Etsy Inc.’s Q1 gross merchandise sales (GMS) declined year over year for the third year in a row, yet revenue grew.
Q1 also marked the sixth consecutive quarter in which Etsy GMS declined year over year. Still, it was consistent with expectations, chief financial officer Lanny Baker told investors on a Q1 earnings call.
Meanwhile, Etsy announced after the quarter ended that it has decided to sell Reverb, a subsidiary marketplace it acquired in 2019, for $105 million in an all-cash transaction, Baker said. The sale leaves Reverb privately held, under the ownership of Creator Partners and Servco. It will also enable Etsy to focus on driving growth for its own marketplace and its other subsidiary, Depop, CEO Josh Silverman told investors on a Q1 earnings call.
Focusing on Etsy, he said the marketplace has used artificial intelligence (AI) and machine learning “to deliver deeper personalization to drive buyer engagement and frequency over time.”
“Recent AI advances enabled us to build an experience where the trends a shopper sees and the items that appear highest for them within each curated collection are based upon their individual activity, including purchased and viewed items,” Silverman told investors.
Q1 marked the first time Etsy tested generative AI to create personalized marketing copy. Silverman said Etsy is optimistic that will “unlock significant gains in the quarters to come.” Doubling down on generative AI, Etsy also participated in using OpenAI’s Operator for agentic commerce, as well as enabling in-app purchases via Microsoft Copilot.
Etsy ranks No. 20 in the Global Online Marketplaces Database. The database is Digital Commerce 360’s ranking of the 100 largest marketplaces by third-party gross merchandise value (GMV). Etsy’s musical instrument marketplace Reverb is No. 45, while its used-clothing marketplace Depop ranks No. 54.
Etsy revenue and GMS in Q1
In Q1, Etsy consolidated GMS decreased 6.5% year over year to $2.8 billion.
Its subsidiary Depop logged its best quarterly GMS performance since Etsy acquired it in 2021, Silverman said. Chief growth officer Kruti Patel Goyal added that Depop has built an app-first experience that drives more than 90% of its sales.
For the Etsy marketplace, specifically, decreased GMS 8.9% year over year to $2.3 billion. Etsy marketplace revenue decreased 1.8% year over year in Q1, which Baker said reflects the GMS decline.
Meanwhile, Etsy Q1 consolidated revenue was $651.2 million, up 0.8% compared to the same period in 2024.
Etsy attributed the Q1 consolidated revenue increase primarily to:
- Growth in on-site advertising revenue for both Etsy and Depop.
- A full quarter impact of the seller set-up fee.
- Continued benefit from Etsy’s payments expansion.
Services revenue, which includes revenue from Etsy on-site ads, grew 7.7% year over year in Q1. Meanwhile, U.S. buyers represented about 75% of Etsy marketplace GMS. Meanwhile, the GMS per buyer declined 3.5% year over year to $120, Baker said.
Buyer conversion rate on the Etsy app grew year over year. Additionally, the Etsy app accounted for 44.5% of Q1 GMS. That’s the highest-ever share of total GMS that has come from the app, Etsy said. The online marketplace added that the app “significantly outperformed” non-app GMS. Additionally, the app saw a year-over-year upward trend in monthly active users, as well as an increase in downloads from first-time users, the company said.
How Etsy is navigating tariffs
Silverman referred to Etsy as “unique and special” as he said global tariff regulation is still in flux.
Etsy has more than 5 million sellers, most of whom Silverman said are “solo entrepreneurs working from their home with 90% sourcing their supplies domestically.” He also said Etsy’s has more than 100 million items that touch on more than 100 retail subcategories. In the U.S. specifically, he said, more than 60 million items are available, with thousands of sellers in each state.
“Our business model has been especially resilient in times like these,” Silverman told investors. “We don’t manufacture, hold or price inventory, and sellers’ pricing on Etsy has been relatively stable over time, even during times of major price volatility elsewhere.”
Etsy has established a “small operational task force” for creating solutions “to specifically address the shifting tariff landscape,” he added. It’s also monitoring “the ricochet impact” of higher global tariffs on consumer spending in Etsy’s core markets, he said. That includes the cost of items people purchase every day and how that could impact demand for discretionary items.
Etsy’s direct tariff exposure appears to be relatively, Baker said, as “just over 1% of GMS” comes from U.S. imports of items purchased from sellers in China.
“Our sellers tell us they primarily source their supply locally,” Baker said. “In fact, the majority of Etsy Marketplace GMS comes from local within country commerce, and we saw the benefit of this advantage during the pandemic and supply chain bottlenecks that impacted international trade a few years ago. The current trade search situation is highly fluid, and it’s challenging to confidently predict when and where specific tariffs will go into effect or how those tariffs may impact demand more broadly.”
Etsy investing in ads, data to fuel LLMs
The Etsy app helps the marketplace capture more data, which in turn builds more powerful large language models (LLMs) that it can leverage. Search, recommendations and ads all contribute to creating a “better buyer data pipeline,” according to the company.
In Q1, Etsy saw a 16.4% increase in buyers it recognizes.
“Previously we only looked at organic search data to power our search models,” Silverman said. “Now we’re working to also incorporate ad and recommendation data.”
And compared to the end of 2024, Etsy is already pulling in over a third more data than it would from search alone, he added.
“We’re also improving our ability to recognize individual shoppers even if they haven’t signed in,” Silverman said. “We’re better connecting the dots between first and third party data to more accurately predict buyer LTV and tailor engagement and retention strategies for different segments.”
As a result, he said, personalized homepages are getting close to double the engagement of non-personalized homepages. Using machine learning, Etsy has also increased the share of personalized email and push notifications by more than 10 percentage points, he said. It used A/B tests to confirm a “lift in engagement compared to prior, more generic content,” Silverman added.
Check back for more earnings reports. Here’s last quarter’s report on Etsy sales.
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