ETSY INC recently released its latest 10-Q report. Etsy, Inc. operates two-sided online marketplaces that connect buyers and sellers in the United States, the United Kingdom, and other international markets. Its report shows two operating segments: Etsy, which focuses on handmade, vintage, and creative goods, and Depop, a fashion resale marketplace. The company also earns revenue from transaction fees, payments processing, listing fees, advertising, and shipping labels.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Etsy said its March 31, 2026 quarter should be read alongside its condensed consolidated financial statements and its February 19, 2026 annual report. The company emphasized that its discussion includes forward-looking statements and that actual results could differ materially, with risks tied to market conditions, consumer demand, cross-border trade, and other factors.
A major development in the quarter was Etsy’s February 15, 2026 agreement to sell Depop to eBay for $1.2 billion in cash, subject to adjustments. Etsy said the transaction is expected to close by the end of the third quarter of 2026, pending regulatory approval and other closing conditions. Until then, Depop’s assets, liabilities, results of operations, and cash flows are being shown as discontinued operations. Etsy also said it intends to use the proceeds for general corporate purposes, share repurchases, and investment in the Etsy marketplace.
Etsy completed the sale of Reverb on June 2, 2025, so the March 2026 quarter reflects Etsy marketplace continuing operations only, while the March 2025 comparison period included Reverb. That makes some year-over-year comparisons less direct.
Key operating and financial metrics
For the three months ended March 31, 2026, gross merchandise sales from continuing operations were $2.46 billion, down 3.9% from $2.56 billion a year earlier. On an Etsy marketplace basis, GMS rose 5.5% to $2.46 billion from $2.33 billion.
Revenue increased 3.1% to $631.3 million from $612.2 million. Marketplace revenue was $432.8 million, up 1.1%, and services revenue was $198.5 million, up 7.9%. Revenue take rate rose to 25.7% from 23.9%.
Gross profit increased to $455.6 million from $444.4 million. Operating expenses fell sharply to $335.8 million from $448.3 million, mainly because the prior-year quarter included a $101.7 million Reverb goodwill impairment charge that did not recur.
Net income was $104.7 million, compared with a net loss of $35.1 million in the prior-year quarter. Net income margin improved to 16.6% from negative 5.7%. Adjusted EBITDA rose to $184.7 million from $173.5 million, and the adjusted EBITDA margin improved to 29.3% from 28.3%.
Active sellers were 5.563 million, down from 5.602 million. Active buyers were 86.618 million, down from 89.230 million.
Trailing twelve-month operating cash flow was $725.0 million, down slightly from $732.6 million. Free cash flow was $671.2 million, compared with $684.9 million a year earlier.
GMS and buyer trends
Etsy said the decline in continuing-operations GMS reflected a $228.4 million reduction from the Reverb sale, partly offset by a $128.7 million increase from the Etsy marketplace. Etsy marketplace GMS growth was supported by strategic priorities, foreign exchange tailwinds, and softer prior-year comparisons.
The company said Etsy marketplace GMS per active buyer on a trailing twelve-month basis rose 1.5% year over year to $122, while active buyers on the Etsy marketplace declined 2.1% to 86.6 million.
U.S. buyer GMS represented 74% of continuing operations GMS, down from 76% a year earlier. On the Etsy marketplace alone, U.S. buyer GMS was also 74%, compared with 75% in the prior-year period.
Etsy said macroeconomic uncertainty remains a factor, including geopolitical conflicts, tariffs, changes to de minimis exemptions, and possible effects on consumer demand and cross-border trade.
Revenue detail
Marketplace revenue increased by $4.5 million to $432.8 million. Etsy said the increase was driven by an $11.5 million rise in Etsy payments revenue and a $9.7 million rise in Etsy transaction fee revenue, both tied to higher Etsy marketplace GMS, partly offset by the loss of Reverb revenue.
Services revenue increased by $14.5 million to $198.5 million, mainly because advertising revenue rose by $14.4 million, driven by a higher average price per click on Etsy Ads.
Expense detail
Cost of revenue increased 4.7% to $175.7 million, mainly due to higher refund costs, payments fees, and cloud hosting and bandwidth costs.
Marketing expense rose 1.4% to $174.2 million. Etsy said the increase reflected targeted shifts in portfolio mix and higher stock-based compensation, partly offset by the Reverb sale. Paid GMS was 21% of total GMS, down from 23%.
Product development expense fell 1.7% to $99.1 million, mainly because of the Reverb sale, partly offset by higher Etsy marketplace employee compensation-related expenses.
General and administrative expense fell 15.5% to $62.5 million, mainly because of the reversal of previously recognized Canadian digital services tax expense after Canada repealed the DST in March 2026, along with the effect of the Reverb sale.
Other items
Etsy recorded other income of $9.4 million, compared with other expense of $10.7 million a year earlier, driven mainly by exchange-rate gains on non-functional currency cash and intercompany balances.
The provision for income taxes was $24.6 million, up from $20.5 million.
Loss from discontinued operations was $35.0 million, compared with $17.0 million a year earlier, reflecting Depop’s results. The market has reacted to these announcements by moving the company's shares -1.09% to a price of $62.79. For the full picture, make sure to review ETSY INC's 10-Q report.
