Etsy Reports Earnings Fall Short, Shares Decline Further

Etsy’s shares (ETSY) have fallen 19.7% this year, underperforming compared to the Zacks Retail and Wholesale sector and the Zacks Internet-Commerce industry, which saw declines of 3.6% and 7.1%, respectively.

For the first quarter of 2025, Etsy reported earnings of 46 cents per share. This fell 8% short of the Zacks Consensus Estimate and marked a 4.2% year-over-year decrease.

In contrast, first-quarter revenue increased by 0.8% year over year, reaching $651.2 million. This figure exceeded the Zacks Consensus Estimate by 1.33%. The growth was largely fueled by strong advertising revenues from Etsy and Depop, alongside the impact of the newly implemented seller setup fee and ongoing growth from expanded payment services.

During the first quarter of 2025, Etsy repurchased around $189 million, or 3.7 million shares, under its stock repurchase program.

Etsy, Inc. Price, Consensus and EPS Surprise

Etsy’s earnings surprise history is mixed. The company surpassed the Zacks Consensus Estimate once in the last four quarters but fell short in the other three, with an average negative surprise of 6.78%.

ETSY’s Top-Line Performance

Marketplace revenues were reported at $458.5 million, making up 70.4% of total revenues, which was a 1.8% decrease compared to the previous year. This drop was largely attributed to falling Gross Merchandise Sales (GMS), although it was partially mitigated by increased payments revenue and new seller setup fees, which were raised to $29 for new U.S. sellers.

Etsy added 4.8 million new buyers, bringing the total number of active buyers to 88.5 million, which represented a decrease of 3.4% year over year.

Services revenue increased by 7.7% year over year to $192.7 million, accounting for 29.6% of total revenues.

User Base and GMS Trends

Etsy’s active buyer count declined by 1.7% year over year, totaling 94.8 million, though it surpassed the consensus estimate of 94.4 million.

The active seller count was 8.1 million, showing an 11.3% year-over-year decline and missing the consensus estimate of 8.9 million.

However, Etsy achieved record buyer reactivation, with 6.5 million reactivated buyers, up by 2.1% year over year.

The consolidated GMS for the quarter was $2.8 billion, representing a decline of 6.5% year over year. This figure also narrowly missed the Zacks Consensus Estimate by 0.04%. The Etsy marketplace’s GMS was reported at $2.3 billion, down 8.9% compared to the previous year on a reported basis.

Operating Results Analysis

Total operating expenses for the first quarter of 2025 amounted to $481.4 million, reflecting a 23.2% increase from the prior year. This elevated operating expense now accounts for 73.9% of total revenues, compared to 60.5% in the year-ago quarter.

Marketing expenses slightly decreased by 1.5% year over year to $189 million, and as a percentage of revenues, these costs fell to 29%.

Product development expenses increased marginally by 0.6% year over year to $110.5 million, remaining stable at 17% of revenues.

General and administrative (G&A) expenses showed a decrease of 9.9% year over year, totaling $80.2 million and represented 12.3% of total revenues.

Adjusted EBITDA saw a modest rise of 1.9% year over year to $171.1 million, improving the adjusted EBITDA margin to 26.3%.

Etsy reported an operating loss of $22.3 million compared to an operating income of $68.1 million from the previous year.

Balance Sheet Overview

As of March 31, 2025, Etsy’s cash and cash equivalents totaled $649.2 million, down from $811.2 million as of December 31, 2024.

Short-term investments amounted to $218.5 million, a decrease from $228.3 million in the previous quarter.

Long-term debt stood at $2.3 billion at the end of the first quarter, unchanged from prior quarterly figures.

Q2 Guidance

Looking ahead to the second quarter of 2025, Etsy expects a take rate of 23.3%. The company forecasts that consolidated GMS will decline at a rate similar to, or slightly better than, the year-over-year decline seen in the first quarter of 2025.

Etsy also estimates an adjusted EBITDA margin of around 25% for the upcoming quarter.

ETSY’s Market Position

Currently, Etsy holds a Zacks Rank of #5 (Strong Sell).

In contrast, several stocks in the broader sector hold a better ranking, including Alibaba (BABA), Carvana (CVNA), and Canada Goose (GOOS), each holding a Zacks Rank of #2 (Buy).

Alibaba will release its fourth-quarter fiscal 2025 results on May 15, while Carvana is set to report first-quarter 2025 results on May 7. Canada Goose is also expected to report fourth-quarter fiscal 2025 results on May 15.