Etsy Reports $3.6B Q4, Eyes 2026 Growth With AI Push
Etsy reported $3.6 billion in gross merchandise sales (GMS) for Q4 2025, up 2.4% year-over-year on an adjusted basis, marking a return to slight growth after recent declines. Revenue reached $881.6 million, a 6.6% increase excluding Reverb, the musical instrument marketplace Etsy sold in June 2025.
The results come as the online marketplace faces headwinds in its core user base. Active buyers declined 3.4% to 86.5 million, while active sellers decreased 1.5% to 5.6 million. Etsy is now betting on AI-driven shopping partnerships and expanded international shipping to drive 2026 growth.
Separately, Etsy announced it has agreed to sell fashion resale marketplace Depop to eBay for $1.2 billion in cash, with the transaction expected to close in Q2 2026. The sale comes after Etsy acquired Depop for $1.6 billion in 2021.
Performance Details
App-based GMS grew 6.6%, representing nearly half of total GMS. Net income was $110.7 million with non-GAAP EBITDA of $222.5 million. Etsy ended the quarter with $1.8 billion in cash and repurchased approximately $133 million of stock.
The GMS growth of 2.4% represents improvement but drops to a 3.8% decline when including Reverb's prior-year contribution. The sale of Reverb in June eliminated a revenue stream but allows focus on the core marketplace.
User Base Decline
The decline in active buyers and sellers signals competitive pressure from Amazon Handmade, Shopify-powered stores, and social commerce platforms. The buyer decline suggests difficulty retaining casual shoppers, while fewer sellers may indicate dissatisfaction with fees or increased competition elsewhere.
2026 Strategy: AI and Agentic Shopping
Etsy expects continued GMS growth in 2026, with CEO Kruti Patel Goyal emphasizing “strengthening how we connect the right people with the right items at the right moments.”
The company has announced partnerships with major AI platforms. In January 2026, Etsy integrated with Google's AI Mode in Search, the Gemini app, and Microsoft's Copilot Checkout, allowing signed-in U.S. users to purchase Etsy items directly within AI-powered experiences. The company previously integrated with OpenAI's ChatGPT Instant Checkout.
These “agentic shopping” partnerships aim to capture customers at the moment they move from browsing to buying. Etsy also partnered with Stripe to accept agentic payments from multiple platforms via a single integration.
Beyond AI, Etsy expanded its third-party shipping partner program into five new markets—Bulgaria, Italy, Lithuania, Spain, and Ukraine—to improve cross-border shipping and delivery reliability for sellers. Email and push notification engagement increased more than 25% year-over-year.
Depop Sale and Performance
Etsy announced it will sell fashion resale marketplace Depop to eBay for $1.2 billion in cash, expected to close in Q2 2026. Etsy acquired Depop for $1.6 billion in 2021, making this a significant loss on the investment.
Despite the sale, Depop showed a strong Q4 performance. GMS was $299.7 million, up 37.2% year-over-year on a currency-neutral basis, driven by U.S. market strength. U.S. buyer GMS grew 60.2%, with Depop's largest-ever brand marketing campaign contributing to the performance. Active sellers reached 3.2 million, up 41.1%, while active buyers grew 37.7% to 7.0 million.
The sale allows Etsy to focus on its core marketplace after years of mixed results from acquisitions. Beginning Q1 2026, Depop will be classified as discontinued operations in Etsy's financials.
2026 Guidance and Outlook
Etsy provided Q1 2026 guidance for continuing operations (excluding Depop): GMS of $2.38 billion to $2.43 billion, take rate of approximately 25.5%, and Adjusted EBITDA margin of 28-30%.
For the full year, CFO Lanny Baker said the company expects “slight growth” in GMS with “positive year-over-year comparisons in every quarter.” He noted that “we've improved the Etsy marketplace's annual GMS performance over the last two years, and we expect to further improve our performance this year.”
Key metrics to watch include whether active buyers stabilize or continue declining, how effectively AI partnerships drive discovery and conversion, cross-border GMS growth, and seller retention as competition increases.
The company ended Q4 with $1.8 billion in cash and investments and repurchased $133 million of stock. With a singular focus on the core Etsy marketplace after the Depop sale, the company is betting its AI and international strategies can reverse user base declines and return to sustained growth.
