Etsy outlines Q3 GMS of $2.6B–$2.7B with 24.5% take rate as app and Depop momentum accelerate

Earnings Call Insights: Etsy (ETSY) Q2 2025

Management View

• CEO Joshua G. Silverman highlighted that “our performance in the quarter is directly related to the strategic shift we made midway through last year,” focusing on elevating the holistic customer experience and deploying an app-first, recommendation-driven approach. He emphasized, “we’re seeing early promising signals that our flywheel is gaining speed” and noted that Etsy’s marketplace delivered a quarter that exceeded prior expectations, with GMS down 5.4% year-over-year, an improvement from the previous quarter. Silverman also shared that Depop’s GMS grew 35% year-over-year, reaching a $1 billion annualized run rate, with U.S. GMS up 54% and Peter Semple appointed as permanent Depop CEO.
• Silverman stated, “as the app user experience and consumer perception have improved, App GMS has outpaced non-app GMS growing year-over-year in the second quarter and rising to almost 45% of total GMS.”
• President and Chief Growth Officer Kruti Patel Goyal specified four shared priorities: increasing discovery, improving matching through machine learning, retaining and rewarding valuable customers, and amplifying human connection. She announced a shift in U.S. brand media mix away from cable TV to OTT, audio, digital video, and streaming, with these channels representing about 65% of Q4 brand spend versus 40% a year ago.
• Goyal added the upcoming launch of a V2 Etsy Insider loyalty program for top buyers by the holiday season and foundational improvements to seller tools, including AI-enabled features.
• CFO Charles C. Baker reported, “Second quarter 2025 consolidated GMS was $2.8 billion, down 4.8% year-over-year on an as-reported basis. Excluding Reverb from all periods, second quarter 2025 GMS was approximately $2.7 billion, down 2.6% year-over-year.” Baker noted consolidated revenue increased 4% to $673 million, with adjusted EBITDA of $169 million at a 25.1% margin. He highlighted, “Consolidated Q2 ’25 take rate improved to 24%, meaningfully ahead of our guidance.”

Outlook

• Baker stated, “We currently expect Q3 consolidated GMS to be between $2.6 billion and $2.7 billion, which at the midpoint would represent further quarter-over-quarter improvement in the apples-to-apples growth rate.” He projected a Q3 consolidated take rate of approximately 24.5% and adjusted EBITDA margin of approximately 25%, with Etsy core margins stepping up into the high 20% range. Management expects continued improvement in growth comparisons in the second half of the year, supported by product and marketing investments.

Financial Results

• Excluding Reverb, consolidated GMS reached $2.7 billion, down 2.6% year-over-year, showing improvement compared to the previous quarter’s 6.2% decline. Consolidated revenue was $673 million, up 4%. Adjusted EBITDA margin was 25.1%. Monthly active app users increased 7% year-over-year, and the app’s share of GMS rose to 44.8%. Services revenue grew 15.3% year-over-year, primarily driven by on-site ads at Etsy and Depop. Product development spend declined 2.3% to $112 million, while consolidated marketing spend increased 16% to $212 million. Free cash flow was $90 million for the quarter, and $635 million for the trailing 12 months. Etsy repurchased $335 million in stock, ending the quarter with $1.5 billion in cash and $3 billion in convertible debt.

Q&A

• John Robert Colantuoni, Jefferies: Asked about the drivers for improved GMS and margin targets. Silverman responded that “progress… is very directly related to the strategic priorities we’ve been talking about,” citing app improvements, personalized marketing, paid social, and PLA investments as key. Baker said, “we are managing to the high 20s, the very high 20s” on core margins, with a focus on ROI-driven investments.
• Christopher Louis Kuntarich, UBS: Inquired about app growth and its incremental impact. Silverman explained, “when we get a buyer to adopt the app, we see their lifetime value go up, and we’ve gained confidence that that’s causal, not correlated.”
• Paul Joseph Nawalany, Piper Sandler: Questioned demand trends across income cohorts and GMS inflection. Silverman indicated both higher and lower income cohorts improved, with no dramatic differences, and attributed GMS improvement to app momentum, paid social, and better marketing.
• Marvin Milton Fong, BTIG: Asked about personalized communications and payments growth. Silverman noted gains were driven by “more personalized titles and more personalized content,” adding, “Etsy’s personalization today is still largely based on listing to listing personalization,” with plans to advance this further. Baker said payments growth reflects nearing full adoption by sellers.
• Nathaniel Jay Feather, Morgan Stanley: Sought breakdown of marketing spend and social media ROI. Silverman said Q2 marketing spend step-up was driven by competitive dynamics and Martech improvements, while paid social investments are scaling as ROI improves. Baker added Depop’s marketing aims at awareness, with slower top-line responsiveness.
• Trevor Vincent Young, Barclays: Asked about early GMS wins from resource shifts. Baker commented that “the velocity of our teams… and the size of the wins… is back in very like historically consistent ranges.”
• Naved Ahmad Khan, B. Riley: Queried on Etsy Insider benefit costs and mobile GMS drivers. Silverman described a careful, test-and-learn approach to loyalty economics, with current costs not material to margins. Baker said new app users spend less initially, but long-term app engagement is expected to drive GMS per buyer higher.
• Jason Stuart Helfstein, Oppenheimer: Asked about app acquisition investment and GMS guidance. Baker said, “we are going to continue to lean more in, but I don’t think you’re going to see us like go from 0 to 60 overnight” on app acquisition. For Q3, “at the midpoint of our outlook… year-to-year GMS comparisons would improve… from down about 2.6% in the second quarter to down about 1.9% in the third quarter.”
• Michael Paul Morton, MoffettNathanson: Asked about agentic chatbot traffic and AI’s impact on paid social. Silverman said agentic chatbot traffic is “still so small that it’s really hard to parse it out,” but Etsy is well positioned due to unique inventory. He highlighted GenAI’s role in creating personalized landing experiences for paid social.

Sentiment Analysis

• Analysts raised questions on sustainable growth levers, marketing ROI, loyalty costs, and the incremental value of app users, often seeking more granularity and expressing cautious optimism. The tone was neutral to slightly positive, with a focus on the pace of improvement and clarity on guidance.
• Management remained confident and focused, repeatedly emphasizing disciplined, ROI-driven investment and highlighting progress from strategic shifts. Silverman and Baker used phrases like “we’re really encouraged,” “we think that’s very sustainable,” and “we are going to continue to manage it well while making investments.”
• Compared to the previous quarter, both management and analysts exhibited a more constructive tone, with less discussion of macro uncertainty and more focus on execution and signals of improved momentum.

Quarter-over-Quarter Comparison

• Guidance language shifted from indicating ongoing macro challenges to providing a specific Q3 GMS range and signaling confidence in sequential improvement. Strategic focus has moved further toward accelerating app adoption, personalized marketing, and Depop’s growth. Analysts’ questions shifted from macro headwinds and tariff impacts to operational execution and marketing efficacy. Key metrics such as GMS decline rates, app user growth, and take rate have improved compared to Q1. Management’s confidence was more pronounced, citing sustained momentum and visible early returns on new initiatives. Analysts also appeared more constructive, seeking detail on the durability of gains and investment pacing, rather than expressing skepticism over macro headwinds.

Risks and Concerns

• Management referenced ongoing year-over-year GMS declines and noted that improvement “may take a few quarters to materialize” in certain metrics like active buyers. They continue to monitor consumer discretionary spending and competitive dynamics in paid search. Baker pointed out that the exit of Reverb affects comparability. Analysts questioned the cost structure of loyalty programs, sustainability of marketing ROI, and the incremental benefit of increased app investment.

Final Takeaway

Etsy management underscored that their strategic shift to an app-centric, data-driven, and highly personalized customer experience is yielding tangible progress, with improving GMS trends, robust growth at Depop, and expanding take rates. The company projects further sequential improvement in Q3, supported by accelerated marketing investments and enhanced loyalty initiatives, while maintaining disciplined financial management and a focus on long-term shareholder value.

Read the full Earnings Call Transcript