its money more effectively, by employing personalized, multi-channel marketing and simplifying seller tools to deepen buyer engagement and foster operational efficiency.
- Etsy's business model is evolving, venturing beyond traditional search-ranking models to incorporate generative AI and large language models, a move aimed at understanding user preferences and listings better, and offering more diverse, curated, and personalized recommendations to shoppers, thereby increasing finance and revenue.
