Etsy Inc. kept its marketplace recovery on track in Q1, driven by stronger mobile engagement, higher buyer spending and early wins in artificial intelligence (AI)‑powered product discovery.
For the first quarter ended March 31, gross merchandise sales (GMS) on Etsy’s core marketplace reached $2.46 billion, up 5.5% year over year. That marked Etsy’s second straight quarter of GMS growth — and a meaningful acceleration from the 0.1% uptick in the prior quarter that ended roughly two years without gains.
It was also the first full quarter under new CEO Kruti Patel Goyal, who stepped into the role on Jan. 1. During the company’s Q1 earnings call, she said the results showed “early positive changes tied to customer behavior” following the rollout of Etsy’s strategic priorities last year.
“Active buyers grew sequentially for the first time in two years,” Goyal said. “We delivered year-over-year growth in new buyers and active sellers. GMS per active buyer grew year over year for the first time since 2022, and momentum in our mobile app continued to strengthen.”
Mobile continues to be a bright spot. App‑based GMS rose 11.2% year over year in Q1, according to Etsy’s earnings report.
Etsy also expanded its AI and agentic commerce efforts during the quarter. Alongside new AI agents for buyers and sellers, the company built a dedicated Etsy app for use within OpenAI’s ChatGPT. Goyal said the app has not yet launched, and Etsy has not shared a timeline for its release.
Meanwhile, Etsy is moving ahead with its planned $1.2 billion sale of resale platform Depop to eBay Inc., which it expects to close by the end of the third quarter.
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 sees early signs of GMS improvement in Q1
In a new shareholder letter, Goyal outlined four priorities guiding Etsy’s strategy:
- Show up where shoppers discover, on and off Etsy.
- Use better machine learning (ML) to match shoppers with the right inventory.
- Retain and reward its most valuable customers.
- Amplify human connection.
Goyal said early signs of progress are emerging, especially in product discovery and matching.
“Our app is the centerpiece of this transformation,” she added. “It’s where personalization, machine learning and direct relationships come together most effectively, and we’re seeing that show up in the numbers.”
In Q1, transactions through the Etsy app accounted for 47% of total GMS, up from 46% in the prior quarter. Goyal noted that app users have 40% higher lifetime value than non‑app users because they visit more often, engage more deeply and convert at higher rates. That dynamic, she said, is driving Etsy’s push to make the app more personalized and a stronger starting point for discovery.
Seasonal demand also played a role. Etsy said it continued to perform well in shopping moments where sellers offer differentiated merchandise. Valentine’s Day performance around themes like “love,” “breakups” and “Galentine’s” gained traction, while Easter drove demand for personalized baskets, toys, and gifts. Birthdays were the largest and fastest‑growing gift segment in the quarter, and wedding‑related purchases also climbed as buyers sought customized items.
Trailing 12‑month GMS per active buyer rose to $122 in Q1 — the first year‑over‑year increase since 2022.
Executives said several factors contributed to higher average order values (AOVs). These factors included foreign exchange tailwinds and seller listing-price increases following last year’s expiration of the de minimis tariff exemption.
Etsy customer trends improve
“We anticipate that these benefits, and the resulting impact to AOV, will moderate as the year progresses,” chief financial officer Lanny Baker told analysts on the call.
Even so, he said buyer activity is holding steady, if not improving. Etsy’s U.S. import channel returned to growth in Q1 after slowing last year amid tariff changes. And on a currency‑neutral basis, non‑U.S. GMS grew for the first time since 2023, signaling that buyer resilience is extending beyond the U.S., he said.
Active buyers reached 86.6 million in the quarter, down 2.1% year over year but marking the first sequential increase in two years, Baker said. Active sellers grew 3.3% to 5.6 million, the first year‑over‑year increase since Etsy introduced its seller setup fee in early 2024.
“Our most valuable buyers and sellers drive a disproportionate share of our marketplace, and we’re focused on earning their continued engagement,” Goyal said.
For high-value buyers, Etsy is investing in more personalized recommendations, targeted offers and programs like its Etsy Insider beta, she said. For sellers, the company is using AI to simplify the listing process and streamline other workflows.
Etsy also reworked its marketing mix, boosting paid search while reducing lower‑funnel paid social and shifting spend away from linear TV toward “more efficient digital channels.”
Overall revenue reached $631 million in the quarter, including $432.8 million in marketplace revenue and $198.5 million in services revenue.
On the Etsy marketplace alone, revenue rose 6.3% year over year and services revenue 10.5%.
Etsy expands AI and agentic commerce experiments
Goyal said Etsy is encouraged by “early engagement and traffic signals” from its integrations with OpenAI, Microsoft and Google. The partnerships allow Etsy listings to surface inside AI‑powered search and conversational interfaces.
At the same time, Etsy is reshaping how its own search systems work. Historically, its algorithms prioritized items — often popular listings — most likely to convert in the moment, Goyal said.
“We are shifting toward a more personalized, relevance-driven approach with ML models that learn from both past behavior and real-time intent,” she wrote in the shareholder letter. “In early tests, these improvements are driving increases in add-to-cart rates and conversion.”
Etsy is also experimenting with new “AI‑generated buyer profiles” designed to move beyond a shopper’s past activity and surface new categories and shopping occasions, she said.
On the platform itself, Etsy has been testing conversational AI experiences. During the quarter, the company built two AI agents — one to help buyers find gifts and another to offer insights for sellers, Goyal said.
Looking ahead, she said agentic shopping could become a “meaningful discovery channel” for Etsy. For now, traffic from these experiences is growing and showing high intent, but it still represents only a small share of overall visits.
Etsy expects continued growth through 2026
On Feb. 15, Etsy reached an agreement to sell its resale fashion marketplace Depop to eBay Inc. for $1.2 billion in cash. Etsy had acquired Depop in 2021.
“We have received regulatory clearance for the transaction in the United States and Germany, and reviews are in progress and on track for other markets, including the U.K. and Australia. We expect to close the transaction by the end of the third quarter of 2026,” Baker said.
Looking ahead, he said Etsy expects marketplace growth to continue through the year.
The company projects second‑quarter GMS between $2.48 billion and $2.53 billion, representing year‑over‑year growth of about 3% to 5%. For the full year, Etsy now expects low single‑digit GMS growth, Baker said.
Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports. Here’s last quarter’s report on Etsy revenue and GMS.
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