ETSY Q2 2025: Sees Q3 GMS Decline Easing to 1.9%
- Improved Mobile App Experience and Adoption: The call highlighted that Etsy’s mobile app has become noticeably more engaging—with monthly active users up 7% YoY and a more personalized, browsable home screen—which can drive higher customer lifetime value over time.
- Enhanced Marketing Efficiency Through Segmentation and Personalization: Management emphasized that targeted improvements in PLA segmentation and personalized push/email communications are already generating efficient returns, suggesting that further refinements could sustainably boost GMS and conversion rates.
- Optimistic Outlook on Core Margin Recovery and Depop Growth: Guidance for Q3 indicates a sequential improvement in GMS comparisons (from a 2.6% decline to a 1.9% decline YoY) and the potential for margin expansion, coupled with strong growth prospects for Depop, supporting overall long‑term growth.
- Margin Compression Concerns: Management acknowledged operating margins in the high-twenties—below the historical 30%+ levels—with margin pressure attributed to substantial investments in growth initiatives such as marketing and technology improvements.
- Risks in Mobile App Adoption: While improved app experiences are driving user acquisition, new app users currently spend considerably less than established ones. This raises concerns over the pace of conversion and whether increased investment in the mobile channel will deliver the anticipated incremental GMS.
- Dependence on Temporary External Factors: Some near-term improvements in marketing performance were driven by temporary tailwinds, such as competitors’ withdrawals from the Google Auction, which may not persist, potentially impacting future GMS growth.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Consolidated GMS | Q3 2025 | decline at a rate similar to or potentially slightly better than Q1 2025 decline | $2.6 billion to $2.7 billion | no prior guidance |
Consolidated Take Rate | Q3 2025 | 23.3% | 24.5% | raised |
Consolidated Adjusted EBITDA Margin | Q3 2025 | 25% | 25% | no change |
Core Etsy Marketplace Adjusted EBITDA Margins | Q3 2025 | no prior guidance [N/A] | high 20% range | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Mobile App Experience and Adoption | Q1 2025 emphasized increased adoption with enhanced browsing and personalization features ( ); Q4 2024 noted an intentional push to shift mobile web users to the app despite friction ( ); Q3 2024 focused on driving downloads with interventions that increased app installs ( ). | Q2 2025 highlighted a more intuitive, inspiring, and browsable app with new homepage features, a 7% increase in monthly active users, and app GMS now accounting for nearly 45% of total GMS ( ). | Continued improvement – The sentiment has become increasingly positive with a clear focus on enhancing the user experience and driving higher engagement on the app. |
Marketing Efficiency, Personalization, and Customer Reactivation | Q1 2025 discussed improvements in personalized email/push notifications, the launch of a discovery-centric shopping experience, and early GenAI tests ( ); Q4 2024 focused on channel shifts toward efficient digital spend along with successful buyer reactivation and personalization initiatives ( ); Q3 2024 noted expanded paid social efforts and a full funnel approach to boosting reactivation ( ). | Q2 2025 emphasized expanded owned channels, accelerated influencer marketing, refined segmentation in Google Shopping, and further personalized communications that continue to drive reactivated buyer behavior ( ). | Evolving sophistication – There is a clear shift toward more refined personalization and efficient marketing channels while continuing to focus on reactivation, maintaining a positive momentum. |
Margin Recovery and Compression | Q1 2025 noted margin compression from higher cloud computing and free shipping costs while achieving a modest improvement in adjusted EBITDA ( ); Q4 2024 reported improved margins driven by lower fraud but anticipated near-term compression ( ); Q3 2024 experienced compression linked to increased marketing spending ( ). | Q2 2025 maintained an outlook with EBITDA margins in the high twenties and indicated a planned step-up in core margins in upcoming quarters ( ). | Balanced outlook – Despite short-term compression from investments, there is confidence in margin recovery driven by strategic cost management and long‑term growth investments. |
Gross Merchandise Sales (GMS) Dynamics | Q1 2025 saw a 6.5% YoY decline with muted buyer metrics and lower active engagement ( ); Q4 2024 reported a 6.8% decline in consolidated GMS in the quarter with core marketplace GMS down ( ); Q3 2024 attributed declines to macro and operational headwinds across categories ( ). | Q2 2025 reported a smaller overall decline with consolidated GMS down 4.8% YoY (2.6% ex‑Reverb) and improvements in monthly GMS per buyer and app GMS (44.8% share), with bright spots in key categories ( ). | Improving performance – The pace of decline has moderated, with stronger app contribution and category-specific bright spots pointing to a gradual stabilization. |
Depop Growth and Impact | Q1 2025 highlighted record seller acquisition and strong top‑line growth ( ); Q4 2024 reported nearly 32% YoY growth and robust U.S. performance with 60% growth in the U.S. ( ); Q3 2024 emphasized accelerated growth driven by strategic fee reductions and a major U.S. marketing campaign ( ). | Q2 2025 continued to deliver robust performance with Depop GMS growing 35% YoY, achieving an annualized run rate of $1 billion with U.S. growth at 54% ( ). | Sustained acceleration – Depop remains a standout growth engine, with strong and accelerating performance that reinforces its strategic importance. |
Tariff and Trade Policy Dynamics | Q1 2025 set up a task force to develop creative solutions for dealing with the shifting tariff landscape and monitored potential impacts on cross‑border trade ( ); Q4 2024 discussed exposure to imports and trade resilience, particularly regarding Chinese and European products ( ); Q3 2024 had no related discussion. | Q2 2025 report indicated that no significant shifts in consumer spending related to tariffs or trade announcements have been observed ( ). | Stabilizing environment – Initial proactive measures have transitioned to a situation where tariff and trade policy dynamics are currently less disruptive, reflecting a stable backdrop. |
Macroeconomic and External Factors Affecting Buyer and Seller Activity | Q1 2025 highlighted softer consumer spending and declines in activity due to challenging macro conditions and international softness ( ); Q4 2024 discussed low consumer confidence, wedding declines, and international market headwinds ( ); Q3 2024 noted external disruptions (elections, sports events, natural events) affecting buyer behavior ( ). | Q2 2025 noted a slight stabilization in consumer spending, with improved sequential performance in May and June and favorable competitive dynamics in Google PLA auctions ( ). | Easing pressures – While macro challenges persisted in earlier periods, the current period reflects more stable consumer behavior and a better competitive outlook. |
Investment in Technology, Product Development, and Cost Management | Q1 2025 reported increased spending on ML, search development, and app improvements despite margin headwinds ( ); Q4 2024 detailed a strategic shift from near-term conversion experiments to holistic customer experience, with investments in AI/ML and cost control measures ( ); Q3 2024 emphasized foundational improvements, increased ML hiring, and global talent optimization to reduce costs ( ). | Q2 2025 continued a strong focus on enhancing the app and leveraging ML for personalization while increasing marketing spend as part of a balanced cost management approach ( ). | Consistent strategic focus – Investments in technology and product development remain a priority, with ongoing efforts to balance innovation with disciplined cost management. |
Customer Loyalty and Engagement Programs | Q1 2025 introduced a beta shopper loyalty program with increased personalized communications and strong app engagement ( ); Q4 2024 launched the Etsy Insider loyalty program in closed beta targeting occasional shoppers and enhancing direct marketing content ( ); Q3 2024 noted early stages of the Etsy Insider rollout and initial learnings from personalized engagement initiatives ( ). | Q2 2025 is evolving the Etsy Insider loyalty program with expanded rewards and a broader buyer set, alongside enhanced personalized communications across owned channels ( ). | Expanding and refining – There is continuity with an evolution from beta tests toward broader, more scalable loyalty and engagement programs, indicating a deepening commitment to customer retention. |
Share Repurchase and Capital Allocation Strategies | Q1 2025 reported a $189 million share repurchase supported by strong free cash flow and nearly $1 billion in cash reserves ( ); Q3 2024 highlighted a new $1 billion repurchase authorization, with significant share buyback activity and robust FCF conversion supporting capital allocation ( ); Q4 2024 had no discussion on this topic. | Q2 2025 reported repurchasing $335 million of stock, including $150 million linked to a convertible debt transaction, reiterating confidence in financial flexibility and ongoing shareholder returns ( ). | Strengthening commitment – The company continues to allocate capital to share repurchases, with increased volumes and strategic debt issuance reinforcing its capital allocation strategy. |
New Revenue Streams via Physical Gift Cards | Q3 2024 discussed the launch of physical gift cards as a new revenue stream, highlighting marketing efforts via a third party, careful revenue recognition on redemption/breakage, and potential upside despite currently low GMS contribution ( ); Q1 2025 and Q4 2024 did not mention this area. | Q2 2025 had no mention of physical gift cards initiatives. | Emerging then de-emphasized – The gift card initiative emerged in Q3 2024 but is absent in Q2 2025, suggesting a possible deprioritization or integration into broader revenue strategies. |
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Margin & Spend
Q: What drove buyer spend and margin changes?
A: Management explained that enhanced app features, personalized outreach, and improved PLA segmentation led to better buyer spend, while core margins remain in the high twenties with expectations to improve in Q3. -
App Growth
Q: How is the app driving growth?
A: They highlighted that the revamped app is increasing engagement and boosting buyer lifetime value, reinforcing its role in delivering personalized experiences for sustained growth. -
Marketing Allocation
Q: How is marketing spending allocated across businesses?
A: They noted Q2 spending was balanced between Etsy and Depop, but expect accelerated, awareness-focused investment in Depop in Q3 to support long‑term growth. -
Market Guidance
Q: What is Q3 GMS outlook compared to Q2?
A: Management anticipates apples‑to‑apples GMS improving from around -2.6% in Q2 to roughly -1.9% in Q3 as Depop’s momentum contributes to overall stability. -
GMS Recovery
Q: Is early GMS recovery underway?
A: They indicated that new initiatives are beginning to claw back several hundred million dollars in GMS opportunity, with stacking benefits expected in later quarters. -
Demand Trends
Q: How are income cohorts impacting demand?
A: Management observed that both high‑ and low‑income consumers are spending healthier, with a subtle edge for higher income households and more stable GMS trends lately. -
Personalization & Payments
Q: What’s behind personalization and payments growth?
A: They emphasized that more personalized communications have improved engagement, while near‑universal seller adoption of Etsy Payments simplifies operations and deepens loyalty. -
Etsy Insider Program
Q: How will loyalty program costs be managed?
A: They’re iterating on the Etsy Insider program to boost buyer frequency while carefully managing expenses and improving rewards for top customers. -
Paid Social Efficiency
Q: How is paid social efficiency evolving?
A: Management noted that advances in AI-driven ad copy are gradually unlocking better returns in paid social, although the full impact is still developing. -
App Acquisition Costs
Q: Is extra spend on app acquisition justified?
A: They confirmed a measured approach—relying primarily on organic downloads while testing modest paid initiatives, as improved LTV supports cautious incremental spending. -
Agentic AI Traffic
Q: How is agentic chatbot traffic performing?
A: They admitted the data is still early, but the unique product mix positions Etsy well to capitalize on chatbot-driven discovery, even though conversion behavior is not yet clear. -
AI-Enhanced Messaging
Q: How will AI improve personalized messaging?
A: They expect GenAI to enable much more tailored landing experiences and messaging, promising significant gains in shopper engagement over time, with results still emerging.
Research analysts covering ETSY.