Etsy (ETSY) turns Q1 2026 profit and inks $1.2B Depop sale to eBay
Filing Impact
Filing Sentiment
Form Type
10-Q
Rhea-AI Filing Summary
Etsy reported stronger Q1 2026 results and advanced a major portfolio shift. Revenue from continuing operations reached $631.3 million, up 3.1% year over year, while gross profit rose to $455.6 million. Net income from continuing operations was $104.7 million, compared with a prior-year loss of $35.1 million.
Adjusted EBITDA from continuing operations increased to $184.7 million with a 29.3% margin. Marketplace gross merchandise sales were $2.46 billion, with the Etsy marketplace alone growing 5.5% year over year. Etsy also agreed to sell its Depop resale marketplace to eBay for $1.2 billion in cash, with closing expected by the end of the third quarter of 2026.
Positive
- Return to profitability and margin expansion: Net income from continuing operations reached $104.7 million versus a prior-year loss, and Adjusted EBITDA from continuing operations increased to $184.7 million with a 29.3% margin.
- Strategic $1.2 billion Depop sale: Etsy agreed to sell Depop to eBay for $1.2 billion in cash, with proceeds earmarked for general corporate purposes, continued share repurchases, and investment in the Etsy marketplace.
Negative
- None.
Insights
Etsy returned to solid profitability while reshaping its portfolio around the core marketplace.
Etsy generated Q1 2026 revenue of $631.3M, up 3.1%, and turned last year’s operating loss into income from continuing operations of $104.7M. The swing reflects higher services revenue, tighter operating costs, and lapping a prior-year goodwill impairment.
Adjusted EBITDA from continuing operations rose to $184.7M with a 29.3% margin, showing the core marketplace remains highly profitable. GMS from continuing operations was $2.46B, with the Etsy marketplace alone growing 5.5% year over year after excluding the sold Reverb business.
The pending $1.2B cash sale of Depop to eBay, expected by the end of Q3 2026, is positioned for general corporate purposes, share repurchases, and further Etsy marketplace investment. Continued stock repurchases and sizable cash and investments provide flexibility, though discontinued operations from Depop remain loss-making ahead of closing.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-Q
__________________________________
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||||||
For the quarterly period ended | ||||||||
OR | ||||||||
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||||||
For the transition period from ______ to ______
Commission File Number 001-36911
__________________________________
(Exact name of registrant as specified in its charter)
__________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(718 ) 880-3660
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated Filer | ☐ | ||||||||||||
| Non-accelerated Filer | ☐ | Smaller Reporting Company | ||||||||||||
Emerging Growth Company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of common stock outstanding as of April 24, 2026 was 94,896,231 .
Table of Contents
| Part I - Financial Information | ||||||||
6 | Item 1. | Financial Statements (Unaudited) | ||||||
12 | Notes to Condensed Consolidated Financial Statements | |||||||
27 | Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||||
36 | Item 3. | Quantitative and Qualitative Disclosures About Market Risk | ||||||
36 | Item 4. | Controls and Procedures | ||||||
| Part II - Other Information | ||||||||
37 | Item 1. | Legal Proceedings | ||||||
37 | Item 1A. | Risk Factors | ||||||
68 | Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||||||
68 | Item 3. | Defaults Upon Senior Securities | ||||||
68 | Item 4. | Mine Safety Disclosures | ||||||
68 | Item 5. | Other Information | ||||||
69 | Item 6. | Exhibits | ||||||
70 | Signatures | |||||||
Unless the context otherwise requires, we use the terms “Etsy,” the “Company,” “we,” “us,” and “our” in this Quarterly Report on Form 10-Q (“Quarterly Report”) to refer to Etsy, Inc. and, where appropriate, our consolidated subsidiaries.
See Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating and Financial Metrics” and “Non-GAAP Financial Measures” for the definitions of the following terms used in this Quarterly Report: “active buyer,” “active seller,” “Adjusted EBITDA,” “Adjusted EBITDA margin,” “currency-neutral GMS,” “free cash flow,” “GMS,” “revenue take rate,” and “U.S. Buyer GMS.”
Etsy has used, and intends to continue using, its Investor Relations website and the Etsy News Blog (etsy.com/news) to disclose material non-public information and to comply with its disclosure obligations under Regulation FD. Accordingly, you should monitor our Investor Relations website and the Etsy News Blog in addition to following our press releases, SEC filings, and public conference calls and webcasts.
Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include, but are not limited to, statements relating to our mission, our opportunity and potential to grow; the expected timing of the closing of the Depop transaction; the impact of our growth strategies, including marketing and product initiatives, investments (including in artificial intelligence), and other levers for growth, on our business and operating results, including future gross merchandise sales (“GMS”) and revenue growth; our ability to attract, engage, and retain buyers and sellers; our ability to recruit and retain a diverse group of employees; our ability to maintain profitability; strategic investments, acquisitions or divestitures, product and marketing investments, and the potential benefits thereof; our ability to maintain trustworthy marketplaces; the impact that global macroeconomic, domestic and geopolitical uncertainty and volatility may have on our business, strategy, operating results, key metrics, financial condition, profitability, and cash flows; the effects on consumer behavior from cultural, weather and political events; the impact of tariffs, changes to or elimination of de minimis exemptions, or any other circumstances that hinder cross-border trade; our ability to expand beyond our top geographies; and uncertainty regarding and continued pressure on levels of consumer discretionary product spending and e-commerce generally. Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by terms such as “aim,” “anticipate,” “believe,” “could,” “enable,” “estimate,” “expect,” “goal,” “intend,” “may,” “optimistic,” “outlook,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and derivative forms and/or negatives of those terms.
Forward-looking statements are not guarantees of performance and involve known and unknown risks and uncertainties. Other factors may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Those risks include those described in Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report. Given these uncertainties, you should read this Quarterly Report in its entirety and not place undue reliance on any forward-looking statements in this Quarterly Report.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report and, although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
Moreover, we operate in a competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements made in this Quarterly Report. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. In addition, the global economic climate and general market, political, economic, and business conditions may amplify many of these risks.
Forward-looking statements represent our beliefs and assumptions only as of the date of this Quarterly Report. We disclaim any obligation to update forward-looking statements.
3
Summary Risk Factors
Our business is subject to numerous risks. The following summary highlights some of the risks we are exposed to in the normal course of our business activities. This summary is not complete and the risks summarized below are not the only risks we face. You should review and consider carefully the risks and uncertainties described in more detail in Part II, Item 1A, “Risk Factors,” which includes a more complete discussion of the risks summarized below as well as a discussion of other risks related to our business and an investment in our common stock.
Operational Risks Related to Our Business
•Our quarterly operating results have and may continue to fluctuate for a variety of reasons, many of which are beyond our control, which can cause significant stock price fluctuations.
•We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which could cause our stock price to decline.
•The trustworthiness and safety of our marketplaces and the connections within our communities are important to our success. Our business, financial performance, and growth depend on our ability to attract and retain active and engaged communities of buyers and sellers. If we are unable to maintain and expand that trust and retain our existing buyers and sellers and activate new ones, our business could be adversely affected.
•We track certain operational metrics with internal systems and tools or manual processes, and do not independently verify such metrics. Certain of these metrics are subject to inherent challenges in measurement, and any real or perceived inaccuracies may adversely affect our business and reputation.
•If we experience a technology disruption that results in a loss of information, if personal data or sensitive information about members of our communities or employees is misused, exfiltrated, or disclosed, or if we or our third-party providers are unable to protect against software and hardware vulnerabilities, service interruptions, cyber-related events, or other security breaches, then members of our communities may curtail use of our platforms, we may be exposed to liability or incur additional expenses, and our reputation might suffer.
•We use AI-enabled systems in connection with our business, which exposes us to additional risks, such as damage to our reputation or competitive position, and business, legal, and regulatory risks and additional costs due to rapidly evolving laws, regulations and industry standards governing the development and use of AI.
•Our business depends on continued use of and unimpeded access to third-party technology, services, platforms, and infrastructure that we rely upon to maintain and scale our platform and our business operations. If the widely adopted mobile, social, search, and/or advertising solutions that we, our sellers, and our buyers rely on as part of our key offering are no longer available or effective, or if access to these major platforms is limited, the use of our marketplaces could decline.
•Our payments systems have both operational and compliance risks, including in-house execution risk and dependence on third-party service providers.
•Our ability to recruit and retain a talented and broadly diverse group of employees and deploy that talent effectively is important to our success. Significant attrition or turnover could impact our ability to grow our business.
Strategic Risks Related to Our Business and Industry
•We face intense competition and may not be able to compete effectively.
•Enforcement of our marketplace policies may negatively impact our brands, reputation, and/or our financial performance.
4
•If we are not able to keep pace with technological changes, and enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers, our business, financial performance, and growth may be harmed.
•Growing the Etsy marketplace globally is part of our strategy, and our business could be harmed by the continued imposition of barriers to international trade.
•We have incurred impairment charges and may incur further impairment charges in the future, which would negatively impact our operating results.
•We may engage in acquisitions, dispositions, or strategic partnerships, which may divert management’s attention and/or prove to be unsuccessful.
•The closing of the proposed sale of Depop is subject to various risks and uncertainties, may not be completed in accordance with expected plans or on the currently contemplated timeline, or at all, and the pending sale may be disruptive to Etsy or create loss in value to stockholders.
•We are subject to risks related to our environmental, social, and governance activities and disclosures.
•We have a significant amount of convertible debt and may incur additional debt in the future.
Regulatory, Compliance, and Legal Risks
•Failure to deal effectively with fraud or other illegal activity could harm our business.
•We are regularly involved in litigation, arbitration, and regulatory matters that are expensive and time consuming and that may require changes to our strategy, the features of our marketplaces and/or how our business operates.
•Compliance with evolving global legal and regulatory requirements and/or available safe harbors, including privacy and data protection laws, tax laws, product liability laws, laws regulating speech, platform monitoring or moderation, and minors’ online safety, laws regulating payments services providers, artificial intelligence regulations, intellectual property and counterfeiting regulations, may materially impact our time, resources, and ability to grow our business.
•We may be subject to intellectual property or other claims, which, even if meritless, could be extremely costly to defend, damage our brands, require us to pay significant damages, and limit our ability to use certain technologies or business strategies in the future.
Other Risks
•Future sales and issuances of our common stock or rights to purchase common stock, including upon conversion of our convertible senior notes, could result in additional dilution to our stockholders and could cause the price of our common stock to decline.
5
Table of Contents
PART I - Financial Information
Item 1. Financial Statements (Unaudited)
Etsy, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands, except per share amounts)
| As of March 31, 2026 | As of December 31, 2025 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
Accounts receivable, net of expected credit losses of $ | ||||||||
| Prepaid and other current assets | ||||||||
| Funds receivable and seller accounts | ||||||||
| Current assets of discontinued operations | ||||||||
| Total current assets | ||||||||
| Restricted cash | ||||||||
Property and equipment, net of accumulated depreciation and amortization of $ | ||||||||
| Goodwill | ||||||||
Intangible assets, net of accumulated amortization of $ | ||||||||
| Deferred tax assets | ||||||||
| Long-term investments | ||||||||
| Other assets | ||||||||
| Noncurrent assets of discontinued operations | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders' Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Short-term debt, net | ||||||||
| Funds payable and amounts due to sellers | ||||||||
| Deferred revenue | ||||||||
| Other current liabilities | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Finance lease obligations—net of current portion | ||||||||
| Deferred tax liabilities | ||||||||
| Long-term debt, net | ||||||||
| Other liabilities | ||||||||
| Noncurrent liabilities of discontinued operations | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 11) | ||||||||
| Stockholders’ deficit: | ||||||||
Common stock ($ | ||||||||
Preferred stock ($ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ( | ||||||
| Accumulated other comprehensive loss | ( | ( | ||||||
| Total stockholders’ deficit | ( | ( | ||||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Table of Contents
Etsy, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Marketing | ||||||||
| Product development | ||||||||
| General and administrative | ||||||||
| Asset impairment charge | ||||||||
| Total operating expenses | ||||||||
| Income (loss) from operations | ( | |||||||
| Other income (expense), net | ( | |||||||
| Income (loss) from continuing operations before income taxes | ( | |||||||
| Provision for income taxes from continuing operations | ( | ( | ||||||
| Net income (loss) from continuing operations | ( | |||||||
| Discontinued operations: | ||||||||
| Loss from discontinued operations before income taxes | ( | ( | ||||||
| Benefit for income taxes from discontinued operations | ||||||||
| Net loss from discontinued operations | ( | ( | ||||||
| Net income (loss) | $ | $ | ( | |||||
| Basic net income (loss) from continuing operations per share attributable to common stockholders | $ | $ | ( | |||||
| Total basic net income (loss) per share attributable to common stockholders | $ | $ | ( | |||||
| Diluted net income (loss) from continuing operations per share attributable to common stockholders | $ | $ | ( | |||||
| Total diluted net income (loss) per share attributable to common stockholders | $ | $ | ( | |||||
| Weighted-average common shares outstanding: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
Table of Contents
Etsy, Inc.
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(In thousands)
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Net income (loss) | $ | $ | ( | |||||
| Other comprehensive (loss) income: | ||||||||
Cumulative translation adjustment, net of tax of $( | ( | |||||||
Unrealized (losses) gains on investments, net of tax of $( | ( | |||||||
| Total other comprehensive (loss) income | ( | |||||||
| Comprehensive income (loss) | $ | $ | ( | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
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Etsy, Inc.
Consolidated Statements of Changes in Stockholders’ Deficit (Unaudited)
(In thousands)
| Three Months Ended March 31, 2026 | ||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||
| Shares | Amount | |||||||||||||||||||
| Balance as of December 31, 2025 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||
| Exercise of vested options | — | — | — | |||||||||||||||||
| Vesting of restricted stock units, net of shares withheld | — | ( | — | — | ( | |||||||||||||||
| Stock repurchase | ( | ( | — | ( | — | ( | ||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||
| Balance as of March 31, 2026 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||
Three Months Ended March 31, 2025 | ||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||
| Shares | Amount | |||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||
| Exercise of vested options | — | — | — | |||||||||||||||||
| Vesting of restricted stock units, net of shares withheld | — | ( | — | — | ( | |||||||||||||||
| Stock repurchase | ( | ( | — | ( | — | ( | ||||||||||||||
| Other comprehensive income | — | — | — | — | ||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
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Etsy, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | $ | ( | |||||
| Net loss from discontinued operations | ( | ( | ||||||
| Net income (loss) from continuing operations | ( | |||||||
| Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities: | ||||||||
| Stock-based compensation expense | ||||||||
| Depreciation and amortization expense | ||||||||
| Provision for expected credit losses | ||||||||
| Deferred provision (benefit) for income taxes | ( | |||||||
| Asset impairment charge | ||||||||
| Other non-cash (income) expense, net | ( | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Current assets | ||||||||
| Non-current assets | ( | |||||||
| Current liabilities | ( | ( | ||||||
| Non-current liabilities | ||||||||
| Net cash provided by operating activities of continuing operations | ||||||||
| Net cash used in operating activities of discontinued operations | ( | ( | ||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | ( | ( | ||||||
| Website and app development | ( | ( | ||||||
| Purchases of investments | ( | ( | ||||||
| Sales and maturities of investments | ||||||||
| Net cash used in investing activities of continuing operations | ( | ( | ||||||
| Net cash used in investing activities of discontinued operations | ( | ( | ||||||
| Net cash used in investing activities | ( | ( | ||||||
| Cash flows from financing activities | ||||||||
| Payment of tax obligations on vested equity awards | ( | ( | ||||||
| Repurchase of stock | ( | ( | ||||||
| Proceeds from exercise of stock options | ||||||||
| Payments on finance lease obligations | ( | ( | ||||||
| Other financing, net | ( | |||||||
| Net cash used in financing activities | ( | ( | ||||||
| Effect of exchange rate changes on cash | ( | |||||||
| Net decrease in cash and cash equivalents | ( | ( | ||||||
| Cash, cash equivalents, and restricted cash at beginning of period | ||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | $ | ||||||
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Table of Contents
Etsy, Inc.
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Supplemental non-cash disclosures from continuing operations: | ||||||||
| Stock-based compensation capitalized in website and app development | $ | $ | ||||||
| Lease assets obtained in exchange for new lease liabilities | $ | $ | ||||||
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown above:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Balances per Consolidated Balance Sheets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Cash and cash equivalents of discontinued operations | ||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
11
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Etsy, Inc.
Notes to Condensed Consolidated Financial Statements
Note 1—Basis of Presentation and Summary of Significant Accounting Policies
Description of Business
Etsy operates two-sided online marketplaces that connect millions of creative entrepreneurs with buyers around the world.
The Company’s primary marketplace, Etsy, is the global destination for unique, creative goods from independent sellers, connecting artisans with thoughtful consumers seeking items that reflect their tastes and values. The Company generates revenue primarily from marketplace activities, including transaction fees (inclusive of offsite advertising), payments processing fees, and listing fees, as well as from optional seller services, which include on-site advertising and shipping labels.
Basis of Consolidation
The condensed consolidated financial statements include the accounts of Etsy and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. On June 2, 2025, Etsy completed the sale of Reverb Holdings, Inc. (“Reverb”), its musical instrument marketplace. The financial results of Reverb have been included in Etsy’s condensed consolidated financial statements until June 2, 2025.
Assets Held for Sale and Discontinued Operations
A business is classified as held for sale when management commits to a plan to sell the business, the sale is probable within one year, and the business is being actively marketed at a price that is reasonable in relation to its current fair value. A business classified as held for sale is measured at the lower of its carrying value or fair value less costs to sell, and depreciation and amortization cease once the held for sale criteria are met. The results of operations of a business classified as held for sale are presented as discontinued operations if the disposal represents a strategic shift that has, or will have, a major effect on the Company’s operations and financial results, and prior period amounts are retrospectively reclassified to conform to the current period presentation.
On February 15, 2026, the Company executed a Sale and Purchase Agreement (the “Purchase Agreement”) to sell 100 % of Depop Limited (“Depop”), its fashion resale marketplace, to eBay Inc. (“eBay”), a Delaware corporation. The divestiture of the Depop business meets the held for sale criteria for the three months ended March 31, 2026 and is presented as discontinued operations for all periods presented. The transaction is currently expected to close by the end of the third quarter of 2026. Unless otherwise noted, all amounts and disclosures included in the Notes to Condensed Consolidated Financial Statements reflect only the Company’s continuing operations and exclude the results of the Depop marketplace. Refer to Note 2—Discontinued Operations for additional information.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). The Company has condensed or omitted certain information and notes normally included in complete annual financial statements prepared in accordance with GAAP. These unaudited interim condensed consolidated financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 19, 2026 (the “Annual Report”). In the opinion of management, all material adjustments, which are of a normal and recurring nature, necessary for a fair statement of the results for the periods presented have been reflected in the condensed consolidated financial statements. The results of operations of any interim period are not necessarily indicative of the results of operations for the full annual period or any future period due to seasonal and other factors.
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Etsy, Inc.
Notes to Condensed Consolidated Financial Statements
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates and judgments. The accounting estimates that require management’s most subjective judgments include: income taxes, including the estimate of the annual effective tax rate at interim periods and evaluation of uncertain tax positions; valuation of goodwill; and leases. As of March 31, 2026, there continues to be significant global macroeconomic and geopolitical uncertainty which may impact the Company’s business, results of operations, and financial condition. As a result, many of the Company’s estimates and judgments require increased judgment and carry a higher degree of variability and volatility. As additional information becomes available, the Company’s estimates may change materially in future periods.
Recently Adopted Accounting Pronouncements
In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which amends the guidance for estimating expected credit losses on accounts receivable and contract assets, requiring entities to apply a current expected credit loss model. The Company adopted this standard effective January 1, 2026 on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements or results of operations.
In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the assessment of whether certain settlements of convertible debt instruments should be accounted for as an induced conversion or extinguishment of convertible debt. The Company adopted this standard effective January 1, 2026 on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements or results of operations.
Recently Issued Accounting Pronouncements
In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which includes amendments that clarify guidance, correct errors, and make other minor improvements to the FASB Accounting Standards Codification (“ASC”). The amendments are effective for interim and annual reporting periods beginning after December 15, 2026, and are to be applied either prospectively or retrospectively, depending on the specific guidance amended. Early adoption is permitted, including on an issue-by-issue basis. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the scope and applicability of the interim reporting guidance in Topic 270 and improves the navigability of the interim disclosure requirements. The amendments are effective for interim and annual periods beginning after December 15, 2027, and are to be applied prospectively. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which updates the guidance for accounting for internal-use software costs. An entity will be required to start capitalizing software costs when (1) management has authorized and committed to funding the project and (2) it is probable the project will be completed and the software will be used as intended. The amendments are effective for annual reporting periods beginning after December 15, 2027, including interim periods within those annual periods. Early adoption is permitted, and entities may apply the guidance on a prospective, retrospective, or modified transition basis. The Company is currently evaluating the impact of the standard on its consolidated financial statements and related disclosures.
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Notes to Condensed Consolidated Financial Statements
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The primary objective is to disclose disaggregated information about specific categories underlying certain income statement expense line items for both annual and interim periods in a tabular format. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, and can be applied on a prospective basis, although retrospective application to all periods presented is permitted. Early adoption is permitted. The Company is currently evaluating the impact of the standard on its disclosures.
Note 2—Discontinued Operations
On February 15, 2026, the Company entered into a Purchase Agreement to sell Depop to eBay (the “Acquirer”), in an effort to focus on driving growth in the core Etsy marketplace, for a purchase price of $1.2 billion in cash, subject to certain purchase price adjustments. The transaction is expected to close by the end of the third quarter of 2026, subject to regulatory approval and certain other closing conditions as set forth in the Purchase Agreement.
The Company determined the assets of the Depop subsidiary met the criteria for classification as held for sale for the three months ended March 31, 2026. The Company analyzed the quantitative and qualitative factors relevant to the divestiture of Depop and determined the disposal represents a strategic shift that has a major effect on its operations and financial results. As such, the assets and liabilities, results of operations, and cash flows of Depop are presented as discontinued operations in the Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, and Condensed Consolidated Statements of Cash Flows, respectively, for all periods presented. In addition, divestiture-related expenses incurred as part of the Depop divestiture have been reflected in discontinued operations.
Financial Information of Discontinued Operations (Depop)
The following table summarizes the major line items for Depop that are included in the net loss from discontinued operations in the Condensed Consolidated Statements of Operations (in thousands):
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Marketing | ||||||||
| Product development | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from discontinued operations | ( | ( | ||||||
| Other income (expense), net | ( | |||||||
| Loss from discontinued operations before income taxes | ( | ( | ||||||
| Benefit for income taxes | ||||||||
| Net loss from discontinued operations | $ | ( | $ | ( | ||||
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Notes to Condensed Consolidated Financial Statements
The following table summarizes the carrying amounts of major classes of assets and liabilities of Depop’s discontinued operations (in thousands):
| As of March 31, 2026 | As of December 31, 2025 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid and other current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities | ||||||||
| Accrued expenses | $ | $ | ||||||
| Other current liabilities | ||||||||
| Other liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
Note 3—Revenue
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Marketplace revenue | $ | $ | ||||||
| Services revenue | ||||||||
| Revenue | $ | $ | ||||||
Contract balances
Deferred revenues
The amount of revenue recognized in the three months ended March 31, 2026 that was included in the deferred balance at January 1, 2026 was $20.2 million.
Note 4—Income Taxes
The Company’s provision or benefit from income taxes in interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if its estimated tax rate changes, the Company makes a cumulative adjustment. The estimate of the annual effective income tax rate for the full year is applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year.
For the three months ended March 31, 2026, the Company’s effective income tax rate was 19.0 % representing a provision for income taxes from continuing operations recorded on net income from continuing operations before taxes. The effective tax rate for the three months ended March 31, 2026 was favorably impacted by foreign operations taxed at a lower rate.
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Notes to Condensed Consolidated Financial Statements
Although management believes its tax positions and related provisions reflected in the condensed consolidated financial statements are fully supportable, it recognizes that these tax positions and related provisions may be challenged by various tax authorities. These tax positions and related provisions are reviewed on an ongoing basis and are adjusted as additional facts and information become available, including progress on tax audits, changes in interpretation of tax laws, developments in case law and closing of statute of limitations. To the extent that the ultimate results differ from the original or adjusted estimates of the Company, the effect will be recorded in the provision for income taxes.
A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. Any adjustments as a result of any examination may result in additional taxes and/or penalties against the Company. If the ultimate result of these audits differ from original or adjusted estimates, they could have a material impact on the Company’s tax provision.
The amount of unrecognized tax benefits included in the Consolidated Balance Sheets increased $1.7 million in the three months ended March 31, 2026, from $55.7 million as of December 31, 2025 to $57.4 million as of March 31, 2026. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate is $53.3 million as of March 31, 2026. The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing audits and/or the expiration of applicable statutes of limitations.
The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. For the three months ended March 31, 2026, the Company recorded interest and penalties of $1.3 million as a component of income tax expense, which increased the cumulative balance from $9.8 million as of December 31, 2025 to $11.1 million as of March 31, 2026.
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Notes to Condensed Consolidated Financial Statements
Note 5—Net Income (Loss) Per Share
The following table presents the calculation of basic and diluted net income (loss) per share for the periods presented (in thousands, except per share amounts):
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Numerator: | ||||||||
| Net income (loss) from continuing operations—basic | $ | $ | ( | |||||
| Add back interest expense, net of tax attributable to assumed conversion of convertible senior notes | ||||||||
| Net income (loss) from continuing operations—diluted | $ | $ | ( | |||||
| Net loss from discontinued operations—basic and diluted | $ | ( | $ | ( | ||||
| Net income (loss)—basic | $ | $ | ( | |||||
| Add back interest expense, net of tax attributable to assumed conversion of convertible senior notes | ||||||||
| Net income (loss)—diluted | $ | $ | ( | |||||
| Denominator: | ||||||||
| Weighted-average common shares outstanding—basic | ||||||||
| Dilutive effect of outstanding stock-based compensation awards | ||||||||
| Dilutive effect of assumed conversion of convertible senior notes | ||||||||
| Weighted-average common shares outstanding—diluted | ||||||||
| Basic net income (loss) per share attributable to common stockholders: | ||||||||
| Continuing operations | $ | $ | ( | |||||
| Discontinued operations | ( | ( | ||||||
| Total basic net income (loss) per share attributable to common stockholders | $ | $ | ( | |||||
| Diluted net income (loss) per share attributable to common stockholders: | ||||||||
| Continuing operations | $ | $ | ( | |||||
| Discontinued operations | ( | ( | ||||||
| Total diluted net income (loss) per share attributable to common stockholders | $ | $ | ( | |||||
The following potentially issuable common shares were excluded from the calculation of diluted weighted-average common shares outstanding because their effect would have been anti-dilutive for the periods presented (in thousands):
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Stock-based compensation awards | ||||||||
| Convertible senior notes | ||||||||
| Total anti-dilutive securities | ||||||||
Since the Company has reported net loss in the three months ended March 31, 2025, basic and diluted net loss per share attributable to common stockholders are the same because dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
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Notes to Condensed Consolidated Financial Statements
Note 6—Goodwill
| As of March 31, 2026 | As of December 31, 2025 | |||||||
| Balance as of the beginning of the period | $ | $ | ||||||
| Impairment charge | ( | |||||||
| Foreign currency translation adjustments | ( | |||||||
| Balance as of the end of the period | $ | $ | ||||||
The quantitative analysis indicated that the fair value of finite-lived intangible assets and other long-lived assets was sufficiently in excess of its carrying value. However, the carrying value of the Reverb reporting unit exceeded its fair value, resulting in a non-cash goodwill impairment charge of $101.7 million in the first quarter of 2025 to write off goodwill in full for the Reverb reporting unit. The fair value estimate for the reporting unit considered both income and market approaches, ultimately concluding that the estimated proceeds from the potential sale of the business unit was the most reliable indicator of fair value as of March 31, 2025. The Company sold Reverb in the second quarter of 2025. The remaining goodwill balance is allocated to the Etsy reporting unit.
Note 7—Segment and Geographic Information
For the three months ended March 31, 2026, the Company had one three operating segments, Etsy, Reverb, and Depop which at the time qualified for aggregation as one reportable segment because they met the quantitative and qualitative aggregation criteria prescribed by ASC 280, Segment Reporting. Reverb was sold in the second quarter of 2025, and Depop, beginning in the three months ended March 31, 2026, is classified as discontinued operations for all periods presented, as discussed in Note 2—Discontinued Operations.
The Company’s Chief Operating Decision Maker (“CODM”), the Chief Executive Officer, reviews operating results to assess performance and allocate resources at the segment level. In connection with Depop’s classification as discontinued operations, the Company changed its measure of profit or loss. The Company has concluded that net income (loss) from continuing operations is the measure of profit or loss required to be disclosed under ASC 280 for its single operating segment, although Adjusted EBITDA is another measure of operating performance that continues to be used by the CODM.
The significant segment expenses that are regularly provided on a quarterly basis to the CODM are cost of revenue, marketing, product development, and general and administrative, which are presented on the face of the Condensed Consolidated Statements of Operations and included within net income (loss) from continuing operations. Other segment items include asset impairment charge, other income (expense), net, and provision for income taxes from continuing operations, which represent the total expenses included in net income (loss) from continuing operations, but are not regularly provided to the CODM. The CODM does not review segment assets at a different asset level or category as compared to what is presented in the Consolidated Balance Sheets.
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Notes to Condensed Consolidated Financial Statements
Revenue by country is based on the billing address of the seller. The following table summarizes revenue by geographic area (in thousands):
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| United States | $ | $ | ||||||
| United Kingdom | ||||||||
| All Other | ||||||||
| Revenue | $ | $ | ||||||
With the exception of the United States and United Kingdom, no individual country’s revenue exceeded 10% of total revenue.
The following table summarizes tangible long-lived assets by geographic area (in thousands):
| As of March 31, 2026 | As of December 31, 2025 | |||||||
| United States | $ | $ | ||||||
| Ireland | ||||||||
| All Other | ||||||||
| Long-lived assets | $ | $ | ||||||
With the exception of the United States and Ireland, no individual country’s tangible long-lived assets exceeded 10% of total tangible long-lived assets.
Note 8—Fair Value Measurements
As of March 31, 2026 and December 31, 2025, the Company’s cash equivalents, short-term investments, and long-term investments primarily consisted of available-for-sale debt securities. These debt securities are measured at fair value and classified within Level 1 or Level 2 in the fair value hierarchy as the Company uses unadjusted quoted prices for identical assets in an active market that the Company has the ability to access (Level 1) or quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets (Level 2).
As of March 31, 2026 and December 31, 2025, the Company’s short-term and long-term investments also consisted of investments in loan receivables and in third-party managed funds. The investments in loan receivables are measured on an amortized cost basis and classified in Level 3 of the fair value hierarchy as the fair value is derived from techniques in which one or more significant inputs are unobservable. The investments in third-party managed funds are measured on the net assets value (“NAV”) basis as a practical expedient. NAV is primarily determined based on the information provided by external fund administrators for which the most recent financial information is typically received on a lag within the quarter following the Company’s balance sheet date. These investments are intended to further the Company’s impact strategy as part of the Company’s Impact Investment Fund.
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Notes to Condensed Consolidated Financial Statements
The following table sets forth the cost, gross unrealized losses, gross unrealized gains, and fair value of the Company’s investments as of the dates indicated (in thousands):
| Cost | Gross Unrealized Holding Loss | Gross Unrealized Holding Gain | Fair Value | Cash and Cash Equivalents | Short-term Investments | Long-term Investments | |||||||||||||||||
| March 31, 2026 | |||||||||||||||||||||||
| Level 1 | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| U.S. Government securities | ( | ||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| Level 2 | |||||||||||||||||||||||
| Certificate of deposit | ( | ||||||||||||||||||||||
| Commercial paper | ( | ||||||||||||||||||||||
| Corporate bonds | ( | ||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| Level 3 | |||||||||||||||||||||||
| Loans receivable - held for investment | |||||||||||||||||||||||
| $ | $ | ( | $ | $ | $ | $ | $ | ||||||||||||||||
| Measured at NAV (1) | |||||||||||||||||||||||
| Third-party managed funds | — | ||||||||||||||||||||||
| $ | $ | ||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Level 1 | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| U.S. Government securities | |||||||||||||||||||||||
| Level 2 | |||||||||||||||||||||||
| Certificate of deposit | |||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Corporate bonds | ( | ||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| Level 3 | |||||||||||||||||||||||
| Loans receivable - held for investment | |||||||||||||||||||||||
| $ | $ | ( | $ | $ | $ | $ | $ | ||||||||||||||||
| Measured at NAV (1) | |||||||||||||||||||||||
| Third-party managed funds | |||||||||||||||||||||||
| $ | $ | ||||||||||||||||||||||
(1)Third-party managed funds measured on the NAV basis have not been categorized in the fair value hierarchy. The amount presented in the table is intended to permit reconciliation of the short-term and long-term investments in the fair value hierarchy to the amount presented in the Consolidated Balance Sheets.
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Notes to Condensed Consolidated Financial Statements
The tables below show the fair value and gross unrealized loss related to available-for-sale debt securities, aggregated by investment category and the length of time that the securities have been in a continuous unrealized loss position as of the dates indicated (in thousands):
| As of March 31, 2026 | ||||||||||||||
Less than 12 Months | 12 Months or Greater | |||||||||||||
Fair Value | Gross Unrealized Holding Loss | Fair Value | Gross Unrealized Holding Loss | |||||||||||
| Corporate bonds | $ | $ | ( | $ | $ | |||||||||
| U.S. Government securities | ( | |||||||||||||
Commercial paper | ( | |||||||||||||
Certificate of deposit | ( | |||||||||||||
Total | $ | $ | ( | $ | $ | |||||||||
| As of December 31, 2025 | ||||||||||||||
Less than 12 Months | 12 Months or Greater | |||||||||||||
| Fair Value | Gross Unrealized Holding Loss | Fair Value | Gross Unrealized Holding Loss | |||||||||||
| Corporate bonds | $ | $ | ( | $ | $ | |||||||||
| Total | $ | $ | ( | $ | $ | |||||||||
The Company evaluates fair value for each individual security in the investment portfolio. When assessing the risk of credit loss, the Company considers factors such as the extent to which the fair value is less than the amortized cost basis, the credit rating, including whether there has been any changes to the rating of the security by a rating agency, available information relevant to the collectibility of the security, and management’s intended holding period and time horizon for selling the security. The Company did not recognize a credit loss in the three months ended March 31, 2026 or 2025.
Outside of the Company’s Impact Investment Fund, the Company typically invests in short- and long-term instruments, including fixed-income funds and U.S. Government securities aligned with the Company’s investment strategy. In accordance with the Company’s investment policy, all investments, other than investments made through its Impact Investment Fund, have maturities no longer than 37 months, with the average maturity of these investments maintained at 12 months or less.
Disclosure of Fair Values
The Company’s financial instruments that are not remeasured at fair value in the Consolidated Balance Sheets include the $700.0 million aggregate principal amount of 1.00 % Convertible Senior Notes due 2030 (the “2025 Notes”), the $1.0 billion aggregate principal amount of 0.25 % Convertible Senior Notes due 2028 (the “2021 Notes”), the $650.0 million aggregate principal amount of 0.125 % Convertible Senior Notes due 2027 (the “2020 Notes”), and the $649.9 million aggregate principal amount of 0.125 % Convertible Senior Notes due 2026 (the “2019 Notes” and, together with the 2025 Notes, 2021 Notes, and 2020 Notes, the “Notes”). See “Note 10—Debt” for additional information. The Company estimates the fair value of the Notes through inputs that are observable in the market, classified as Level 2 as described above. The following table presents the carrying value and estimated fair value of the Notes as of the dates indicated (in thousands):
| As of March 31, 2026 | As of December 31, 2025 | |||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||
| 2025 Notes | $ | $ | $ | $ | ||||||||||
| 2021 Notes | ||||||||||||||
| 2020 Notes | ||||||||||||||
| 2019 Notes | ||||||||||||||
| $ | $ | $ | $ | |||||||||||
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Notes to Condensed Consolidated Financial Statements
The carrying value of other financial instruments, including accounts receivable, funds receivable and seller accounts, accounts payable, and funds payable and amounts due to sellers approximate fair value due to the immediate or short-term maturity associated with these instruments.
Note 9—Accrued Expenses
Accrued expenses consisted of the following as of the dates indicated (in thousands):
| As of March 31, 2026 | As of December 31, 2025 | |||||||
| Vendor accruals | $ | $ | ||||||
| Pass-through marketplace tax collection obligation | ||||||||
| Employee compensation-related liabilities | ||||||||
| Taxes payable | ||||||||
| Total accrued expenses | $ | $ | ||||||
Note 10—Debt
The following table presents the outstanding principal amount and carrying value of short- and long-term debt as of the dates indicated (in thousands):
| As of March 31, 2026 | |||||||||||||||||
| 2025 Notes | 2021 Notes | 2020 Notes | 2019 Notes | Total | |||||||||||||
| Principal | $ | $ | $ | $ | $ | ||||||||||||
| Unamortized debt issuance costs | |||||||||||||||||
| Net carrying value | $ | $ | $ | $ | $ | ||||||||||||
| As of December 31, 2025 | |||||||||||||||||
| 2025 Notes | 2021 Notes | 2020 Notes | 2019 Notes | Total | |||||||||||||
| Principal | $ | $ | $ | $ | $ | ||||||||||||
| Unamortized debt issuance costs | |||||||||||||||||
| Net carrying value | $ | $ | $ | $ | $ | ||||||||||||
Terms of the Notes
The terms of the Notes are summarized below:
| Convertible Notes | Maturity Date | Contractual Convertibility Date (1) | Initial Conversion Rate per $1,000 Principal (2) | Initial Conversion Price | Annual Effective Interest Rate | ||||||||||||
| 2025 Notes | June 15, 2030 | February 15, 2030 | 11.6570 | $ | % | ||||||||||||
2021 Notes | June 15, 2028 | February 15, 2028 | 4.0518 | % | |||||||||||||
2020 Notes | September 1, 2027 | May 1, 2027 | 5.0007 | % | |||||||||||||
2019 Notes | October 1, 2026 | June 1, 2026 | 11.4040 | % | |||||||||||||
(1)As of March 31, 2026, none of the conditions permitting the holders of the Notes to early convert have been met, based on the daily closing prices of the Company’s stock during the quarter ended March 31, 2026.
(2)The initial conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company’s common stock.
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Notes to Condensed Consolidated Financial Statements
Based on the terms of each series of Notes, they will mature on the respective maturity date, unless earlier converted, redeemed, or repurchased. Additionally, the holders of each series of Notes may convert all or a portion of such series of Notes prior to the close of business on the business day immediately preceding the respective contractual convertibility date only under the following circumstances: (1) during any calendar quarter preceding the respective contractual convertibility date of each series of Notes, in which the closing price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the applicable conversion price for such series of Notes on each applicable trading day; (2) during the 5 business day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of such series of Notes for each trading day of the measurement period was less than 98 % of the product of the closing price of the Company’s common stock and the conversion rate on each such trading day; (3) if the Company calls the 2025 Notes or 2021 Notes for redemption at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events. On and after the applicable contractual convertibility date until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances.
The Company may redeem all or any portion of the 2025 Notes and 2021 Notes, at the Company’s option, subject to partial redemption limitations, on or after June 20, 2028 and June 20, 2025, respectively, if the last reported sale price of the Company’s common stock has been at least 130 % of the applicable conversion price for such series of Notes then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption for such series of Notes at a redemption price equal to 100 % of the principal amount of the 2025 Notes or 2021 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
If a fundamental change occurs prior to the maturity date for any series of Notes, holders of the applicable series of Notes may require the Company to repurchase all or a portion of their Notes for cash at a price equal to 100 % of the principal amount of the Note to be repurchased. Holders of the Notes who convert their Notes in connection with a notice of a redemption or a make-whole fundamental change may be entitled to a premium in the form of an increase in the conversion rate of the applicable series of Notes.
Based on the terms of each series of Notes, when a conversion notice is received, the Company has the option to pay by delivery of cash, shares of the Company’s common stock, or a combination thereof. Accordingly, the Company cannot be required to settle the 2025 Notes, 2021 Notes, and 2020 Notes in cash and, therefore, the aforementioned notes are classified as long-term debt in the Consolidated Balance Sheets. The 2019 Notes will mature on October 1, 2026 and therefore, are classified as short-term debt in the Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025.
Seniority of the Notes
The Notes are general unsecured obligations of the Company. The Notes rank senior in right of payment to all of the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; rank equal in right of payment with all of the Company’s liabilities that are not so subordinated; are effectively junior to any of the Company’s secured indebtedness; and are structurally junior to all indebtedness and liabilities (including trade payables) of the Company’s subsidiaries.
Interest Expense
Interest expense related to each of the Notes consisted of coupon interest and amortization of debt issuance costs, and was $4.4 million and $2.1 million in the three months ended March 31, 2026 and 2025, respectively.
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Notes to Condensed Consolidated Financial Statements
Fair Value of Notes
The estimated fair value of each of the Notes was determined through inputs that are observable in the market, and are classified as Level 2. See “Note 8—Fair Value Measurements” for more information regarding the fair value of the Notes.
Capped Call Transactions
The Company used a portion of the net proceeds from each of the 2021, 2020, and 2019 Note offerings to enter into separate privately negotiated capped call instruments (the 2021, 2020, and 2019 capped call instruments collectively referred to as the “Capped Call Transactions”) with certain financial institutions, initial purchasers, and/or their respective affiliates. The Capped Call Transactions are expected generally to reduce the potential dilution and/or offset the cash payments the Company is required to make in excess of the principal amount of the 2021, 2020, and 2019 Notes upon conversion of the respective Notes in the event that the market price per share of the Company’s common stock is greater than the strike price of the Capped Call Transactions with such reduction and/or offset subject to a cap. Collectively, the Capped Call Transactions cover, initially, the number of shares of the Company’s common stock underlying the respective Notes, subject to anti-dilution adjustments substantially similar to those applicable to the respective Notes.
The initial terms of the Company’s outstanding Capped Call Transactions are presented below:
| Capped Call Transactions | Maturity Date | Initial Cap Price per Share | Cap Price Premium | ||||||||
| 2021 Capped Call Transactions | June 15, 2028 | $ | % | ||||||||
| 2020 Capped Call Transactions | September 1, 2027 | % | |||||||||
| 2019 Capped Call Transactions | October 1, 2026 | % | |||||||||
2023 Credit Agreement
On March 24, 2023, the Company entered into a $400.0 million senior secured revolving credit facility pursuant to an Amended and Restated Credit Agreement (the “2023 Credit Agreement”) among the Company, as borrower, certain subsidiaries of the Company as guarantors, the lenders, and JPMorgan Chase Bank N.A., as administrative Agent. The 2023 Credit Agreement will mature in March 2028 and includes a letter of credit sublimit of $60.0 million and a swingline loan sublimit of $20.0 million.
Borrowings under the 2023 Credit Agreement (other than swingline loans) bear interest, at the Company’s option, at (i) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 0.50 %, and (c) an adjusted Term SOFR rate for a one-month interest period plus 1.00 %, in each case plus a margin ranging from 0.50 % to 1.25 % or (ii) an adjusted Term SOFR rate plus a margin ranging from 1.50 % to 2.25 %. Swingline loans under the 2023 Credit Agreement bear interest at the same base rate (plus the margin applicable to borrowings bearing interest at the base rate). These margins are determined based on the senior secured net leverage ratio (defined as secured funded debt, net of unrestricted cash up to $100.0 million, to EBITDA (as defined in the 2023 Credit Agreement)) for the preceding four fiscal quarter periods. The Company is also obligated to pay other customary fees for a credit facility of this size and type, including an unused commitment fee, ranging from 0.20 % to 0.35 % depending on the Company’s senior secured net leverage ratio, and fees associated with letters of credit. The 2023 Credit Agreement also permits the Company, in certain circumstances, to request an increase in the facility by an amount of up to $200.0 million at the same maturity, pricing and other terms and to request an extension of the maturity date for the facility. In connection with the 2023 Credit Agreement, the Company also paid the lenders certain upfront fees.
The Company had no outstanding borrowings under the 2023 Credit Agreement and was in compliance with all financial covenants as of March 31, 2026.
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Etsy, Inc.
Notes to Condensed Consolidated Financial Statements
Note 11—Commitments and Contingencies
Purchase Obligations
The Company’s purchase obligations primarily consist of the minimum, non-cancelable commitments as well as cancellation fees related to technology spending. During the three months ended March 31, 2026, there were no material changes outside the ordinary course of business to the Company’s non-cancelable purchase obligations disclosed in the Company’s Annual Report.
Legal Proceedings
In the ordinary course of business, various claims and litigation are regularly asserted or commenced against the Company. Due to uncertainties inherent in litigation and other claims, the Company can give no assurance that it will prevail in any such matters and such claims or litigation could have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows. However, the Company currently believes that the final outcome of these matters will not have a material adverse effect.
Note 12—Stockholders’ Deficit
In June 2023, the Board of Directors approved a stock repurchase program that authorized the Company to repurchase up to $1 billion of its common stock. The program was completed in the first quarter of 2025.
In October 2024, the Board of Directors approved a stock repurchase program that authorizes the Company to repurchase up to $1 billion of its common stock.
In December 2025, the Board of Directors approved a new stock repurchase program that authorizes the Company to repurchase up to $750 million of its common stock.
As of March 31, 2026, the remaining amount available to be repurchased under the approved plans was $827.9 million.
The stock repurchase programs have no expiration date and may be modified, suspended, or terminated at any time by the Board of Directors. The number of shares repurchased and the timing of repurchases will depend on a number of factors, including, but not limited to, stock price, trading volume, and general market conditions, along with the Company’s working capital requirements, general business conditions, and other factors.
Under the stock repurchase programs, the Company may purchase shares of its common stock through various means, including open market transactions, privately negotiated transactions, tender offers, or any combination thereof. In addition, open market repurchases of common stock have and could be made pursuant to trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which would permit common stock to be repurchased at a time that the Company might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions.
The following table summarizes the Company’s cumulative share repurchase activity under the programs noted above (in thousands, except per share amounts):
Shares Repurchased | Average Price Paid per Share (1) | |||||||
Repurchases of common stock for the three months ended: | ||||||||
| March 31, 2026 | $ | |||||||
(1) Average price paid per share excludes broker commissions and excise tax.
All repurchased shares of common stock have been retired.
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Etsy, Inc.
Notes to Condensed Consolidated Financial Statements
Note 13—Stock-Based Compensation
2024 Equity Incentive Plan
During the three months ended March 31, 2026, the Company granted restricted stock units (“RSUs”), including financial performance-based restricted stock units (“Financial PBRSUs”) and total shareholder return performance-based restricted stock units (“TSR PBRSUs”), and long-term cash awards (“LTC awards”) under its 2024 Equity Incentive Plan (“2024 Plan”). LTC awards are not included in the stock-based compensation awards disclosures below. At March 31, 2026, 19,280,062 shares were authorized under the 2024 Plan and 3,528,977 shares were available for future grant.
2024 Inducement Plan
The Etsy, Inc. 2024 Inducement Plan (the “2024 Inducement Plan”) was terminated on March 6, 2026 and no further awards will be granted thereunder.
Stock-Based Compensation Awards
The following table summarizes the activity for the Company’s unvested RSUs under the 2024 Plan and the 2024 Inducement Plan, which includes Financial PBRSUs and TSR PBRSUs, and includes awards related to continuing and discontinued operations, during the three months ended March 31, 2026 (in thousands, except per share amounts):
| Shares | Weighted-Average Grant Date Fair Value | |||||||
| Unvested at December 31, 2025 | $ | |||||||
| Granted | ||||||||
| Vested | ( | |||||||
| Forfeited/Canceled | ( | |||||||
| Unvested at March 31, 2026 (1) | ||||||||
(1) Includes 1.2 million shares underlying unvested awards held by employees of Depop as of March 31, 2026. Any unvested Depop awards as of the date of the close of the sale transaction will be forfeited at that time.
The total unrecognized compensation expense at March 31, 2026 related to the Company’s unvested RSUs, including the Financial PBRSUs and TSR PBRSUs, was $496.5 million, which will be recognized over an estimated weighted-average amortization period of 2.43 years.
Stock-based compensation expense included in continuing operations in the Condensed Consolidated Statements of Operations for the periods presented below is as follows (in thousands):
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Cost of revenue | $ | $ | ||||||
| Marketing | ||||||||
| Product development | ||||||||
| General and administrative | ||||||||
| Stock-based compensation expense | $ | $ | ||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and with the audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 19, 2026 (the “Annual Report”). This discussion, particularly information with respect to our outlook, key trends and uncertainties, our plans and strategy for our business, and our performance and future success, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, particularly in Part II, Item 1A, “Risk Factors.” We also believe that our performance and future success depend on a number of factors that present significant opportunities for us, as discussed in Part I, Item 1, “Business,” in our Annual Report, which we incorporate by reference.
Overview
Business
Etsy operates two-sided online marketplaces that connect millions of creative entrepreneurs with buyers around the world.
The Etsy marketplace is the global destination for unique, creative goods from independent sellers, connecting artisans with thoughtful consumers seeking items that reflect their tastes and values.
On February 15, 2026, we entered into a Sale and Purchase Agreement (the “Purchase Agreement”) with eBay Inc. (“eBay”) for eBay to purchase Depop Limited (“Depop”), our fashion resale marketplace, for $1.2 billion in cash, subject to certain adjustments as set forth in the Purchase Agreement. The sale is currently expected to close by the end of the third quarter of 2026, subject to regulatory approval and certain other closing conditions as set forth in the Purchase Agreement. We will continue to own and operate Depop through such time as the transaction is completed, with Depop’s assets and liabilities, results of operations, and related cash flows presented as discontinued operations in the Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, and Condensed Consolidated Statements of Cash Flows, respectively, for all periods presented. Unless otherwise noted, all financial results and other metrics discussed in this report are for continuing operations only. In keeping with our current capital allocation approach, we plan to utilize the proceeds from this transaction for general corporate purposes, continued share repurchases, and investment in the Etsy marketplace.
On June 2, 2025, we completed the sale of Reverb Holdings, Inc. (“Reverb”), our musical instrument marketplace. The results of Reverb, until its sale on June 2, 2025, are included in all financial results and other metrics discussed in this report, unless otherwise noted.
We generate revenue primarily from marketplace activities, including transaction fees (inclusive of offsite advertising), payments processing fees, and listing fees, as well as from optional seller services, which include on-site advertising and shipping labels.
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Key Operating and Financial Metrics
We collect and analyze operating and financial data to evaluate the health and performance of our business and allocate our resources (such as capital, people, and technology investments). Our key operating and financial metrics are presented on a continuing operations basis in the table below for all periods presented, since Depop is presented as a discontinued operation due to its pending sale. Due to the sale of Reverb on June 2, 2025, continuing operations includes Reverb and Etsy marketplaces for the three months ended March 31, 2025, but the three months ended March 31, 2026 reflects the Etsy marketplace only. This makes year-over-year continuing operations results not directly comparable. To provide investors with a meaningful basis for comparing our results year-over-year, we have presented Etsy marketplace results for the three months ended March 31, 2025. Our calculation of trailing twelve months free cash flow includes activity for combined continuing and discontinued operations. See “Non-GAAP Financial Measures” for more information regarding our use of Etsy marketplace financial metrics, Adjusted EBITDA, Adjusted EBITDA margin, and free cash flow, and reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure.
Our key operating and financial metrics are (in thousands, except percentages):
| Three Months Ended March 31, | % (Decline) Growth Y/Y for Continuing Operations | % Growth (Decline) Y/Y for the Etsy Marketplace (Non-GAAP) (1) | |||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Continuing Operations | Continuing Operations | Etsy Marketplace (Non-GAAP) | |||||||||||||||
| GMS (2) | $ | 2,460,195 | $ | 2,559,821 | $ | 2,331,462 | (3.9) | % | 5.5 | % | |||||||
| Revenue | $ | 631,277 | $ | 612,204 | $ | 586,557 | 3.1 | % | 7.6 | % | |||||||
| Revenue take rate (3) | 25.7 | % | 23.9 | % | 25.2 | % | 180 | bps | 50 | bps | |||||||
| Marketplace revenue | $ | 432,773 | $ | 428,236 | $ | 406,965 | 1.1 | % | 6.3 | % | |||||||
| Services revenue | $ | 198,504 | $ | 183,968 | $ | 179,592 | 7.9 | % | 10.5 | % | |||||||
| Gross profit | $ | 455,598 | $ | 444,403 | $ | 432,168 | 2.5 | % | 5.4 | % | |||||||
| Operating expenses | $ | 335,752 | $ | 448,276 | $ | 329,015 | (25.1) | % | 2.0 | % | |||||||
| Net income (loss) | $ | 104,662 | $ | (35,087) | $ | 71,491 | (398.3) | % | 46.4 | % | |||||||
| Net income (loss) margin | 16.6 | % | (5.7) | % | 12.2 | % | 2,230 | bps | 440 | bps | |||||||
| Adjusted EBITDA (Non-GAAP) | $ | 184,711 | $ | 173,521 | $ | 170,649 | 6.4 | % | 8.2 | % | |||||||
| Adjusted EBITDA margin (Non-GAAP) | 29.3 | % | 28.3 | % | 29.1 | % | 100 | bps | 20 | bps | |||||||
| Active sellers (4) | 5,563 | 5,602 | 5,386 | (0.7) | % | 3.3 | % | ||||||||||
| Active buyers (5) | 86,618 | 89,230 | 88,472 | (2.9) | % | (2.1) | % | ||||||||||
(1)% growth (decline) Y/Y for the Etsy marketplace is the change in continuing operations for the three months ended March 31, 2026, which represents activity for the Etsy marketplace only, compared to the Etsy marketplace excluding Reverb for the three months ended March 31, 2025, as Reverb was sold in the second quarter of 2025.
(2)Excluded from the table above is gross merchandise sales (“GMS”) for Depop, which was $348.9 million and $233.5 million for the three months ended March 31, 2026 and 2025, respectively. GMS is the dollar value of items sold in our marketplaces, excluding shipping fees and net of refunds, within the applicable period. GMS does not represent revenue earned by us.
(3)Revenue take rate is revenue divided by GMS.
(4)An active seller is a seller who has had a charge or sale in the last 12 months. A seller is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple seller accounts and can count as a distinct active seller in each of our marketplaces. As part of our commitment to integrity and transparency, we continuously monitor, and from time to time adjust, the criteria for disqualifying a seller as an active seller.
(5)An active buyer is a buyer who has made at least one purchase in the last 12 months. A buyer is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple buyer accounts and can count as a distinct active buyer in each of our marketplaces.
| As of March 31, | % Decline Y/Y | ||||||||||
| 2026 | 2025 | ||||||||||
| Continuing and Discontinued Operations | Continuing and Discontinued Operations | ||||||||||
| Net cash provided by operating activities - trailing twelve months | $ | 724,973 | $ | 732,619 | (1.0) | % | |||||
| Free cash flow - trailing twelve months (Non-GAAP) | $ | 671,155 | $ | 684,924 | (2.0) | % | |||||
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We disclose key operating metrics because they provide meaningful insight into the performance and health of our business. GMS, active sellers, and active buyers each reflect core drivers of our business—seller success, buyer engagement, and the overall scale of our platforms. We believe these measures help investors and management evaluate our growth potential and the underlying strength of our marketplace.
GMS
GMS from continuing operations decreased by $99.6 million to $2,460.2 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025, reflecting a decrease of $228.4 million from the sale of Reverb, partially offset by an increase of $128.7 million from the Etsy marketplace. Etsy marketplace year-over-year GMS growth, which excludes Reverb from the prior year period, was up 5.5%, driven by progress against our strategic priorities, which are beginning to translate into underlying improvements across our marketplace, as well as from foreign exchange tailwinds. We also benefited from softer performance in the prior year comparable period. The Etsy marketplace GMS per active buyer on a trailing twelve month basis increased 1.5% year-over-year to $122, partially offset by a year-over-year decline of 2.1% of active buyers on the Etsy marketplace to 86.6 million.
U.S. buyer GMS is GMS from transactions in which the shipping address entered by the buyer at the time of sale is in the U.S., net of refunds. GMS from transactions in which the shipping address entered by the buyer at the time of sale is not in the U.S, net of refunds is non-U.S. buyer GMS. Percent U.S. buyer GMS for the periods presented below are as follows:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Percent U.S. Buyer GMS - Continuing operations | 74 | % | 76 | % | ||||
| Percent U.S. Buyer GMS - Etsy marketplace | 74 | % | 75 | % | ||||
There is considerable uncertainty regarding macroeconomic conditions, including geopolitical conflicts and the evolving tariff landscape, how recent changes to de minimis exemptions may play out, and the impact any of the foregoing might have on consumer demand and discretionary wallet share. Any circumstances that reduce consumer demand or hinder our sellers' cross-border trade may adversely affect our business. See Part II, Item 1A, “Risk Factors” for further detail.
Currency-Neutral GMS
We calculate currency-neutral GMS by translating current period GMS for goods sold that were listed in non-U.S. dollar currencies into U.S. dollars using prior year foreign currency exchange rates.
As reported and currency-neutral GMS (decline) growth for the periods presented below are as follows:
| Three Months Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||
| As Reported | Currency-Neutral | FX Impact | As Reported | Currency-Neutral | FX Impact | |||||||||||||||
| GMS - Continuing operations | (3.9) | % | (5.7) | % | 1.8 | % | (8.9) | % | (8.2) | % | (0.7) | % | ||||||||
| GMS - Etsy marketplace | 5.5 | % | 3.6 | % | 1.9 | % | (8.9) | % | (8.1) | % | (0.8) | % | ||||||||
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Results of Operations
Comparison of Three Months Ended March 31, 2026 and 2025
Revenue
| Three Months Ended March 31, | Change | |||||||||||||
(in thousands, except percentages) | 2026 | 2025 | $ | % | ||||||||||
| Revenue: | ||||||||||||||
| Marketplace | $ | 432,773 | $ | 428,236 | $ | 4,537 | 1.1 | % | ||||||
| Percentage of total revenue | 68.6 | % | 69.9 | % | ||||||||||
| Services | $ | 198,504 | $ | 183,968 | $ | 14,536 | 7.9 | % | ||||||
| Percentage of total revenue | 31.4 | % | 30.1 | % | ||||||||||
| Total revenue | $ | 631,277 | $ | 612,204 | $ | 19,073 | 3.1 | % | ||||||
Revenue increased primarily driven by an increase in services revenue, and, to a lesser extent, an increase in marketplace revenue.
Services revenue increased primarily due to a $14.4 million increase in advertising revenue, primarily driven by an increase in average price per click on Etsy Ads.
Marketplace revenue increased primarily due to an $11.5 million increase in Etsy payments revenue and a $9.7 million increase in Etsy transaction fee revenue, both driven by an increase in Etsy marketplace GMS. These increases in marketplace revenue were partially offset by a decrease of $21.3 million related to the sale of Reverb on June 2, 2025.
Costs and Operating Expenses
Cost of Revenue
| Three Months Ended March 31, | Change | |||||||||||||
(in thousands, except percentages) | 2026 | 2025 | $ | % | ||||||||||
| Cost of revenue | $ | 175,679 | $ | 167,801 | $ | 7,878 | 4.7 | % | ||||||
| Percentage of total revenue | 27.8 | % | 27.4 | % | ||||||||||
The increase in cost of revenue was primarily driven by an increase in cost of refunds, payments fees, and cloud-related hosting and bandwidth costs, partially offset by the sale of Reverb on June 2, 2025.
Marketing
| Three Months Ended March 31, | Change | |||||||||||||
(in thousands, except percentages) | 2026 | 2025 | $ | % | ||||||||||
| Marketing | $ | 174,239 | $ | 171,857 | $ | 2,382 | 1.4 | % | ||||||
| Percentage of total revenue | 27.6 | % | 28.1 | % | ||||||||||
Marketing expenses increased primarily due to targeted shifts in portfolio mix, in which strong returns in specific channels supported incremental spend. Marketing expenses also increased due to increased stock-based compensation, mainly resulting from forfeitures related to an executive departure in the three months ended March 31, 2025 that did not recur in the three months ended March 31, 2026. These increases were partially offset by the sale of Reverb on June 2, 2025. Paid GMS was 21% of overall GMS for the three months ended March 31, 2026 compared to 23% for the three months ended March 31, 2025.
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Product development
| Three Months Ended March 31, | Change | |||||||||||||
(in thousands, except percentages) | 2026 | 2025 | $ | % | ||||||||||
| Product development | $ | 99,052 | $ | 100,810 | $ | (1,758) | (1.7) | % | ||||||
| Percentage of total revenue | 15.7 | % | 16.5 | % | ||||||||||
Product development expenses decreased primarily due to the sale of Reverb on June 2, 2025, offset by increased Etsy marketplace employee compensation-related expenses.
General and administrative
| Three Months Ended March 31, | Change | |||||||||||||
(in thousands, except percentages) | 2026 | 2025 | $ | % | ||||||||||
| General and administrative | $ | 62,461 | $ | 73,906 | $ | (11,445) | (15.5) | % | ||||||
| Percentage of total revenue | 9.9 | % | 12.1 | % | ||||||||||
General and administrative expenses decreased, primarily due to the reversal of previously recognized Canadian digital services tax (“DST”) expense in the first quarter of 2026, following the repeal of the DST in Canada in March 2026. Additionally, general and administrative expenses decreased due to the sale of Reverb on June 2, 2025.
Asset impairment charge
| Three Months Ended March 31, | Change | |||||||||||||
(in thousands, except percentages) | 2026 | 2025 | $ | % | ||||||||||
Asset impairment charge | $ | — | $ | 101,703 | (101,703) | (100.0) | % | |||||||
| Percentage of total revenue | — | 16.6 | % | |||||||||||
Asset impairment charge was $101.7 million in the three months ended March 31, 2025, related to the impairment of the goodwill of Reverb. See Part I, Item 1, “Note 6—Goodwill” for more information. There was no asset impairment charge in the three months ended March 31, 2026.
Other Income (Expense), net
| Three Months Ended March 31, | Change | |||||||||||||
(in thousands, except percentages) | 2026 | 2025 | $ | % | ||||||||||
| Other income (expense), net | $ | 9,414 | $ | (10,714) | $ | 20,128 | (187.9) | % | ||||||
| Percentage of total revenue | 1.5 | % | (1.8) | % | ||||||||||
Other income, net increased from other expense, net, primarily driven by changes in exchange rates that impact our non-functional currency cash and intercompany balances, which resulted in a gain for the three months ended March 31, 2026 as compared to a loss for the three months ended March 31, 2025.
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Provision for Income Taxes
| Three Months Ended March 31, | Change | |||||||||||||
(in thousands, except percentages) | 2026 | 2025 | $ | % | ||||||||||
| Provision for income taxes | $ | (24,598) | $ | (20,500) | $ | (4,098) | 20.0 | % | ||||||
| Percentage of total revenue | (3.9) | % | (3.3) | % | ||||||||||
The primary driver of our income tax provision for the three months ended March 31, 2026 was tax expense on income before income taxes.
The primary drivers of our income tax provision for the three months ended March 31, 2025 were tax expense on income before income taxes excluding the impairment charge and tax deficiencies from stock-based compensation due to a lower stock price at vesting of restricted stock units compared to the stock price upon grant.
Loss on Discontinued Operations
| Three Months Ended March 31, | Change | |||||||||||||
(in thousands, except percentages) | 2026 | 2025 | $ | % | ||||||||||
Loss on discontinued operations | $ | (34,982) | $ | (17,009) | $ | (17,973) | 105.7 | % | ||||||
Loss on discontinued operations for the three months ended March 31, 2026 and 2025 was $35.0 million and $17.0 million, respectively, reflecting operating results from Depop. See Part I, Item 1, “Note 2—Discontinued Operations” for more information.
Non-GAAP Financial Measures
Other Key Financial Metrics
Given the pending sale of Depop, Etsy results are presented on a continuing operations basis, while Depop results are reported as discontinued operations across all periods presented. Due to the sale of Reverb on June 2, 2025, continuing operations for the three months ended March 31, 2025 includes Reverb and Etsy marketplaces, but the three months ended March 31, 2026 reflects the Etsy marketplace only. This makes year-over-year continuing operations results not directly comparable.
To provide investors with a meaningful basis for comparing our ongoing operating results year-over-year, we have presented certain Etsy marketplace financial measures for the three months ended March 31, 2025 in this Quarterly Report. These measures include the following non-GAAP financial measures for the three months ended March 31, 2025 where we exclude the impact of Reverb: (1) Revenue and Revenue take rate, (2) Marketplace revenue, (3) Services revenue, (4) Gross profit, (5) Operating expenses, (6) Net (loss) income and Net (loss) income margin, and (7) Adjusted EBITDA and Adjusted EBITDA margin.
Management believes that presenting these Etsy marketplace non-GAAP financial measures is useful to investors because they:
•provide a clearer, normalized baseline to evaluate the organic growth, financial performance, and underlying trends of our remaining Etsy marketplace business;
•facilitate more direct year-over-year comparisons of our continuing operations by removing the impact of the divested Reverb marketplace; and
•align with how management evaluates the performance of the business, allocates resources, and sets internal operational targets moving forward.
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These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for, financial information prepared in accordance with GAAP. Furthermore, our calculation of these non-GAAP measures may differ from similarly titled measures reported by other companies. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is provided in the following tables below (in thousands, except percentages):
| Three Months Ended March 31, 2025 | |||||||||||
| Continuing Operations (As Reported) | Less: Reverb Marketplace | Etsy Marketplace (Non-GAAP) | |||||||||
| Revenue | $ | 612,204 | $ | 25,647 | $ | 586,557 | |||||
| Revenue take rate | 23.9 | % | 11.2 | % | 25.2 | % | |||||
| Marketplace revenue | $ | 428,236 | $ | 21,271 | $ | 406,965 | |||||
| Services revenue | $ | 183,968 | $ | 4,376 | $ | 179,592 | |||||
| Gross profit | $ | 444,403 | $ | 12,235 | $ | 432,168 | |||||
| Operating expenses | $ | 448,276 | $ | 119,261 | $ | 329,015 | |||||
| Net (loss) income | $ | (35,087) | $ | (106,578) | $ | 71,491 | |||||
| Net (loss) income margin | (5.7) | % | (415.6) | % | 12.2 | % | |||||
Adjusted EBITDA
Adjusted EBITDA represents our net income (loss) adjusted to exclude: stock-based compensation expense and related payroll taxes; depreciation and amortization expense; provision (benefit) for income taxes; interest and other non-operating (income) expense, net; foreign exchange (gain) loss; acquisition, divestiture, and corporate structure-related expenses; asset impairment charge; restructuring and other exit costs; and retroactive non-income tax income. The following table reflects the reconciliation of net income (loss) from continuing operations to Adjusted EBITDA from continuing operations and the Etsy marketplace. The table also reflects the calculation of Adjusted EBITDA margin from continuing operations and the Etsy marketplace for each of the periods indicated (in thousands, except percentages):
| Three Months Ended March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Continuing Operations | Continuing Operations (As Reported) | Less: Reverb Marketplace | Etsy Marketplace (Non-GAAP) | |||||||||||
| Net income (loss) | $ | 104,662 | $ | (35,087) | $ | (106,578) | $ | 71,491 | ||||||
| Excluding: | ||||||||||||||
| Stock-based compensation expense and related payroll taxes | 55,537 | 57,639 | 4,083 | 53,556 | ||||||||||
| Depreciation and amortization expense | 15,315 | 17,189 | 4,112 | 13,077 | ||||||||||
| Provision (benefit) for income taxes | 24,598 | 20,500 | (443) | 20,943 | ||||||||||
| Interest and other non-operating (income) expense, net | (6,956) | (4,902) | 220 | (5,122) | ||||||||||
| Foreign exchange (gain) loss | (2,448) | 15,616 | (225) | 15,841 | ||||||||||
| Acquisition, divestiture, and corporate structure-related expenses | 39 | 1,263 | — | 1,263 | ||||||||||
| Asset impairment charge | — | 101,703 | 101,703 | — | ||||||||||
| Restructuring and other exit income | — | (400) | — | (400) | ||||||||||
| Retroactive non-income tax income | (6,036) | — | — | — | ||||||||||
| Adjusted EBITDA | $ | 184,711 | $ | 173,521 | $ | 2,872 | $ | 170,649 | ||||||
| Divided by: | ||||||||||||||
| Revenue | $ | 631,277 | $ | 612,204 | $ | 25,647 | $ | 586,557 | ||||||
| Adjusted EBITDA margin | 29.3 | % | 28.3 | % | 11.2 | % | 29.1 | % | ||||||
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Free Cash Flow
Free cash flow represents our net cash provided by operating activities, reduced by purchases of property and equipment and website and app development that are included in cash flows from investing activities. The following table reflects the reconciliation of operating activities to free cash flow for combined continuing and discontinued operations on a trailing twelve month basis (in thousands):
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Continuing and Discontinued Operations | Continuing and Discontinued Operations | |||||||
| Net cash provided by operating activities | $ | 724,973 | $ | 732,619 | ||||
| Purchases of property and equipment | (13,677) | (15,199) | ||||||
| Website and app development | (40,141) | (32,496) | ||||||
| Free cash flow | $ | 671,155 | $ | 684,924 | ||||
Liquidity and Capital Resources
Cash and cash equivalents and short-term investments were $1.4 billion as of March 31, 2026. Additionally, we have $150.6 million in long-term investments, a majority of which we can liquidate at short notice and with minimal penalties if needed. We also have the ability to draw down on our $400.0 million senior secured revolving credit facility (the “2023 Credit Agreement”). As of March 31, 2026, we had net working capital from continuing operations of $520.3 million and in the three months ended March 31, 2026, we had positive operating cash flows of continuing operations of $102.5 million. We believe that this capital structure, as well as the nature and framework of our business, will allow us to meet all debt covenants, sustain our business operations, and be able to react to changing macroeconomic conditions.
As of March 31, 2026, a majority of our cash and cash equivalents, short-term, and long-term investments balance was held in the United States. Our cash and cash equivalents are held for future investments, working capital funding, and general corporate purposes. We fund our non-U.S. operations from our funds held in the United States on an as-needed basis.
We typically invest in short- and long-term instruments, which are intended to allow us to preserve our principal, maintain the ability to meet our liquidity needs, deliver positive yields across a balanced portfolio, and continue to provide us with direct fiduciary control. In accordance with our investment policy, all investments, other than investments made through our Impact Investment Fund, have maturities no longer than 37 months, with the average maturity of these investments maintained at 12 months or less.
Sources of Liquidity
We have the ability to draw down on the 2023 Credit Agreement. See Part I, Item 1, “Note 10—Debt” for more information on the 2023 Credit Agreement.
Upon completion of the Purchase Agreement for eBay to purchase Depop, which is expected to close by the end of the third quarter of 2026, we anticipate receiving approximately $1.2 billion in cash, net of certain purchase price adjustments. See Part I, Item 1, “Note 2—Discontinued Operations” for more information on the Purchase Agreement.
We believe that our existing cash and cash equivalents and short- and long-term investments, together with cash generated from operations, will be sufficient to meet our anticipated operating cash needs for at least the next 12 months. While this belief is based on our current expectations and assumptions, in light of current macroeconomic conditions, our future capital requirements and the adequacy of available funds will depend on many factors, including those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report.
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Cash Flows
| Three Months Ended March 31, | ||||||||
(in thousands) | 2026 | 2025 | ||||||
| Cash provided by (used in): | ||||||||
| Operating activities of continuing operations | $ | 102,536 | $ | 49,816 | ||||
| Investing activities of continuing operations | (13,319) | (18,964) | ||||||
| Financing activities | (158,446) | (204,782) | ||||||
Net Cash Provided by Operating Activities of Continuing Operations
Our cash flows from continuing operations are largely dependent on revenue generation and net income from continuing operations, as well as working capital movements and non-cash items. Non-cash working capital at any specific point in time is subject to many variables, including variability in the timing of cash receipts and payments (including payment of taxes), and vendor payment terms. The increase in the three months ended March 31, 2026 of $52.7 million, compared to the same period in 2025, was primarily due to a $28.8 million increase in the change in working capital less cash and an increase of $24.0 million in net income, excluding non-cash items.
Net Cash Used in Investing Activities of Continuing Operations
Net cash used in investing activities of continuing operations results from purchases and maturities of investments and capital expenditures, including investments in website and app development and purchases of property and equipment to support our business initiatives. The decrease in the three months ended March 31, 2026 of $5.6 million, compared to the same period in 2025, was primarily due to a decrease in net purchases of investments.
Net Cash Used in Financing Activities
Net cash used in financing activities primarily consists of cash outflows for stock repurchases and payment of tax obligations on vested equity awards. The decrease in the three months ended March 31, 2026 of $46.3 million, compared to the same period in 2025, was primarily due to a decrease in stock repurchases.
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Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. We continue to monitor the effects of global macroeconomic and geopolitical factors on our results of operations, cash flows, and financial position. We believe we have used reasonable estimates and assumptions in preparing the condensed consolidated financial statements. Our actual results could differ from these estimates.
There have been no significant changes to our critical accounting policies and estimates included in our Annual Report.
Recent Accounting Pronouncements
See Part I, Item 1, “Note 1—Basis of Presentation and Summary of Significant Accounting Policies” for information regarding recently adopted and recently issued accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Management believes there are no material changes to our quantitative and qualitative disclosures about market risks during the three months ended March 31, 2026, compared to those disclosed in the Annual Report.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2026. “Disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2026 at the reasonable assurance level.
Our disclosure controls and procedures and internal controls over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal controls over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) or 15d-15(d) of the Exchange Act during the first quarter of 2026 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings.
See Part I, Item 1, “Note 11—Commitments and Contingencies—Legal Proceedings.”
Item 1A. Risk Factors.
Investing in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below, our Condensed Consolidated Financial Statements and related notes, and the other information in this Quarterly Report on Form 10-Q. If any of these risks actually occur, our business, financial condition, results of operations, and prospects could be adversely affected. As a result, the price of our securities could decline and you could lose part or all of your investment. In addition, factors other than those discussed below or in other of our reports filed with or furnished to the SEC also could adversely affect our business, financial condition, results of operations or prospects. We cannot assure you that the risk factors described below or elsewhere in our reports address all potential risks that we may face. These risk factors also serve to describe factors which may cause our results to differ materially from those described in forward-looking statements included herein or in other documents or statements that make reference to this Quarterly Report. For more information, see the “Note Regarding Forward-Looking Statements.”
Operational Risks Related to Our Business
Our quarterly operating results have and may continue to fluctuate, which can cause significant stock price fluctuations.
Our quarterly operating results, as well as our key metrics, have and may continue to fluctuate for a variety of reasons, many of which are beyond our control, including:
•inflation, interest rates, recessionary factors, foreign exchange rate volatility, tariffs and other trade barriers, disruptions to the banking industry, changing consumer shopping preferences, continued pressure on consumer discretionary product spending, weather, domestic and global geopolitical volatility or uncertainties, various types of cultural events, public health crises, supply-chain disruptions, an increasingly competitive retail environment, and employment levels, among other factors (collectively, “Macro Conditions”);
•fluctuations in our GMS or revenue, including as a result of Macro Conditions, the seasonality of market transactions, and our sellers’ use of services;
•uncertainty regarding overall levels of consumer spending and e-commerce generally;
•our success in attracting and retaining sellers and buyers;
•our ability to convert marketplace visits into sales for our sellers;
•our ability to manage our operating expenses and our Adjusted EBITDA margin as we continue to invest in our marketplaces;
•our success in executing on our strategy, the effectiveness of our strategy, and the impact of any changes in our strategy;
•the timing and success of product launches, including new services and features we may introduce;
•the success of our marketing efforts;
•the success of our acquisitions, dispositions, or partnerships;
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•disruptions or defects in our marketplaces, such as privacy or data security breaches, errors in our software, or other incidents that impact the availability, reliability, or performance of our platforms;
•the impact of competitive developments and our response to those developments; and
•our ability to recruit and retain employees.
These events may also impact our sellers’ ability to run their businesses on our marketplaces, which could negatively impact our business and financial performance.
Fluctuations in our quarterly operating results, key metrics, and the price of our common stock may be particularly pronounced during periods of economic uncertainty, including uncertainty caused by Macro Conditions. Consumer purchases of discretionary items, including the goods that our sellers offer, generally decline during recessionary periods or periods of economic uncertainty, when disposable income is reduced, or when there is a reduction in consumer confidence. In the event of a prolonged economic downturn or acute recession, significant inflation, or increased supply chain disruptions impacting our communities of sellers and the economy as a whole, consumer spending habits could be materially and adversely affected, as could our business, financial condition, operating results, and ability to execute and capitalize on our strategies.
We believe that our quarterly operating results and key metrics may vary in the future and that period-to-period comparisons of our operating results may not be meaningful. You should not rely on quarter-to-quarter or any other period-to-period comparisons of our results of operations as an indication of future performance.
We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which could cause our stock price to decline.
Our guidance includes forward-looking statements based on projections prepared by our management. Projections are based upon a number of assumptions and estimates that are based on information known when they are issued. While presented with numerical specificity, projections are inherently subject to significant business, economic, and competitive uncertainties and contingencies relating to our business, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions and developments, some of which may prove incorrect and/or may change. Some of those key assumptions include the timing and impact of broad Macro Conditions, particularly in our core geographies, and the resulting impact of these factors on future consumer spending patterns and our business. These assumptions are inherently difficult to predict, particularly in the long term.
We generally state possible outcomes as high and low ranges, which are intended to provide a sensitivity analysis as variables are changed, but are not intended to imply that actual results could not fall outside of the suggested ranges. Furthermore, analysts and investors develop and publish their own projections for our business, which may form a consensus about our future performance. Our actual business results may vary significantly from such guidance or consensus due to Macro Conditions or other factors, many of which are outside of our control, which could adversely affect our business and future operating results. Furthermore, if we make downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors, or other interested parties as it has in the past, the price of our common stock could decline.
Guidance is necessarily speculative in nature, and guidance offered in periods of significant uncertainty is inherently more speculative in nature than guidance offered in periods of relative stability. It can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results may vary from our guidance and the variations may be material. In light of the foregoing, investors are urged to put our guidance in context and not to place undue reliance on it in making an investment decision regarding our common stock.
The trustworthiness and safety of our marketplaces and the connections within our communities are important to our success. If we are unable to maintain and expand that trust and keep our marketplaces safe, our business could be adversely affected.
Our reputation and brands depend, in part, upon our ability to maintain trustworthy marketplaces, and also upon our sellers, the quality of their offerings, their adherence to our policies, and their ability to deliver a trusted purchasing
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experience. We view the trustworthiness and reliability of our marketplaces, as well as the connections we foster in our buyer/seller communities, to be cornerstones of our business and key to our success. Many things could undermine these cornerstones, such as:
•a failure to operate our business in a way that is consistent with our guiding principles and mission;
•an inability to gain the trust of prospective buyers;
•disruptions or defects in our marketplaces, privacy or data security incidents, website outages, payment disruptions, or other incidents that impact the reliability of our platforms;
•lack of awareness of, or adherence to, our policies by our communities or confusion about how they are applied;
•a failure to enforce our policies effectively, consistently, and transparently, including, for example, by allowing the repeated widespread listing of items that are unsafe, infringe intellectual property rights, or otherwise violate our marketplace policies;
•changes to our policies or fees that members of our communities perceive as inconsistent with their best interests or our mission, or that are not clearly articulated;
•complaints or negative publicity about us, our platforms, or our policies and guidelines, even if factually incorrect or based on isolated incidents;
•inadequacies in our House Rules, policies, and other terms of use;
•frequent product launches, updates, and experiments that could deteriorate member trust and/or engagement; or
•inadequate or unsatisfactory customer service experiences, failure to adequately respond to feedback from our communities, or failure of our sellers to fulfill their orders in accordance with our policies, including as a result of fraud, their own shop-specific policies, or buyer expectations.
Our business also depends on our ability to provide a safe experience for our buyers and sellers. For example, we are and may continue to be an attractive target to bad actors and fraudsters targeting our marketplaces, users, and our communities. These bad actors use a variety of tactics, including social engineering, coordinated phishing attacks, spam, and website and social media spoofing, which frequently involve attempts to exploit, defraud, obtain financial or other data from our buyers and sellers, or otherwise harm them. These tactics may be amplified by advances in artificial intelligence and generative artificial intelligence, machine learning, and similar tools and technologies (collectively, “AI”), including the use of automated content generation and impersonation techniques.
Our tools, processes, and controls designed to detect and address potential fraud and policy violations may not be adequate and may not be sufficient to keep up with quickly-shifting techniques used by those attempting to undertake fraudulent activity on our platforms. Sellers, buyers, and other third parties use increasingly sophisticated techniques, which has made, and may continue to make, fraudulent activity more challenging to combat and may increase its impact. Even if we are successful in defending against these tactics, we may be required to spend significant resources on those efforts, which may distract our management and otherwise negatively impact our results of operations. Furthermore, our actions may be insufficient, may not be timely, and may not be effective in mitigating harm to our buyers, sellers, or other third parties or avoiding negative publicity. While we regularly update our processes for handling complaints and detecting policy violations and fraud, these processes are by their nature imperfect in a dynamic marketplace, and include risks to us, our sellers, and our buyers from both under-enforcement and over-enforcement, as well as potentially heightened friction on our marketplaces, which may reduce seller and buyer trust and engagement.
We continue to evolve our marketplaces and invest to improve our customer experience. If we are unable to maintain trusted brands and marketplaces, our ability to attract and retain buyers and sellers could be harmed.
Our business, financial performance, and growth depends on our ability to attract, retain, and drive momentum with active and engaged communities of buyers and sellers.
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Our financial performance, specifically our GMS, revenue, and Adjusted EBITDA, has been, and will continue to be, significantly determined by our success in attracting and retaining active buyers and active sellers and increasing their engagement. Etsy marketplace active buyers and GMS per active buyer on a trailing twelve month basis have declined year-over-year, and to drive growth, we will need to drive active buyer momentum. We believe that many new buyers and sellers find us by word of mouth and other non-paid referrals from existing buyers and sellers. If existing buyers do not find our platforms appealing, for example, because of a negative experience, lack of competitive shipping charges, delayed shipping times, inadequate customer service, buyer fees or lack of buyer-friendly features, declining interest in the goods offered by our sellers, lack of desirable listings, or other factors, they may make fewer purchases and they may not refer others to us. Likewise, if existing sellers are dissatisfied with their experience on our platforms, or feel they have more attractive alternatives, they may stop listing items in our marketplaces and using our services and may stop referring others to us, which could negatively impact our financial performance. Further, if trends supporting self-employment and the desire for supplemental income were to reverse, the number of sellers offering their goods in our marketplaces and the number of goods listed in our marketplaces could decline.
A perception that our marketplaces’ levels of responsiveness and support for our sellers and buyers are inadequate could damage our reputation, and reduce our sellers’ willingness to sell and buyers’ willingness to shop on our marketplaces. In some situations, we may choose to reimburse our buyers for their purchases to help avoid harm to our reputation. Our cost of refunds may exceed our expectations, and we do not always recover the funds reimbursed, which could impact our financial performance. When we do recover buyer refund amounts from sellers, it may increase general seller dissatisfaction and reduce their desire to continue selling using our platforms. In addition, buyers may not be refunded the full amount of their purchase, which could negatively impact their experience with, or perception of, our marketplaces. In addition, we have used, expect to continue to use, and may expand use of, disbursement holds and other fraud prevention and enforcement mechanisms to prevent and mitigate losses from fraud even though these restrictions may impact our value proposition for sellers. Although we are focused on enhancing customer service, our efforts may be unsuccessful, and our sellers and buyers may be disappointed in their experience and not return.
In addition, our GMS and revenue are concentrated in our most active buyers and sellers. If we lose a significant number of buyers or sellers, or our buyers or sellers do not maintain their level of activity for any reason, our financial performance could be harmed. Even if we are able to attract new buyers and sellers to replace the ones that we may lose, we may not be able to do so at comparable levels, they may not maintain the same level of activity, and the GMS and revenue generated from new buyers and sellers may not be as high as the GMS and revenue generated from the ones who leave, or reduce their activity level on our marketplaces.
Additionally, the demand for the goods listed on our marketplaces is dependent on consumer preferences and available discretionary spending, which can and do change quickly and may differ across generations, genders, cultures, and other demographic characteristics. If demand for the goods that our sellers offer declines, or if demand for goods falls and is not replaced by demand in new or different categories, we may not be able to attract and retain buyers and our business could be harmed. Further, a shift in trends away from unique or vintage goods, socially-conscious consumerism, or second-hand fashion, could also make it more difficult to attract new buyers and sellers. If we are unable to attract and retain buyers and sellers, or our buyers or sellers do not maintain their level of activity, our business and financial performance could be harmed.
We rely on our sellers to provide a fulfilling experience to our buyers.
Our sellers manage their shops, certain shop policies, products and product descriptions, shipping, and returns. As a result, we do not have the ability to control important aspects of buyers’ experiences on our platforms. For example, buyers may report that they have not received the items they purchased, that the items received were not as represented by a seller, or that a seller has not been responsive to their questions. In addition, popular or trending sellers may experience an influx of orders that may be beyond their ability to fulfill in a timely manner. While we have introduced features designed to protect buyers, there can be no assurance that these measures will be effective in combating fraudulent transactions or improve overall buyer satisfaction. Further, anything that prevents the timely processing of orders or delivery of goods to our buyers could harm our sellers. If buyers have a negative purchase experience, whether due to service interruptions or other reasons, or if sellers are unable to timely fulfill their orders from buyers, our reputation could be harmed. In addition, negative publicity and sentiment generated as a result of these types of complaints, or any associated enforcement action taken against sellers, could reduce our ability to attract and retain our sellers and buyers or damage our reputation.
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We track certain operational metrics with internal systems and tools or manual processes and do not independently verify such metrics. Certain of these metrics are subject to inherent challenges in measurement, and any real or perceived inaccuracies may adversely affect our business and reputation.
We track certain operational metrics, including active buyers and active sellers, GMS, GMS from specific categories of goods, classes of buyers or sellers, or specific platforms, and other information about our communities and the performance of our platforms, with internal systems and tools or manual processes. These metrics are not independently verified by a third party. The methodologies used to measure certain of these metrics require significant judgment, are susceptible to errors, may change over time, and may differ from estimates or metrics published by third parties due to differences in sources, methodologies, or the underlying assumptions. We also use surveys to collect and track information about our buyers and sellers and rely on third-party data, which we do not independently verify, to evaluate and report on our opportunity. Our internal systems, tools, processes, and surveys or data collection methodologies have a number of limitations and may have errors or could change over time, any of which could result in unexpected changes to our metrics, including the metrics we publicly disclose. Similarly, our third-party data sources have in the past and may in the future revise the historical data provided as a result of adjustments to their prior estimates or for other reasons. If the internal systems and tools, processes, or surveys we use to track these metrics under count or over count performance or contain algorithmic or other technical errors, the data we report may not be accurate. While these numbers are based on what we believe to be reasonable estimates of our metrics, there are inherent challenges in measuring this data. In addition, limitations or errors with respect to how we measure data or with respect to the data that we measure or obtain from third parties may affect our understanding of certain details of our business or our opportunity, which could affect our long-term strategies. If our operating metrics are not accurate, or if investors do not perceive them to be accurate, investors may lose confidence in our operating metrics and business, we could be subject to legal claims, and our business, reputation, financial condition, and results of operations could be adversely affected.
If we experience a technology disruption or failure that results in a loss of information, if personal data or sensitive information about members of our communities or employees is misused, exfiltrated, or disclosed, or if we or our third-party providers are unable to protect against software and hardware vulnerabilities, service interruptions, cyber-related events, or other security breaches, then members of our communities may curtail use of our platforms, we may be exposed to liability or incur additional expenses, and our reputation might suffer.
Like all online services, we are vulnerable to power outages, telecommunications failures, phishing, social engineering, malware, credential stuffing, account takeover, software supply chain compromises, and other attempts to gain unauthorized access to member accounts or data, as well as cyber attacks, breaches, and other security incidents. Cybersecurity incidents may also result from the inadvertent or intentional actions or inactions of employees, contractors, consultants, vendors, or other third parties with authorized access to our systems or data. We also rely on service providers and other third-party vendors, who are subject to the same vulnerabilities, and whose security and data protection practices we do not control. We and our third-party vendors regularly experience data incidents and cyber-related events that may result in technology disruptions and/or security breaches. These incidents could adversely affect us even if we are not the direct target of an attack. For example, a cyberattack on a key service provider or a vulnerability in software or systems used by that provider could disrupt our operations or compromise data. Any of these occurrences could lead to, among other things, interruptions or shutdowns of one or more of our platforms, loss of data, unauthorized disclosure or use of our employees’ or members’ personal or financial data, theft of our intellectual property or user data, unauthorized access to member accounts, or disruption of transactions. As we strive to reignite growth in our business, expand internationally, and gain greater public visibility, we may continue to face a higher risk of being targeted by cyber attacks.
Although we use a variety of processes, technologies, and controls to assist in our efforts to assess, identify, and manage material cybersecurity-related risks, these are not exhaustive, and we cannot assure that they will be adequate to prevent or detect service interruption, system failure, data loss or theft, or other material adverse consequences, directly or through our vendors. Additionally, these measures have not always been in the past, and in the future may not be, sufficient to prevent or detect a cyber attack, system failure, or security breach, particularly given the increasingly sophisticated tools and methods used by cybercriminals and other bad actors. The costs and effort to respond to a security breach and/or to mitigate any security vulnerabilities that may be identified could be significant, and our efforts to address these problems may not be successful, which could result in unexpected interruptions, impair our ability to operate our marketplaces, and cause other harm to our business and our competitive position.
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In addition, the industry has generally moved to cloud based or other remote infrastructure and, as a result, we and our partners may be more vulnerable to cyber attacks. If a natural disaster, power outage, connectivity issue, or other event that impacted our employees’ ability to work remotely were to occur, it may be difficult or, in certain cases, impossible, for us to operate our business for a substantial period of time. The prevalence of remote working for employees, vendors, or contractors may also result in increased consumer privacy, IT security, and fraud concerns and/or increased administrative costs.
A successful cyber attack could occur and persist for an extended period of time before being detected. We may not anticipate or implement adequate measures to prevent a cyber attack for a number of reasons, including because of the rapidly changing threat vectors and techniques used by bad actors, potential adverse impacts to employee productivity and/or user experience, and the significant cost and resources that these efforts require. Further, applicable rules regarding how to respond, required notices to users, and reporting to regulators and investors are subject to change and vary by jurisdiction, and may subject us to additional liability and reputational harm.
If we experience, or are perceived to experience, security breaches that result in marketplace performance or availability problems or the loss, compromise or unauthorized disclosure of personal data or other sensitive information, or if we or our vendors fail to respond appropriately to any security breaches that we or they may experience, or are perceived to do so, people may become unwilling to provide the information necessary to set up an account with us to become a new seller or buyer. Existing sellers and buyers may also stop listing new items for sale, decrease their purchases or use of our websites, or close their accounts altogether. We could also face damage to our reputation, potential liability, regulatory investigations in multiple jurisdictions, and costly remediation efforts and litigation, which may not be adequately covered by, and may impact our future access to, insurance. Any of these results could harm our growth prospects, our business, and our reputation for maintaining trusted marketplaces.
Our software is highly complex and may contain undetected errors.
The software underlying our platforms is highly interconnected and complex. It contains vulnerabilities and may contain undetected errors that may only be discovered after the code has been released. We rely heavily on a software engineering practice known as “continuous deployment,” meaning that we frequently release software code to our platforms. For the Etsy marketplace platform we typically release software code many times per day. This practice may result in the more frequent introduction of errors or vulnerabilities into the software underlying our platforms, which can impact the user experience and functionality of our marketplaces. Additionally, due to the interconnected nature of the software underlying our platforms, updates to parts of our code, third-party and open source code, and application programming interfaces, on which we rely and that maintain the functionality of our marketplaces and business, could have an unintended impact on other sections of our code, which may result in errors or vulnerabilities to our platforms that negatively impact the user experience, functionality or accessibility of our marketplaces. In some cases, such as our mobile apps, errors may only be correctable through updates distributed through slower, third-party mechanisms, such as app stores, and may need to comply with third-party policies and procedures to be made available, which may add additional delays due to app review and user delay in updating their mobile apps. In addition, our systems are increasingly reliant on AI and large language models, which are complex, subject to increasing litigation and regulatory scrutiny, and may have errors or inadequacies that are not easily detectable. In some instances, we may make use of third-party AI models, including foundational models, that have been pre-trained on data which may be insufficient, erroneous, stale, contain biased information, or infringe intellectual property or other rights. These models may inadvertently reduce our efficiency, or may cause unintentional or unexpected outputs that are incorrect, do not match our business goals, do not comply with our policies or applicable legal requirements, or otherwise are inconsistent with our brands, guiding principles, and mission. Any errors or vulnerabilities discovered in our code after release could also result in damage to our reputation, buyer or seller attrition, loss of revenue, or liability for damages, any of which could adversely affect our growth prospects and our business.
We rely on Google Cloud for a substantial portion of the computing, storage, data processing, networking, and other services for the Etsy marketplace. A significant disruption of or interference with our use of Google Cloud would negatively impact our operations and seriously harm our business.
Google Cloud provides a distributed computing infrastructure as a service platform for the Etsy marketplace’s business operations. Our products and services rely in significant part on continued access to, and the continued stability, reliability, and flexibility of Google Cloud. Any significant disruption of, or interference with, our use of Google Cloud would negatively impact our operations, and our business would be seriously harmed. In addition, if
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hosting costs increase over time, and if we require more computing or storage capacity, our costs could increase disproportionately. If we are unable to grow our revenues faster than the cost of utilizing the services of Google or similar providers, our business and financial condition could be adversely affected. Further, any transition of the cloud services currently provided by Google Cloud to another cloud provider would be difficult to implement and would cause us to incur significant time and expense. Depop relies on Amazon Web Services for its primary production environment, and that marketplace is thus subject to analogous risks.
We use AI-enabled systems, which could expose us to liability or adversely affect our business.
We use AI in connection with our business. The use of AI, a relatively new and emerging technology in the early stages of commercial use, exposes us to additional risks, such as damage to our reputation, competitive position, and business, legal, and regulatory risks and additional costs. For example, generative AI has been known to produce false or “hallucinatory” inferences or output, and certain generative AI uses machine learning and predictive analytics, which can create inaccurate, incomplete, or misleading content, unintended biases and other discriminatory or unexpected results, errors, or inadequacies, any of which may not be easily detectable by us or our related service providers. Accordingly, while AI-enabled applications may help provide more tailored or personalized user experiences, if the content, analyses, or recommendations that AI-enabled applications assist in producing in our products and solutions are, or are perceived to be, deficient, inaccurate, biased, unethical, or otherwise flawed, our reputation, competitive position, and business may be materially and adversely affected. In addition, laws, regulations, and industry standards governing the development and use of AI are rapidly evolving, and compliance with new or changing requirements may increase our costs and expose us to legal, regulatory, and reputational risk.
Additionally, if any of our employees, contractors, consultants, vendors, or service providers use any third-party AI-enabled systems and software in connection with our business or the services they provide to us, it may lead to the inadvertent disclosure or incorporation of our confidential information into training sets, which may impact our ability to realize the benefit of, or adequately maintain, protect, and enforce our intellectual property or confidential information, harming our competitive position and business. Any outputs that we create using AI-enabled tools may not be subject to copyright protection, which may adversely affect our intellectual property rights in, or ability to commercialize or use, any such content. To the extent that we do not have sufficient rights to use the data or other material or content used in or produced by the AI-enabled systems used in our business, or if we experience cybersecurity incidents in connection with our use or any third party’s use of AI-enabled applications, it could adversely affect our reputation and expose us to legal liability or regulatory risk, including with respect to third-party intellectual property, data privacy, cybersecurity, publicity, contractual or other rights. Further, our competitors or other third parties may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively.
Our business depends on third-party services and technology that we utilize to maintain and scale the technology underlying our platforms and our business operations.
Our business operations depend upon a number of third-party service providers, such as cloud service providers, marketing platforms and providers, payments and shipping providers, contingent labor teams, background and identity check providers, and network and mobile infrastructure providers. Any disruption in the services provided by third parties, any failure on their part to deliver their services in accordance with our scale and expectations, or any failure on our part to maintain appropriate oversight on these third-party providers during the course of our engagement with them, or appropriate redundancies, could significantly harm our business.
We are unable to exercise significant oversight over some of these providers, which increases our vulnerability to their financial conditions and to problems with the services they provide, such as technical failures, deprecation of key services, privacy and/or security concerns, and we have from time to time experienced such problems with the services provided by one or more third parties. Our efforts to update our infrastructure or supply chain may not be successful as we may not sufficiently distribute our risk across providers or geographies or our efforts to do so may take longer than anticipated. If we experience failures in our technology infrastructure or supply chain or do not expand our technology infrastructure or supply chain successfully, then our ability to run our marketplaces could be significantly impacted, which could harm our business.
In addition, our sellers rely on continued and unimpeded access to postal services and shipping carriers to deliver their goods reliably and timely to buyers. Our sellers have at times experienced transportation service disruptions and delays in the delivery of their goods. In particular, recent volatility in the global tariff environment has pressured delivery times or carrier service availability as carriers adapt to keep pace with new requirements relating to the calculation, collection, and remittance of tariffs and related fees. Likewise, recent global conflict and instability,
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including in the Middle East, have caused and could continue to cause increases or volatility in fuel prices and other transportation costs, resulting in increased shipping costs for our sellers. If these shipping delays or interruptions continue or worsen, or if shipping rates and fees increase significantly or remain volatile, our sellers may have increased costs or elect not to ship into particular markets, and/or our buyers may have a poor purchasing experience and may lose trust in our marketplaces, which could negatively impact our business, financial performance, and growth prospects.
Our business depends on access to third-party services, platforms, and infrastructure that are critical to the successful operation of our business.
Our sellers and buyers rely on access to the internet or mobile networks to access our marketplaces. We also depend on widely adopted third-party platforms to reach our customers, such as popular mobile, social, search, and advertising offerings. Internet service providers may choose to disrupt or degrade access to our platforms or increase the cost of such access. Mobile network operators or operating system providers could block or place onerous restrictions on the ability to download and use our mobile apps or deny or condition access to application programming interfaces or documentation, limiting the functionality of our products or services on the platform, including in ways that could require us to make significant changes to our marketplaces, websites, or mobile apps. If we are not able to deliver a rewarding experience on these platforms, if our or our sellers’ or buyers’ access to these platforms is limited, if the cost or terms of accessing these platforms increases or changes, or if these large platforms implement features that compete with us or our sellers, then our business may suffer.
Internet service providers, mobile network operators, operating system providers, and/or app stores regularly place technical and policy restrictions on applications and platforms that use their services, which restrictions change over time. They have also and could in the future attempt to charge us for, or restrict our ability to access or provide access to, certain platforms, features, or functionality that we use in our business, and such changes may adversely affect our marketplaces.
In addition, the success of our marketplaces has at times and could in the future also be harmed by factors outside our control, such as actions taken by providers of mobile and desktop operating systems, social networks, or search and advertising platforms, including:
•policy changes that interfere with, add tolls or costs to, or otherwise limit our ability to provide users with a full experience of our platforms, such as for our mobile apps or social network presence, including policy changes that effectively require us to use the provider’s payment processing or other services for transactions on the provider’s operating system, network, or platform;
•unfavorable treatment received by our platforms, especially as compared to competing platforms, such as the placement of our mobile apps in a mobile app download store;
•increased costs to distribute or use our platforms via mobile apps, social networks, or established search and advertising systems;
•changes in mobile operating systems, such as iOS and Android, that degrade the functionality of our mobile website or mobile apps, our understanding of the data and usage related to our services, or that give preferential treatment to competitive products;
•changes to social networks that degrade the e-commerce functionality, features, or marketing of our services or our sellers’ shops and products; or
•implementation and interpretation of regulatory or industry standards by these widely adopted platforms that, as a side effect, degrade the e-commerce functionality, features, or marketing of our services or our sellers’ shops and products.
Any of these events could materially and adversely affect our business, financial performance, and growth prospects.
Our payments systems have both operational and compliance risks, including in-house execution risk and dependence on third-party service providers.
The payment offerings provided on each of our marketplaces differ and, as such, are subject to varying degrees and types of risk. In particular, each payment offering has a different level of reliance on third parties to perform certain
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aspects of its services. We have invested, and plan to continue to invest, in our payments tools and infrastructure, and have, or may in the future, add or change payment tools and third-party service providers to maintain existing availability, expand into additional markets, and offer new payment methods, offerings, and tools to our buyers and sellers. If we fail to invest adequate resources into our payments platforms, or if our investment efforts are unsuccessful or unreliable, our payments services may not function properly, keep pace with competitive offerings, or comply with applicable laws and regulatory requirements, any of which could negatively impact their usage and our marketplaces, as well as our trusted brands, which, in turn, could adversely affect our GMS and results of operations.
We rely upon third-party service providers to perform key functions for our payments platforms, including payments processing and payments disbursing, compliance, currency exchange, identity verification, sanctions screening, tax collection, and fraud analysis. Failure of these service providers to perform adequately, or changes to or termination of our relationships with these service providers, has and could again negatively affect our sellers’ ability to receive payments, or potentially result in legal liability.
Disruptions related to our third-party service providers could also potentially affect our sellers’ ability to receive orders, our buyers’ ability to complete purchases, and our ability to operate our payments program, including maintaining certain compliance measures, including fraud prevention and detection tools. This could decrease revenue, increase costs, lead to potential legal liability, and negatively impact our brands and business. If we (or a third-party payment processor) suffer a security breach affecting payment card information, we could be subjected to fines, penalties, and assessments arising out of the major card brands’ rules and regulations, contractual indemnification obligations or other obligations contained in merchant agreements and similar contracts, and we may lose our ability to accept payment cards as payment for our services and our sellers’ goods and services.
In addition, we and our third-party service providers may experience service outages from time to time that negatively impact payments on our platforms. We have in the past experienced, and may in the future experience, such payments-related service outages and, if we are unable to promptly remedy or provide an alternative payment solution, our business could be harmed. In addition, if our third-party providers increase the fees they charge us, our operating expenses, or those of our sellers, could increase, and it could negatively impact our sellers’ businesses and/or our business.
Further, our ability to expand our payments services into additional countries is dependent upon the third-party providers we use to support these services. As we continue to expand the availability of our payments services to additional markets or offer new payment methods to our sellers and buyers in the future, we, along with our sellers may become subject to additional and evolving regulations, compliance requirements, and may be exposed to heightened operational and fraud risk, which could lead to an increase in our operating expenses.
The global scope of our business subjects us to macroeconomic and geopolitical risks.
Doing business outside of the United States subjects us to increased risks and burdens such as:
•complying with different (and sometimes conflicting) laws and regulatory standards (including those related to the use and disclosure of personal information, online payments and money transmission, intellectual property, product safety and liability, consumer protection, online platform liability, minors’ online safety, e-commerce marketplace regulation, AI, labor and employment laws, business practices, including those related to corporate social responsibility and sustainability, and taxation of income, goods, and services), including attempts to apply these laws and regulatory standards extra-territorially;
•defending our marketplaces against international litigation and regulatory matters, including in jurisdictions that may not offer judicial norms or protections similar to those found in the United States;
•conforming to local business or cultural norms;
•barriers to international trade, such as tariffs, customs, or other taxes, or, when applicable, reductions to or the elimination of the use of de minimis entry thresholds;
•uncertainties around the continuing impact on operations of supply chain disruptions, interruptions of order or payment processing, interruptions in sellers’ supply chains, transportation and shipping disruptions, customs delays, public health crises, political unrest, and geopolitical events such as natural disasters, pandemics, terrorism, and acts of war;
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•varying levels of internet, e-commerce, and mobile technology adoption and infrastructure;
•potentially heightened risk of fraudulent or other illegal transactions;
•limitations on the repatriation of funds;
•exposure to liabilities under anti-corruption, anti-money laundering and export control laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.K. Bribery Act of 2010, trade controls and sanctions administered by the U.S. Office of Foreign Assets Control of the U.S. Treasury Department, and similar laws and regulations in other jurisdictions;
•limitations on our ability to enforce contracts, our terms of use and policies, and intellectual property rights in jurisdictions outside the United States;
•fluctuations of currency exchange rates, including the strengthening or weakening of the U.S. dollar against foreign currencies; and
•uncertainties and instability in the U.K. and E.U. markets caused by the patchwork of cross-border service agreements triggered by Brexit.
Our sellers face similar risks in conducting their businesses across borders. Even if we are successful in managing the risks of conducting our business across borders, if our sellers are not, our business could be adversely affected.
Our ability to recruit and retain a talented and broadly diverse group of employees and deploy that talent effectively is important to our success. Significant attrition or turnover could impact our ability to grow our business.
Our ability to attract, retain, engage, and effectively deploy a talented and broadly diverse group of employees is important to our success. We strive to attract, retain, and engage employees who share our dedication to our buyer and seller communities and our mission to “Keep Commerce Human.” We cannot guarantee we will be able to continue to attract and retain the number or caliber of employees we need to maintain our competitive position, particularly given the uncertainty of the current macroeconomic environment.
Some of the challenges we face in attracting and retaining employees include:
•skepticism regarding our ability to reignite GMS growth in the future;
•continuing ability to offer competitive compensation and benefits, including stock-based compensation, for our employees, given our historical stock price volatility and as more external scrutiny is placed on stock-based compensation expenses;
•competition for talent in our industry and our talent markets, which could cause payroll costs, including stock-based compensation, to become a larger percentage of our total cost base;
•evolving expectations in our talent markets and our own policies regarding remote, hybrid or other flexible work modes;
•continuing to find promotion and internal mobility opportunities to retain key employees for leadership positions;
•mitigating concerns around any potential cost-savings actions in light of past restructurings; and
•responding to competitive pressures and changing business conditions in ways that do not divert us from our guiding principles.
Filling key strategic roles, including engineering and product management, can be challenging at times, particularly for more specialized positions. Qualified individuals may be limited and in high demand, and we may incur significant costs to attract, develop, retain and engage them. Even if we were to offer higher compensation and other benefits, people with suitable technical skills may choose not to join us or to continue to work for us. In addition, job candidates and existing employees often consider the value of the stock awards they receive in connection with
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their employment. The value of our stock awards in a volatile macroeconomic environment may adversely affect our ability to recruit and retain highly-skilled employees.
We operate in a flexible work model in which a significant percentage of our workforce works remotely while others work from our offices on a hybrid schedule. It is possible that these arrangements could have a negative impact on our employee engagement, on our ability to effectively deploy our talent, and on the execution of our business plans and operations. We have structured our work modes to reinforce our workplace culture, and optimize the natural creativity and innovation that arises from live cross-functional and team gatherings in our offices. If we are unsuccessful in optimizing our hybrid work environment, it may adversely affect our ability to recruit, retain, and effectively deploy employees. If we continue to operate with a significant portion of our employees located outside of our offices, and we are unable to adapt to new hybrid work modes, it could negatively impact our company culture.
In general, our employees, including our management team, work for us on an at-will basis. The unexpected loss of or failure to retain one or more of our key employees, or unsuccessful succession planning, could adversely affect our business. Further, if members of our management and other key personnel in critical functions across our organization are unable to perform their duties, we may not be able to execute on our business strategy and/or our operations may be negatively impacted. Other companies, including our competitors, may be successful in recruiting and hiring our employees, and it may be difficult for us to find suitable replacements on a timely basis or on competitive terms.
If we experience increased voluntary attrition in the future, if we are unable to attract and retain qualified employees in a timely fashion or on reasonable terms, particularly in critical areas of operations such as engineering, and/or if we are otherwise not able to place the right employees in the right roles to drive execution of our business plans, we may not achieve our strategic goals, and our business and operations could be harmed.
We may be unable to adequately protect our intellectual property.
Our intellectual property is an essential asset of our business. To establish and protect our intellectual property rights, we rely on a combination of copyright, trademark, and patent laws, as well as confidentiality procedures and contractual provisions. We also rely on trade secret protection for parts of our technology and intellectual property. The efforts we have taken to protect our intellectual property may not be sufficient or effective. We generally do not elect to register our copyrights, relying instead on the laws protecting unregistered intellectual property, which may not be sufficient. We rely on both registered and unregistered trademarks, which may not always be comprehensive in scope. In addition, our copyrights, trademarks, and patents may be held invalid or unenforceable if challenged, and may be of limited territorial reach. While we have obtained or applied for patent protection with respect to some of our intellectual property, patent filings may not be adequate alone to protect our intellectual property, and may not be sufficiently broad to protect our proprietary technologies. Additionally, it is expensive to maintain these rights, both in terms of application and maintenance costs and the time and cost required to defend such rights, if necessary. From time to time, we acquire or license intellectual property from third parties, but these acquired assets, like our internally developed intellectual property, may lapse, be abandoned, be challenged or circumvented by others, be held invalid, be unenforceable, or may otherwise not be effective in protecting our platforms.
In addition, we may not be effective in policing unauthorized use of our intellectual property and authorized uses may not have the intended effect. Even when we do detect violations, enforcing our rights may require us to engage in litigation, use of takedowns and similar procedures, or licensing. Any enforcement efforts we undertake, including litigation, could be time-consuming and expensive and could divert our management’s attention. In addition, our efforts may be met with defenses and counterclaims challenging the validity and enforceability of our intellectual property rights or may result in a court determining that our intellectual property rights are invalid or unenforceable. If we are unable to adequately prevent unauthorized use or misappropriation of our intellectual property by third parties, the value of our brand and other intangible assets may be diminished and customers may lose trust in Etsy. Any of these events could have an adverse effect on our business.
We attempt to protect our intellectual property and confidential information, in part, through confidentiality, non-disclosure, and invention assignment agreements with employees, advisors, service providers, and other third parties who develop intellectual property on our behalf, or with whom we share information. However, we cannot guarantee that we have entered into such agreements with each party that has developed intellectual property on our behalf or that has or may have had access to our confidential information, trade secrets, and other intellectual property. These agreements may also be breached, or may not effectively prevent unauthorized use, disclosure, or
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misappropriation of our confidential information or intellectual property. Moreover, these agreements may not provide an adequate remedy for breaches or in the event of unauthorized use or disclosure of our confidential information or infringement of our intellectual property. The legal framework surrounding protection of intellectual property changes frequently throughout the world, particularly as to technologies used in e-commerce, and these changes may impact our ability to protect our intellectual property and defend against third-party claims. If we are unable to cost-effectively protect our intellectual property rights, our business could be harmed.
We may experience fluctuations in our tax obligations and effective tax rate.
We are subject to a variety of tax and tax collection obligations in the United States and in numerous other foreign jurisdictions. We record tax expense, including indirect taxes, based on current tax payments and our estimates of future tax payments, which may include reserves for estimates of probable or likely settlements of tax audits. We may recognize additional tax expense and be subject to additional tax liabilities, including tax collection obligations, due to changes in tax law, regulations, administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions. An increasing number of jurisdictions are considering or have adopted laws or administrative practices that impose new tax measures, including revenue-based taxes, such as digital services taxes or online sales taxes, targeting online commerce and the remote selling of goods and services. These include new obligations to withhold or collect sales, consumption, value added, or other taxes on online marketplaces and remote sellers, or other requirements that may result in liability for third-party obligations. For example, several jurisdictions have proposed or enacted taxes on online advertising and marketplace service revenues. Proliferation of these or similar unilateral tax measures may continue unless broader international tax reform is implemented. Our effective tax rate, results of operations and cash flows have at times been, and could in the future be, materially and adversely affected by additional taxes imposed on us prospectively or retroactively. We may also be subject to increased requirements for marketplaces to report, collect, remit, and hold liability for their customers’ direct and indirect tax obligations, as a result of changes to regulations, administrative practices, outcomes of court cases, and changes to the global tax framework.
Our effective tax rate and cash taxes paid in a given financial statement period may be adversely impacted by results of our business operations including changes in the mix of revenue among different jurisdictions, acquisitions, investments, entry into new geographies, the relative amount of foreign earnings, changes in foreign currency exchanges rates, changes in our stock price, intercompany transactions, changes to accounting rules, expectation of future profits, changes in our deferred tax assets and liabilities and our assessment of their realizability, and changes to our ownership or capital structure. Fluctuations in our tax obligations and effective tax rate could adversely affect our business.
In the ordinary course of our business, there are numerous transactions and calculations for which the ultimate tax determination is uncertain. Although we believe that our tax positions and related provisions reflected in the financial statements are fully supportable, we recognize that these tax positions and related provisions may be challenged by various tax authorities. These tax positions and related provisions are reviewed on an ongoing basis and are adjusted as additional facts and information become available, including progress on tax audits, changes in interpretation of tax laws, developments in case law, and closing of statute of limitations. To the extent that the ultimate results differ from our original or adjusted estimates, our actual tax liability and/or effective tax rate could be adversely affected.
The (provision) benefit for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which we operate. Future changes in applicable laws, including any implementation of the Organization for Economic Cooperation and Development (“OECD”) “two pillar” project, projected levels of taxable income, and tax planning could change the effective tax rate and tax balances recorded by us. In addition, tax authorities periodically review income tax returns filed by us and raise issues regarding filing positions, timing and amount of income and deductions, and the allocation of income among the jurisdictions in which we operate. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. Any adjustments as a result of any examination may result in additional taxes or penalties against us. If the ultimate result of these audits differs from original or adjusted estimates, they could have a material impact on our effective tax rate and tax liabilities.
At any one time, we typically have multiple tax years subject to audit by various taxing jurisdictions. As a result, we could be subject to higher than anticipated tax liabilities as well as ongoing variability in our quarterly tax rates as audits close and exposures are re-evaluated.
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Strategic Risks Related to Our Business and Industry
We face intense competition and may not be able to compete effectively.
Operating e-commerce marketplaces is highly competitive, and we expect competition to increase in the future. We face competition from a wide range of online and offline competitors on both sides of our two-sided marketplace, which connects buyers and sellers to facilitate transactions. We compete for sellers with many companies and venues, including marketplaces, retailers, and social media commerce. For example, in addition to listing goods for sale on one of our marketplaces, a seller can list goods with online retailers or sell goods through local consignment and vintage stores, as well as other venues or marketplaces, or through social networks and agentic experiences. They may also sell wholesale directly to traditional retailers, including large national retailers, who discover their goods in our marketplaces or otherwise.
We also compete with companies that sell software and services to small businesses, enabling a seller to sell from her own website or otherwise run her business independently of our platforms, or enabling her to sell through multiple channels.
We compete to attract, engage, and retain sellers based on many factors, including:
•the value, awareness, trustworthiness, reputation, and perception of our brands;
•our investments in product and marketing for the benefit of our sellers;
•the effectiveness of our member support and trust and safety practices and policies;
•the global scale of our marketplaces and the breadth of our online presence;
•our tools, education, and services;
•the number and engagement of buyers;
•our policies and fees;
•the ability of a seller to scale her business;
•the effectiveness of our mobile apps;
•the strength of our communities; and
•our mission.
We also face competition on the buyer side from both online and offline competitors. We compete for the attention of buyers who have the choice of shopping with any online or offline venue, including large e-commerce marketplaces, national retail chains, direct-to-consumer brands, local consignment and vintage stores, social networks, agentic experiences, resale marketplaces, and other venues or marketplaces. Many of these companies offer low-cost or free shipping, fast shipping times, favorable return policies, and other features that may be difficult or impossible for our sellers to match.
We compete to attract, engage, and retain buyers based on many factors, including:
•the breadth, value, and quality of items that sellers list in our marketplaces;
•the ease of finding items;
•the value, awareness, trustworthiness, and perception of our brands;
•the effectiveness of our marketing;
•the person-to-person commerce experience;
•customer service;
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•the effectiveness of our mobile apps;
•the availability of timely, fair, and free shipping offered by sellers to buyers;
•ease of payment;
•localization and experiences targeted based on regional preferences; and
•the availability and reliability of our platforms.
We also compete for media placements, including with retailers competing for the attention of our buyers, and increased competition can impact the cost we pay for media placements, including in dynamic auctions.
Many of our competitors and potential competitors have longer operating histories, greater resources, better name recognition, or more customers than we do. They may invest more to develop and promote their services than we do, and they may offer lower fees or more services to sellers than we do. Our competitors also may be able to more quickly or effectively develop, adopt, and integrate new technologies, including AI–enabled tools and agentic commerce experiences, into their platforms, which could make their offerings more attractive to buyers or sellers and reduce our ability to compete effectively. In addition, large, widely adopted platforms may benefit from significant user bases, access to user or industry-wide data, the ability to unilaterally set policies and standards, and control over complementary services such as fulfillment, advertising or on-platform apps or e-commerce transactions. To the extent Etsy and our sellers may rely on these competitors’ services, such services may be integrated into site functionality, and these competitors may have access to substantial data about Etsy and its communities of buyers and sellers. As a result, they may be able to reduce our ability to service our users and/or to obtain analytics or information to optimize advertising or intentionally seek to disintermediate Etsy.
Local companies or more established companies based in markets where we operate outside of the United States may also have a better understanding of local customs, providing them a competitive advantage. For example, in certain markets outside the United States, we compete with smaller, but similar, local online marketplaces with a focus on unique goods that are attempting to attract sellers and buyers in those markets.
If we are unable to compete successfully, or if competing successfully requires us to expend significant resources in response to our competitors’ actions, our business and results of operations could be adversely affected.
Our marketing efforts to help grow our business may not be effective.
Maintaining and promoting awareness of our marketplaces and services is important to our ability to attract and retain sellers and buyers. One of the key parts of our strategy for the Etsy marketplace is to bring new buyers to the marketplace, reactivate lapsed buyers, and create more habitual buyers by inspiring more frequent purchases across multiple categories and purchase occasions. We continue to iterate on and invest in our marketing strategies for each of our marketplaces, which may not succeed for a variety of reasons, including our inability to execute and implement our plans.
Our digital marketing efforts currently include, among others, agentic search integration, search engine optimization, search engine marketing, affiliate marketing, and display advertising, as well as social media, mobile push notifications, and email marketing. If we fail to scale and deliver an effective return on investment in any of our marketing efforts, it may harm our business. We also engage with celebrities and influencers as part of our marketing efforts, and our perceived affiliation with these individuals could cause us brand or reputational damage in the event they are perceived to be or take actions inconsistent with our brands and values.
Additionally, we invest significantly in brand advertising via channels such as television and digital video advertising. If we do not produce effective content or purchase effective air time and placement for that content, it could fail to deliver a return on our investment, and damage our brands and/or business. Many of our marketing efforts include our sellers and products from their shops selected via automated systems. These automated systems may not always operate effectively. While both our manual and automated systems have tools and procedures designed to account for our and our partners’ policies, despite our best efforts, we may inadvertently include in our marketing efforts sellers or their products inconsistent with our policies, brands, and values, which could result in failure to deliver a return on our investment, media or regulatory scrutiny, and damage to our brands and/or business.
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We obtain a significant number of visits via search engines such as Google. Search engines frequently change the algorithms that determine the ranking and display of results of a user’s search, alter analytics or search engine optimization data available to us, or make other changes to the way results and source content are displayed. These changes have and may continue to negatively affect the placement of links to our marketplaces and reduce the number of visits we receive from search engines. We continue to adjust our marketing strategies to account for these changes, but there can be no guarantee these adjustments will be effective.
We have entered into strategic relationships with certain third-party platforms, including AI–enabled applications, that surface our sellers’ products within those platforms and, in some cases, enable buyers to complete purchases directly through those applications. These arrangements represent an additional channel through which buyers may discover and purchase items from our sellers, and we rely on these third parties to operate their platforms in a manner that supports accurate product presentation and reliable transaction completion. These platforms are operated by parties outside of our control and may experience outages, disruptions, errors, or changes to functionality, policies, or business practices that could impair product discovery, reduce buyer engagement, or negatively affect the marketing and sale of our sellers’ products. We cannot control the availability of such third-party AI-enabled applications, especially in a highly competitive environment, and we may be unable to negotiate favorable economic terms with the applicable providers. If any such third-party AI-enabled applications become incompatible with our solutions or unavailable for use, or if the providers of such models unfavorably change the terms on which such AI-enabled platforms are offered or terminate their relationship with us, our solutions may become less appealing to our customers and our business will be harmed.
We do not control the user interface, ranking, prompts, rates of updates or information fields through which our sellers’ products are displayed on these third-party platforms and rely on our partners to surface complete and accurate product information. If product information is displayed inaccurately or incompletely, or if automated or AI–driven outputs produce unexpected results, buyers may have a negative experience or be confused about the source of a transaction. Such outcomes could result in reputational harm, reduced trust in our marketplace, increased customer support costs, or claims from consumers, payments partners/networks, or regulators.
We also obtain a significant number of visits from social media platforms such as Facebook, Instagram, and Pinterest. Search engines, social networks, and other third parties typically require compliance with their policies and procedures, which may be subject to change or new interpretation with limited ability to negotiate, which from time to time negatively impacts our marketing capabilities (including marketing services for our sellers), GMS, and revenue. Limits on how data can be used in connection with third-party advertising and the growing use of online ad-blocking software and technological changes to browsers and mobile operating systems that, for example, limit access to usage information for advertisers like Etsy, impact the effectiveness of, or our visibility and insights into, our marketing efforts. As a result, we may fail to bring more buyers, or fail to increase frequency of visits, to our platforms. In addition, ongoing legal and regulatory changes in the data privacy, social media and technology spheres in U.S. states and countries throughout the world – and the interpretation of these laws by major search, social, and operating system providers – have and may continue to impact the scope and effectiveness of marketing and advertising services generally, including those used on our platforms.
We also obtain a significant number of visits through email marketing. If we are unable to successfully deliver emails to our sellers and buyers, if our email subscription tools do not function correctly, or if our sellers and buyers do not open our emails, whether by choice, because those emails are marked as low priority or spam, or for other reasons, our business could be adversely affected. As e-commerce, search, and social networking, as well as related regulatory regimes, evolve, we must continue to evolve our marketing tactics and technology accordingly and, if we are unable to do so, our business could be adversely affected.
Many providers of consumer devices, mobile or desktop operating systems, and web browsers have blocked, or have announced options to block, third-party cookies and similar online tracking technologies, which has and may continue to reduce the effectiveness of traditional online tracking methods. Similarly, our vendors, particularly those providing advertising and analytics products and services have modified and may continue to modify their products and services based on legal and technical changes relating to privacy in ways that could reduce the efficiency of our marketing efforts and our access to data about use of our platforms. Any reduction in our ability to make effective use of such technologies could harm our ability to personalize the experience of buyers, increase our costs, and limit our ability to attract and retain our sellers and buyers on cost-effective terms. As a result, our business and results of operations could be adversely affected.
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Enforcement of our marketplace policies may negatively impact our brands, reputation, and/or our financial performance.
We maintain and enforce policies that outline expectations for users while they engage with our services, whether as a seller, a buyer, or a third party. Additionally, we prohibit a range of items on our marketplaces, including (but not limited to), drugs, alcohol, tobacco, weapons, endangered animal products, hazardous materials, recalled items or those that create an unreasonable risk of harm, highly regulated items, items violating intellectual property rights of others, illegal products, pornography, items from sanctioned jurisdictions, hateful content, and items that promote or glorify violence.
We maintain and enforce our policies, including those related to fraud and other illegal activity, in order to uphold the safety and integrity of our marketplaces, comply with laws and regulations, engender trust in the use of our services, uphold our values, and encourage positive connections among members of our communities. We strive to enforce our policies in a consistent and principled manner that is transparent and explicable to stakeholders. However, this work involves a combination of human judgment and technological and manual review. As a result, there could be errors or inconsistencies in, or disagreement with, our policy determinations; policy enforcement could be subject to different, inconsistent, or conflicting regional consensus or regulatory standards in different jurisdictions; and our policy decisions could be perceived to be arbitrary, unfair, unclear, offensive, objectionable, or inconsistent. Similarly, the tools and processes in place at our Depop marketplace differ from those used by the Etsy marketplace, and, at each marketplace, our tools and processes may not be as sophisticated or mature as those of our competitors. Shortcomings and errors in our policies, policy enforcement, and/or any perceived or actual concerns regarding transparency of our policy enforcement decisions across our marketplaces could lead to negative publicity, distrust from our members, legal or regulatory risks, or lack of confidence in the use of our services, and could negatively impact the reputation of our brands.
Enforcement of our policies has been in the past, and may continue to be, received negatively by stakeholders or the public or negatively affect our financial performance. For example, we have limited or prohibited the sale of items in our marketplaces based on our policies, and will continue to do so, even though we could benefit financially from the sale of those items. Additionally, from time to time, we revise our policies in ways that we believe will enhance trust in our platforms, but which may be negatively perceived by our buyers, sellers, segments of our communities, regulators, or other stakeholders. As a result, enforcement of our policies may negatively impact our brands, reputation, and/or financial performance.
If we are not able to keep pace with technological changes and enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers, our business, financial performance, and growth may be harmed.
Our industry is characterized by rapidly changing technology, new service and product introductions, and changing customer demands and preferences, and we are not able to predict the effect of these changes on our business. The technologies that we currently use to support our platforms may become inadequate or obsolete, and the cost of incorporating new technologies, including advances in AI, into our products and services may be substantial. Our sellers and buyers, however, may not be satisfied with our enhancements or new offerings or may perceive that these offerings do not respond to their needs or create value for them. Additionally, as we invest in and experiment with new offerings or changes to our platforms, our sellers and buyers may find these changes to be disruptive and may perceive them negatively. In addition, developing new services and features is complex, and the timetable for public launch is difficult to predict and may vary from our historic experience. As a result, the introduction of new offerings may occur after anticipated release dates, or they may be introduced as pilot programs, which may not be continued for various reasons. In addition, new offerings may not be successful due to defects or errors, negative publicity, or our failure to market them effectively.
New offerings may not drive GMS or revenue growth, may require substantial investment and planning, and may bring us more directly into competition with companies that are better established or have greater resources than we do.
If we do not continue to cost-effectively develop new offerings that satisfy sellers and buyers, then our competitive position and growth prospects may be harmed. In addition, new offerings may not drive the GMS or revenue that we anticipate, may have lower margins than we anticipate or than existing offerings, and our revenue from the new offerings may not be enough to offset the cost of developing and maintaining them, which could adversely affect our business, financial performance, and prospects.
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Growing the Etsy marketplace globally is part of our strategy, and our business could be harmed by the continued imposition of barriers to international trade.
Operating outside of the United States and facilitating cross-border transactions between buyers and sellers require significant management attention, including managing operations and people over diverse geographic areas with varying cultural norms and customs, and adapting our platforms and business operations to local markets. Although we have a significant number of sellers and buyers outside of the United States, and Depop is headquartered in the United Kingdom, we are primarily a U.S.-based company with less experience developing local markets outside the United States and managing cross-border trade. We have had, and may continue to have, difficulty executing our global strategy successfully. An inability to effectively execute cross-border transactions, or to otherwise grow our business outside of the United States in a cost-effective manner could adversely affect our GMS, revenue, and operating results.
Our business may be adversely affected by any circumstances that reduce or hinder cross-border trade. If jurisdictions continue to impose barriers to international trade, including increased tariffs, changes to or elimination of de minimis thresholds, certifications, representative requirements, additional regulation of small sellers and platforms, or customs requirements that increase the cost or complexity of cross-border trade, our sellers and buyers could experience increased costs, our marketplace could be disrupted, and our business could be adversely impacted. For example, OBBBA eliminates the global de minimis exemption for commercial goods imported into the United States beginning in July 2027, and the exemption was earlier suspended by an executive order that became effective on August 29, 2025. This change has impacted certain Etsy orders that were previously able to use the de minimis exemption. The E.U. and the U.K. are also pursuing de minimis removals and associated fees, which may affect the appeal of non-domestic inventory in those markets.
The goods that sellers list on our Etsy marketplace may not appeal to non-U.S. consumers in the same way as they do to consumers in the United States. In addition, non-U.S. buyers are not as familiar with the Etsy brand as buyers in the United States and may not perceive us as relevant or trustworthy. Similarly, consumers outside the United Kingdom, the United States, and Australia may be less familiar with Depop, which may make it challenging to expand into new markets.
Competition is likely to intensify as we expand our business in markets outside of the United States. Local companies based outside the United States may have a substantial competitive advantage because of their greater understanding of, and focus on, their local markets, along with regulations that may favor local companies. Some of our competitors may also be able to develop and grow internationally more quickly than we will. In addition, our international growth strategy may be adversely affected by geopolitical or other events that result in closures, delayed or terminated delivery services, or restrictions to cross-border trade.
We continue to invest in relationships with third-party service providers to support operations in multiple countries, and may potentially acquire additional companies based outside the United States to integrate them into our operations, both of which could expose us to additional risks. Our investment outside of the United States may be more costly than we expect or unsuccessful.
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We have incurred impairment charges and may incur further impairment charges in the future, which would negatively impact our operating results.
We review goodwill and other long-term assets quarterly to assess if indicators of impairment arose. which may indicate a decline in the fair value of goodwill and other long-term tangible and intangible assets requiring impairment charges. In the event we are required to record an additional impairment charge to our goodwill, other intangibles, and/or long-lived assets, it could have a material adverse effect on our Consolidated Statements of Operations and Balance Sheets in the reporting period in which we record the charge.
We may engage in acquisitions, dispositions, or strategic partnerships, which may divert management’s attention and/or prove to be unsuccessful.
We have acquired businesses in the past and may acquire additional businesses or technologies, or enter into strategic partnerships, in the future. We have not always been able to realize the anticipated benefits of our acquisitions, and may not be able to realize the anticipated benefits of possible future acquisitions or partnerships, and such transactions may disrupt our business and divert management’s time and attention. We have also disposed of businesses in the past and may in the future dispose of businesses or assets that no longer fit our long-term strategies. For example, we recently sold Reverb and entered into an agreement to sell Depop to focus on our Etsy marketplace.
In addition, integrating an acquired business or technology, or separating an existing business or asset group, is risky and may require significant time and attention from our management team and workforce. Any acquisitions, dispositions, or partnerships may result in unforeseen operational difficulties and expenditures associated with:
•integrating new businesses and technologies into, or separating existing businesses from, our infrastructure;
•clearing any required regulatory review that may be complex, costly, time-consuming, or place additional requirements on the business;
•implementing growth initiatives;
•integrating or separating administrative functions;
•hiring, retaining, and integrating key employees;
•supporting and enhancing morale and culture;
•retaining key customers, merchants, vendors, and other key business partners;
•maintaining or developing controls, procedures, and policies (including effective internal controls over financial reporting and disclosure controls and procedures, as well as information privacy controls); and
•assuming liabilities related to the activities of the acquired business before and after the acquisition, including liabilities for violations of laws and regulations, intellectual property infringement, commercial disputes, cyber attacks, taxes, and other matters.
We also may issue additional equity securities in connection with an acquisition or partnership, which could cause dilution to our stockholders. Finally, acquisitions, dispositions, or partnerships could be viewed negatively by analysts, investors, or the members of our communities. If we fail to realize the expected benefits of our acquisitions, dispositions, or strategic partnerships our business, growth and/or results of operations could be adversely affected.
The closing of the proposed sale of Depop is subject to various risks and uncertainties, may not be completed in accordance with expected plans or on the currently contemplated timeline, or at all, and the pending sale may be disruptive to Etsy or create loss in value to stockholders.
On February 15, 2026, we entered into a Sale and Purchase Agreement (the “Purchase Agreement”) to sell Depop to eBay Inc. The sale is currently expected to close by the end of the third quarter of 2026, subject to regulatory approval and certain other closing conditions as set forth in the Purchase Agreement. If the conditions to the closing of the sale of Depop are neither satisfied nor, where permissible, waived on a timely basis or at all, we may be unable to complete the sale of Depop, or such sale may be delayed beyond our expected timeline.
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Whether or not the proposed sale of Depop is completed, the pending Depop sale may be disruptive to Etsy. Uncertainties regarding the pending sale of Depop may impair Etsy or Depop’s ability to attract, retain, and motivate key personnel and could divert the attention of Etsy or Depop’s management and other employees from day-to-day business and operations in preparation for the sale. If we are unable to effectively manage these risks, our business, results of operations, financial conditions, and prospects could be adversely affected.
If the proposed sale of Depop is delayed or not completed for any reason, investor confidence could decline, and we could face negative publicity and potential litigation. In addition, in the event of a failed sale, we will have expended significant management resources in an effort to complete the sale and, although in some circumstances the buyer may be obligated to pay us a termination fee of $90 million, we will have incurred significant transaction costs. The Purchase Agreement also provides that, upon certain termination events, eBay will be required to pay Etsy an additional termination fee of $70 million. Further, in the event of a failed sale, we may need to spend significant resources to reintegrate the Depop business, and we could face a loss in the value of our stock price if a failed transaction is negatively perceived by investors. Accordingly, if the proposed sale of Depop is not completed on the terms set forth in the Purchase Agreement, or at all, our business, results of operations, financial condition, cash flows, and stock price may be adversely affected.
We are subject to risks related to our environmental, social, and governance activities and disclosures.
Our Impact strategy focuses on areas where we believe Etsy can most effectively advance positive environmental and social outcomes while supporting long-term business objectives. We have announced a number of goals and initiatives and elected to publicly report on a significant number of environmental and social metrics that we monitor, including in our Annual Report. As a result, our business may face heightened scrutiny for these activities. For more information see Part I, Item I, “Business— Our Impact Strategy, Goals, & Progress” in our Annual Report. While selected metrics receive limited assurance from an independent third party, this is inherently a less rigorous process than the reasonable assurance sought in connection with a financial statement audit and such review process may not identify errors and may not protect us from potential liability under the securities laws or other applicable laws. In addition, for some of the metrics we report, the methodology of computation and/or the scope of our value chain assessed continues to evolve from year to year. As a result, period over period comparisons may not be meaningful.
The implementation of our Impact strategy, including our Impact investing strategy and other initiatives intended to help us meet our Impact goals, requires considerable investments, and our goals, with all of their contingencies, dependencies, and in certain cases, reliance on third-party verification and/or performance, are complex and ambitious, and we are not always able to achieve them. If we do not demonstrate progress against our Impact goals or if our Impact strategy is not perceived to be adequate or appropriate, our reputation could be harmed. Our reputation and the value of our brands could also be damaged if we or our vendors fail to act responsibly in the areas in which we report, or we fail to demonstrate that our commitment to our Impact strategy enhances our overall financial performance.
There can be no assurance that our current programs, reporting frameworks, and principles will be in compliance with any new environmental and social laws and regulations that may be promulgated in the United States and elsewhere. Additionally, the costs and business impact of changing our current practices to comply with current and future regulatory requirements may be substantial. Furthermore, industry and market practices may further develop to become even more robust than what is required under any new laws and regulations, and we may have to expend significant efforts and resources to keep up with market trends and stay competitive among our peers.
While many of the recently introduced environmental and social laws are designed to promote more robust transparency and enhance resiliency, laws, regulations, and administrative actions have also been proposed and implemented in the United States and elsewhere to limit, restrict, or prohibit company activities on environmental and social issues and/or to rollback portions of recently enacted laws. As a result, our Impact strategy and metrics may subject us to heightened scrutiny, litigation or regulatory proceedings, or reputational damage.
Any harm to our reputation resulting from setting public goals or our failure or perceived failure to meet such goals could impact employee engagement and retention, the willingness of our buyers and sellers and our partners and vendors to do business with us, or investors’ willingness to purchase or hold shares of our common stock, any of which could adversely affect our business and financial performance.
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We may need additional capital, which may not be available to us on acceptable terms or at all.
We believe that our existing cash and cash equivalents and short- and long-term investments, together with cash generated from operations, will be sufficient to meet our anticipated operating cash needs for at least the next 12 months. However, we may require additional cash resources due to changes in business conditions or other developments, such as acquisitions or investments we may decide to pursue. We may seek to borrow funds under our credit facility or sell additional equity or debt securities. The sale of additional equity or convertible debt securities could also result in dilution to our existing stockholders. Additionally, while the indentures governing our outstanding convertible senior notes do not include material restrictions on our ability to pursue our business strategy, our credit facility requires us to comply with, and future debt instruments may require us to comply with, various covenants that limit our ability to take actions such as: disposing of assets; completing mergers or acquisitions; incurring additional indebtedness; encumbering our properties or assets; paying dividends, making other distributions or repurchasing our common stock; making specified investments; and engaging in transactions with our affiliates. These restrictions could limit our ability to pursue our business strategies. It is also possible that financing may not be available to us in amounts or on terms acceptable to us, if at all. Weakness and volatility in capital markets and the economy in general could limit our access to capital markets and increase our costs of borrowing.
We have a significant amount of convertible debt and may incur additional debt in the future. We may not have sufficient cash flow from our business to pay our substantial debt when due.
Our ability to pay our debt when due or to refinance our outstanding indebtedness, including the 0.125% Convertible Senior Notes due 2026 we issued in September 2019 (the “2019 Notes”), the 0.125% Convertible Senior Notes due 2027 we issued in August 2020 (the “2020 Notes”), the 0.25% Convertible Senior Notes due 2028 we issued in June 2021 (the “2021 Notes”) and the 1.00% Convertible Senior Notes due 2030 we issued in June 2025 (the “2025 Notes” and, together with the 2019 Notes, the 2020 Notes, and the 2021 Notes, the “Notes”), depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. While we used a portion of the net proceeds from certain of the Notes offerings to enter into separate privately negotiated capped call instruments designed to reduce the potential dilution and/or offset a portion of the cash payments due in respect of such series of the Notes, there can be no assurance that the capped call instruments will pay out in full or at all. If we are unable to generate the cash flow necessary to pay our debts when due, we may be required to adopt one or more alternatives, such as selling assets, refinancing or restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. In addition, any required repurchase of the Notes for cash as a result of a fundamental change would lower our current cash on hand such that we would not have those funds available for use in our business or could require us to obtain additional financing to fund the repurchase. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. Higher prevailing interest rates and/or a tightening supply of credit may adversely affect the terms upon which we will be able to refinance our indebtedness, if at all. As a result, we may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. Based on the daily closing prices of the Company’s stock during the quarter ended March 31, 2026, holders of the Notes are not eligible to convert their Notes during the second quarter of 2026. See Part I, Item 1, “Notes to Condensed Consolidated Financial Statements—Note 10—Debt” for more information on the Notes.
In addition, we and our subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in our debt instruments, some of which may be secured debt. If, for example, we incur additional debt, secure existing or future debt, or recapitalize our debt, these actions may diminish our ability to make payments on our substantial debt when due.
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Regulatory, Compliance, and Legal Risks
Failure to deal effectively with fraud or other illegal activity could harm our business.
Our operations are subject to anti-corruption laws, such as the FCPA, which generally prohibit us and our officers, employees, and third-party intermediaries from, directly or indirectly, offering, authorizing, or making improper payments to government officials and other persons for the purpose of obtaining or retaining business or another advantage. Our operations are also subject to U.S. and foreign export controls, trade sanctions, and import laws and regulations. Such laws may restrict or prohibit the provision of certain products and/or services to countries, governments, and persons targeted by U.S. sanctions. We have adopted policies and procedures that are intended to ensure compliance with law, including, for example anti-corruption, anti-money laundering, export control, and trade sanctions requirements, and we have measures in place to detect and limit the occurrence of fraudulent and other illegal activity in our marketplaces. However, those policies, procedures, and measures may not always be effective. In addition, despite our efforts to comply with our policies and procedures, we may at times fail to do so or may be perceived to have failed to do so. In certain instances, the procedures and measures in place at our Depop marketplace are not as sophisticated or mature as those used by the Etsy marketplace. Further, the measures that we use to detect and limit the occurrence of fraudulent and other illegal activity must be dynamic and require significant investment and resources. Bad actors apply continually evolving technologies and ways to commit fraud and other illegal activity, including through the use of AI, and regulations requiring marketplaces to detect and limit these activities are increasing. The use of increasingly sophisticated techniques by bad actors has increased, and may continue to increase, their ability to commit fraud on our marketplaces, or on our buyers and sellers, and may increase the impact of such activity. Our measures are not always able to keep up with these changes. Additionally, new technologies such as agentic commerce require different approaches to maintaining trustworthy marketplaces and monitoring for fraud and illegal activity, and we may not be able to keep pace as this technology evolves. We are and have been subject to requests from regulators regarding these efforts. If we fail to limit the impact of illegal activity in our marketplaces, we could be subject to penalties, fines, other enforcement actions and/or incur significant expenses and our business, reputation, financial performance, and growth could be adversely affected.
We rely upon third-party service providers to perform and assist us with certain compliance services. If we or our service providers do not perform adequately, our compliance measures may not be effective, which could increase our expenses, lead to potential legal liability, and negatively impact our business. In addition, we could be subject to penalties, fines, other sanctions, and/or incur significant expenses.
Our brands may be harmed if third parties or members of our communities use or attempt to use our marketplaces as part of their illegal or unethical business practices.
Our emphasis on our mission and guiding principles makes our reputation particularly sensitive to allegations of illegal or unethical business practices by our sellers or other members of our communities. Our seller policies promote legal and ethical business practices. Etsy expects sellers, as well as any manufacturers or production partners they work with, to work only with manufacturers who comply with all applicable laws, who do not use child or involuntary labor, who do not discriminate, and who promote sustainability and humane working conditions. We also expect our suppliers to comply with our Supplier Code of Conduct. Although we seek to influence, we do not directly control our sellers, suppliers, or other members of our communities or their business practices, and we cannot ensure that they comply with our policies. If members of our communities engage in illegal or unethical business practices, or are perceived to do so, we may receive negative publicity and our reputation may be harmed, which may adversely impact our business and financial performance.
We regularly receive and expect to continue receiving claims alleging that items listed by sellers on our marketplaces are counterfeit, infringing, unlawful, harmful, or otherwise violate our policies.
We regularly receive claims, notices, and other allegations that items listed on our marketplaces, or other user-generated content posted on our platforms, infringe upon third-party copyrights, trademarks, patents, or other intellectual property or personal rights, or that such items are otherwise harmful, dangerous, or unlawful. We have procedures in place for third parties to report these claims, including our notice-and-takedown process for intellectual property and mechanisms to report items that are illegal or otherwise violate our policies. We also have tools and procedures in place to take action against potentially violative content, which may include the removal of listings, content, sellers, or shops that violate our policies. At the same time, our tools and procedures are subject to gaps, limitations, resourcing constraints, human and machine error, and other shortcomings, and may not effectively mitigate the risks we face in hosting user-generated content as part of our business.
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While we benefit from certain protections and safe harbors from liability, such as the Digital Millennium Copyright Act § 512 et seq., those protections are limited, vary across jurisdictions, and may diminish as lawmakers, courts, and regulators across the globe continue to reexamine the legal liability of platforms for the content and actions of their third-party users. We have been and may continue to be subject to allegations, litigation and/or regulatory claims seeking to hold us liable for the content and actions of our third-party sellers, including in the areas of intellectual property, consumer protection, product liability, privacy and data protection, content compliance, and criminal laws. If we are alleged or found to be liable for our sellers’ content or actions, or if new laws or court decisions expand the obligations or liability of marketplace platforms, we could be forced to pay monetary damages, civil or criminal penalties and attorneys’ fees, change or restrict our business practices or services, restrict certain types of content from our marketplaces, and/or suffer reputational or other harm. Any of these, or similar, consequences could have a material adverse impact on our business, including by making our platform less attractive to buyers or sellers, reducing our revenue, or increasing our costs.
Any public perception that unlicensed, counterfeit, harmful, or unlawful items are commonly offered by sellers in our marketplaces, even if factually incorrect, could result in negative publicity and damage to our reputation.
We are regularly involved in litigation, arbitration, and regulatory matters that are expensive and time-consuming and that may require changes to our strategy, the features of our platforms, and/or how our business operates.
We are regularly involved in litigation, arbitration, disputes, and regulatory matters, including those related to intellectual property, consumer protection, product liability, product safety, regulatory compliance, security and privacy, and/or commercial matters, either individually or, where available, on a class-action basis. We have been, are, and may in the future be subject to heightened regulatory scrutiny, inquiries, or investigations, including with respect to our sellers, vendors or third parties, relating to both specific inquiries as well as broad, industry-wide concerns, such as antitrust, product liability, and privacy, that could lead to legal liability, increased expenses, injunctive relief, or reputational damage.
Under certain circumstances, we have contractual and other legal obligations to indemnify and to incur legal expenses on behalf of current and former directors, officers, employees, underwriters, and other third parties. Any lawsuit or legal action to which we are a party, with or without merit, may result in an unfavorable judgment or settlement, substantial monetary payments or fines, adverse changes to our offerings or business practices, reputational harm, and other consequences. We have in the past settled lawsuits, regulatory actions, and other disputes and may decide in the future to settle such actions, even if non-meritorious. In addition, defending claims is costly and can impose a significant burden on our management.
We manage and mitigate certain legal risks through our House Rules, policies, and other terms of use, including through the use of informal dispute resolution, individual arbitration, mass arbitration procedures, limitations of liability, venue selection, choice-of-law, and indemnification requirements. These requirements may be subject to differing interpretations, risks, and legal frameworks in different U.S. federal, state, and foreign courts, and may not be enforceable in some jurisdictions. If certain of our House Rules, policies, and other terms are not enforceable in particular jurisdictions or disputes, we could experience increased costs and expenses, litigation in multiple jurisdictions, inconsistent decisions, and/or forum shopping by third parties seeking jurisdictions amenable to their claims.
Lawsuits, enforcement actions, and other legal proceedings brought against us have resulted in judgments or settlements, and may result in injunctions, damages, fines, or penalties, which could have a material adverse effect on our financial condition or results of operations or require changes to our business. Although we establish accruals for our litigation and regulatory matters in accordance with applicable accounting guidance when they present loss contingencies that are both probable and reasonably estimable, there may be a material exposure to loss in excess of any amounts accrued, or in excess of any loss contingencies disclosed as reasonably possible, particularly in more uncertain legal or regulatory environments. Such loss contingencies may not be probable and reasonably estimable until the proceedings have progressed significantly, which could take several years and occur close to resolution of the matter.
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Privacy, data protection, information security, and AI regulations are complex and rapidly evolving areas that have and may adversely affect our and our sellers’ business.
We collect, receive, use, store, disclose, share, and transfer a host of personal, confidential, proprietary, and otherwise potentially protected information in the course of our operations, including to operate our business and for legal, compliance, and marketing purposes, which subjects us to an increasingly complex array of global privacy, AI, and data protection regulations. Authorities around the world have adopted and are considering a number of legislative and regulatory proposals affecting data protection, data usage, data transfer, localization, AI, and information security, among other things. These laws and regulations are evolving, are subject to interpretation, in some cases may conflict with each other, and create substantial operational, financial, regulatory, reputational, and legal risk to our business. We are subject to regular inquiries and requests from regulators regarding these efforts. Examples of these laws include:
•The E.U. General Data Protection Regulation and the U.K. General Data Protection Regulations, which apply to our activities conducted from an establishment in the European Union or the United Kingdom, respectively, or related to products and services that we offer to our users in the European Union or the United Kingdom.
•Various comprehensive U.S. state and international privacy laws, which give new data privacy rights to their respective residents (including, in California, a private right of action in the event of a data breach resulting from our failure to implement and maintain reasonable security procedures and practices) and impose significant obligations on controllers and processors of consumer and employee data.
•U.S. state laws governing the processing of biometric information, including laws in Illinois, Texas, and Washington, which impose obligations on businesses that collect or disclose consumer biometric information and contain broad definitions of biometric information.
•Various federal, state, and international laws, like the Children’s Online Privacy Protection Act of 1998, state age assurance laws, and the U.K. Age-Appropriate Design Code, which govern the provision of services to children and minors, including the collection and processing of their data.
Further, we are subject to evolving international laws, regulations, decisional authority, and guidance governing whether, how, and under what circumstances we can transfer, process, and/or receive personal data. The validity of various cross-border data transfer mechanisms remains subject to legal, regulatory, and political developments in both the European Union and the United States. Any changes to existing frameworks may require us to adapt our existing arrangements or could impede our ability to effectively transfer data to our users, vendors, and partners in other jurisdictions.
We incorporate AI and machine learning technologies into our products and internal operations. As a result, we are increasingly subject to a rapidly developing body of laws and regulations specifically addressing AI. These evolving laws may impose significant compliance burdens, including requirements for impact assessments, risk management systems, human review of AI outputs, and disclosures to users. Moreover, because these technologies are themselves highly complex and rapidly developing, it is not possible to predict all of the legal, cybersecurity, or regulatory risks that may arise relating to our use of such technologies. Our failure to comply with these emerging AI laws and regulations could result in significant fines, restrictions on the deployment or use of AI systems, reputational harm, and legal liability.
Collectively, worldwide privacy, data protection, AI, and information security laws and regulations have and may continue to change some of the ways that we, our sellers, our vendors, and other third parties collect, use, and share protected information, in some cases creating costly compliance obligations and/or impeding our business. For example, some of these requirements may introduce friction into the user experience on our platforms, restrict our ability to use data in ways that could benefit our sellers and our business, or impact the scope and effectiveness of our marketing efforts, any of which could negatively impact our business and future outlook.
We may fall short of our data protection obligations due to various factors either within our control (such as limited internal resource allocation) or outside our control (such as a lack of vendor cooperation, new regulatory interpretations, or lack of regulatory guidance in respect of certain requirements). Any actual or perceived failure to comply with applicable privacy or data protection laws, our contractual obligations to third parties, our privacy policies, or similar requirements, could subject us to significant damages, fines, penalties, regulatory investigations, lawsuits, remediation costs, reputational damage, and/or other liabilities. In addition, although our sellers and
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vendors are independent businesses with their own data protection and privacy obligations, it is possible that a privacy authority could deem us jointly and severally liable for actions of our sellers or vendors, which would increase our potential liability and costs of compliance and could harm our business.
We are also subject to various data breach notification laws and, in some instances, have contractual and other obligations to notify relevant stakeholders in the event of an actual or potential breach. Our contracts, our contractual representations, and/or industry standards, to varying extents, may require us to use industry-standard or other reasonable measures to safeguard personal or confidential information. Cyber-related events and security breaches, even if only related to the actions of a third-party vendor, are and have been costly, could lead to legal liability or negative publicity, may cause our users, employees, or other stakeholders to lose confidence in our security measures, may cause us to breach certain contracts, and may require us to expend significant resources to remediate and/or defend against regulatory inquiries or litigation. There can be no assurance that indemnity, contractual remedies, or insurance will be available or adequate to protect us from liabilities or damages in the event of a breach or cyber-related incident.
Our business and our sellers and buyers may be subject to evolving sales and other tax regimes in various jurisdictions, which may harm our business.
The application of indirect taxes, such as sales and use tax, duties, value-added tax, provincial tax, goods and services tax, business tax, withholding tax, digital service tax, and gross receipt tax, as well as tax information reporting obligations, to businesses like ours and to our sellers and buyers is a complex and evolving area. Significant judgment is required to evaluate applicable tax obligations and, as a result, amounts recorded are estimates and are subject to adjustments. In many cases, the ultimate tax determination is uncertain because it is not clear when and how new and existing statutes might apply to our business or to our sellers’ businesses. In some cases it may be difficult or impossible for us to validate information provided to us by our sellers on which we must rely to ascertain Etsy’s potential obligations, given the intricate nature of these regulations as they apply to particular products or services and that many of the products and services sold in our marketplace are unique or handmade.
Various jurisdictions (including the U.S. states and E.U. member states) are seeking to impose, or have recently imposed, additional reporting, record-keeping, indirect tax collection and remittance obligations, or revenue-based taxes on businesses like ours that facilitate online commerce. Such changes to current law or new legislation could adversely affect our business and our sellers’ businesses. This legislation could also require us or our sellers to incur substantial costs in order to comply, including costs associated with tax calculation, collection, remittance, and audit requirements, which could make selling on our marketplaces less attractive.
Additionally, certain member states within the European Union and other countries, as well as certain U.S. states, have proposed or enacted taxes on online advertising and marketplace service revenues. Our results of operations and cash flows could be adversely affected by additional taxes of this nature imposed on us prospectively or retroactively or additional taxes or penalties resulting from the failure to provide information about our buyers, sellers, and other third parties for tax reporting purposes to various authorities. In some cases, we also may not have sufficient notice to enable us to build solutions and adopt processes to properly comply with new reporting or collection obligations by the applicable effective date. If we are found to be deficient in how we have addressed our tax obligations, our business could be adversely impacted.
Our business is subject to a large number of U.S. and non-U.S. laws, many of which are evolving, and the resulting compliance costs and liability risk could negatively impact our business.
We are subject to a variety of laws and regulations in the United States and around the world, including those relating to traditional businesses, such as employment laws, accessibility requirements, taxation, trade, product liability, marketing, intellectual property, and consumer protection laws, and laws and regulations focused on e-commerce and online marketplaces, such as those governing online payments, privacy, anti-spam, data security and protection, online platforms, content moderation, online child safety, social media regulation, marketplace seller regulation, AI, automated decision-making, and machine learning. Additional examples include data localization requirements, limitations on marketplace scope or ownership, intermediary liability protections, regulation of online speech and content moderation, packaging and recycling requirements, seller certification and representative requirements, know-your-customer/business regulations, and rules related to security, privacy, or national security, which may regulate us, our users, or our vendors. In light of our international operations, we need to comply with various laws associated with doing business outside of the United States, including anti-money laundering, sanctions, anti-corruption, and export control laws. In some cases, privacy, data security, consumer protection, e-commerce, and other laws and regulations differ significantly across jurisdictions, and in some countries, such laws
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are more actively enforced. In addition, regulations, laws, policies, and international accords relating to environmental and social matters, including sustainability, due diligence, climate change, human capital, forced labor, and diversity, have been enacted or are being developed and formalized in Europe, the United States (both at the federal level and on a state-by-state basis), and elsewhere, some of which include specific disclosure requirements, target-driven frameworks, and/or due diligence obligations to which we may be subject.
These laws and regulations are continuously evolving, and compliance is costly and can require changes to our business practices and significant management time and effort. Additionally, it is not always clear how existing laws apply to online marketplaces as many of these laws do not address the unique issues raised by online marketplaces or e-commerce. Some jurisdictions attempt to extend domestic laws and regulations globally, including to Etsy or our subsidiaries, and may subject us to inconsistent obligations across jurisdictions. In addition, outside of the United States, governments of one or more countries have in the past, do, and may continue to seek to censor content available on our platforms (including at times lawful content) or require Etsy to block or remove such content, and/or to block access to our platforms.
Compliance is often complex, resource intensive, and/or operationally challenging. In addition, applicable laws may conflict with each other, and by complying with the laws or regulations of one jurisdiction, we may find that we are violating the laws or regulations of another jurisdiction. Despite our efforts, we may have not always fully complied and may not be able to fully or timely comply with all applicable laws in all jurisdictions where we operate, particularly where the applicable regulatory regimes are new or have not been broadly interpreted. If we become liable under laws or regulations applicable to us, we could be required to pay significant fines and penalties, our reputation may be harmed, and we may be forced to change the way we operate. That could require us, for example, to incur significant expenses, discontinue certain services, or limit, change, or discontinue our services in particular jurisdictions, any of which could negatively affect our business. In addition, if we are blocked or restricted from operating in one or more countries, our ability to attract and retain sellers and buyers may be adversely affected and we may not be able to operate our business as we anticipate.
Additionally, if third parties with whom we work violate applicable laws or our policies, those violations could also result in liabilities for us and could harm our business. Our ability to rely on insurance, contracts, indemnification, and other remedies to limit these liabilities may be insufficient or unavailable in some cases. Furthermore, the circumstances in which we may be held liable for the acts, omissions, or responsibilities of our sellers or other third parties is uncertain, complex, and evolving. Upcoming and proposed regulations may require marketplaces like ours to comply with specific obligations, beyond what marketplaces have traditionally been required to do, to avoid liability. With an increasing number of such laws being proposed and passed, the resulting compliance costs and potential liability risk could negatively impact our business.
Our business is subject to a complex, evolving global landscape of laws, regulations, rules, and standards relating to the technology sector, which may disproportionately burden smaller platforms and businesses like ours.
Various laws, rules, and regulations govern our business, and these laws are complex, evolving, subject to change, and vary across jurisdictions in the United States and globally. These regimes cover diverse areas, including payments services, platform obligations and liability, marketplace regulation, AI, data protection, cybersecurity, product safety, online and minors’ safety, consumer protection, intellectual property, anti-money laundering, taxation, and competition. As the technology sector faces increased scrutiny, new legislation, and regulatory inquiries—even those targeted at the largest technology platforms—may disproportionately burden smaller platforms and businesses, including Etsy and our sellers.
These evolving laws and regulations create significant legal and financial risks, compliance obligations, and complexity for our products and business. For example, regulations such as the U.S. Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (INFORM), the Digital Services Act (DSA), the General Product Safety Regulation, and the U.K. Online Safety Act subject Etsy to obligations with respect to seller verification, minors’ safety, product safety, and consumer protection, among other things, and in many cases impose obligations and requirements on our sellers or third-party vendors and service providers. Similarly, there are and have been various efforts, both in the U.S. and internationally, to impose more obligations on platforms with respect to product and user safety and intellectual property, for example, and to restrict the scope of intermediary liability protections or roll back safe harbors that are available to online platforms that host third-party content. These evolving laws and regulations, including regulatory and court interpretations of them, may subject us to legal and financial exposure, and may require us to implement costly compliance measures, restrict sellers’ ability to ship into certain jurisdictions, modify our products and services, or change how and/or where we operate our business. They
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also could impose requirements that our sellers find difficult or impossible to meet, which in turn, could drive sellers away from our platform or require us to refuse service to them.
Our payments systems are also subject to complex and evolving financial regulations and obligations. We act as a regulated payment institution in the European Economic Area through our subsidiary Etsy Payments Ireland Limited, we are registered as a payments services provider in Canada through our subsidiary Etsy Canada Limited, and we may in the future apply for registration or licensure in additional jurisdictions. Each authorization subjects us to additional regulation, compliance burdens, and oversight. Further, through our agreements and arrangements with our third-party payments service providers, we are subject to evolving rules and requirements, like the Visa and Mastercard network rules and Payment Card Industry Data Security Standard, rules governing electronic funds transfers, and various fee arrangements, all of which are subject to change in ways that may adversely affect our business.
If we, our sellers, or our third-party service providers fail to comply with applicable legal, regulatory, licensure, registration, contractual, or other requirements, including judicial and regulatory interpretations of those requirements, we could face substantial fines, liabilities, litigation, enforcement actions, reputational damage, and/or be forced to substantially change, curtail, or suspend our services or features in key markets. We and our sellers could similarly be harmed by changes to rules and regulations that affect our business, or changes to the rules and fees imposed by our third-party payment partners or payment card providers. Additionally, compliance with these evolving regimes may require significant investment of resources, necessitate changes to our business model and offerings, reduce the attractiveness of our platforms for buyers and sellers, increase our costs, or make our business less profitable.
We may be subject to intellectual property and similar claims, which, even if meritless, could be extremely costly to defend, damage our brands, require us to pay significant damages, and limit our ability to use certain technologies in the future.
Technology companies are frequently subject to litigation based on allegations of infringement and other violations of intellectual property rights, rights of publicity, and similar rights. We regularly receive claims that we have infringed, misappropriated, or misused others’ intellectual property and other rights in the operation of our marketplaces and business. Third parties regularly claim that they have intellectual property rights that cover significant aspects of our technologies or business methods and may seek to limit or block our services and/or offerings. We also regularly receive claims alleging that we are liable, either directly, indirectly, or vicariously, for alleged infringement by sellers using Etsy’s platforms, our vendors, or other third parties, and that statutory, judicial, or other immunities and defenses do not protect us. Intellectual property claims against us, with or without merit, have been, are, and could in the future be time-consuming and expensive to settle or litigate and could divert the attention of our management. Litigation regarding intellectual property and similar rights is inherently uncertain due to the complex issues involved, and we may not be successful in defending ourselves in such matters. To the extent we gain greater public recognition and scale worldwide, we may face a higher risk of being the subject of intellectual property claims.
Some of our competitors have extensive portfolios of issued patents. Many potential litigants, including some of our competitors, patent holding companies, and other intellectual property rights holders, have the ability to dedicate substantial resources to enforcing their actual and alleged intellectual property rights. Any claims successfully brought directly against us, or implicating us as part of an action against third parties, such as our sellers or service providers, could subject us to significant liability for damages, and we may be required to stop using technology or other intellectual property alleged to be in violation of a third party’s rights in one or more jurisdictions where we do business. We have been and might in the future be required to seek a license for third-party intellectual property. Even if a license is available, we could be required to pay significant royalties or submit to unreasonable terms, which would increase our operating expenses. We may also be required to develop alternative non-infringing technology, which could require significant time and expense. If we cannot license or develop technology for any allegedly infringing aspect of our business, we could be forced to limit our services and may be unable to compete effectively. Any of these results could harm our business.
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We are subject to the terms of open source licenses because our platforms incorporate, and we contribute to, certain open source software, potentially impairing our ability to adequately protect some of our intellectual property.
The software powering parts of our platforms incorporates certain software that is covered by open source licenses. In addition, we contribute source code to open source software projects and release internal software projects under open source licenses, and we anticipate doing so in the future. The terms of many open source licenses that we and others in the internet and technology industries rely on have been interpreted in only a few court decisions, and there is a risk that the licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to operate our marketplaces. Under certain open source licenses, if certain conditions are met, we could be required to publicly release portions of the source code or make certain software available under open source licenses.
To avoid the public release of the affected portions of our source code, we could be required to expend substantial time and resources to re-engineer some or all of the impacted software. In addition, the use of open source software can lead to greater risks than use of third-party commercial software because open source licensors generally do not provide warranties or controls on the origin of the software. Use of open source software also presents additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to compromise our platforms, and patches or fixes may not be consistently or quickly available, as they may be subject to the continued community engagement in a particular open source project. Additionally, because any software source code we contribute to open source projects is publicly available, while we may benefit from the contributions of others, our ability to protect our intellectual property rights in such software source code may be limited or lost entirely, and we will be unable to prevent our competitors or others from using such contributed software source code. Similarly, we may be subject to third-party intellectual property claims as a user of or contributor to such open source software. Any of these risks could be difficult to eliminate or manage and, if not addressed, could adversely affect our business, financial performance, and growth.
If we are unable to maintain effective internal controls over financial reporting, investors may lose confidence in the accuracy of our financial reports.
As a public company, we are required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal controls over financial reporting. It also requires our independent registered public accounting firm to attest to our evaluation of our internal controls over financial reporting. Although our management has determined, and our independent registered public accounting firm has attested, that our internal controls over financial reporting were effective as of December 31, 2025, we cannot assure you that we or our independent registered public accounting firm will not identify a material weakness in our internal controls in the future.
If we have a material weakness in our internal controls over financial reporting in the future, we may not detect errors on a timely basis, which could harm our operating results, adversely affect our reputation, cause our stock price to decline, or result in inaccurate financial reporting or material misstatements in our annual or interim financial statements. We could be required to implement expensive and time-consuming remedial measures. Further, if there are material weaknesses or failures in our ability to meet any of the requirements related to the maintenance and reporting of our internal controls, such as Section 404 of the Sarbanes-Oxley Act, investors may lose confidence in the accuracy and completeness of our financial reports and that could cause the price of our common stock to decline. We could become subject to investigations by the New York Stock Exchange (“NYSE”), the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect our business.
In addition, our internal controls over financial reporting will not prevent or detect all errors and fraud, and individuals, including employees and contractors, could circumvent such controls. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
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Other Risks
The price of our common stock has been and will likely continue to be volatile, and declines in the price of our common stock could subject us to litigation.
The price of our common stock has been and is likely to continue to be volatile. For example, between January 1, 2025 and April 24, 2026, our common stock’s daily closing price on Nasdaq or the NYSE, as applicable, has ranged from a low of $40.80 to a high of $75.56. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities litigation. We have experienced securities class action lawsuits in the past and may experience more such litigation following recent or future periods of volatility or declines in our stock price. Any securities litigation could result in substantial costs and divert our management’s attention and resources, which could adversely affect our business.
The price of our common stock may fluctuate significantly for numerous reasons, many of which are beyond our control, such as:
•variations in our operating results and other financial and operational metrics, including the key financial and operating metrics disclosed in this Quarterly Report, as well as how those results and metrics compare to analyst and investor expectations;
•forward-looking statements related to our financial guidance or projections, our failure to meet or exceed our financial guidance or projections, or changes in our financial guidance or projections;
•failure of analysts to initiate or maintain coverage of our company, changes in their estimates of our operating results or changes in recommendations by analysts that follow our common stock or a negative view of our financial guidance or projections and our failure to meet or exceed the estimates of such analysts;
•the strength of the global economy or the economy in the jurisdictions in which we operate, particularly during times of macroeconomic uncertainty affecting members of our communities;
•entry into or exit from stock market indices;
•announcements of new services or enhancements, strategic alliances or significant agreements or other developments by us or our competitors;
•announcements by us or our competitors of mergers, acquisitions, or divestitures, or rumors of such transactions involving us or our competitors;
•the amount and timing of our operating expenses and the success of any cost-savings actions we take;
•changes in our Board of Directors or senior management team;
•disruptions in our marketplaces due to hardware, software or network problems, security breaches, or other issues;
•the trading activity of our largest stockholders;
•the number of shares of our common stock that are available for public trading;
•litigation or other claims against us;
•stakeholder activism;
•the operating performance of other similar companies;
•short sales and the covering of short positions;
•changes in legal requirements relating to our business; and
•any other factors discussed in this Quarterly Report.
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In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the price of our common stock could decline for reasons unrelated to our business, financial performance, or growth. Stock prices of many internet and technology companies have historically been highly volatile.
Future sales and issuances of our common stock or rights to purchase common stock, including upon conversion of our convertible senior notes, could result in additional dilution to our stockholders and could cause the price of our common stock to decline.
We may issue additional common stock, convertible securities, or other equity in the future, including as a result of conversion of the outstanding Notes. New investors in such issuances could also receive rights senior to those of current stockholders. We also issue common stock to our employees, directors, and certain other service providers pursuant to our equity incentive plans. Such issuances could be dilutive to investors and could cause the price of our common stock to decline.
The conversion of some or all of the Notes would dilute the ownership interests of existing stockholders to the extent we deliver shares upon conversion of any of the Notes. Each series of Notes is convertible at the option of their holders prior to their scheduled maturity in the event the conditional conversion features of such series of Notes are triggered. Based on the daily closing prices of our stock during the quarter ended March 31, 2026, holders of the Notes are not eligible to convert their Notes during the second quarter of 2026. If the Notes are eligible for conversion and one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely cash to converting holders of such Notes, we could be required to deliver to them a significant number of shares of our common stock, increasing the number of outstanding shares of our common stock. The issuance of such shares of common stock and any sales in the public market of the common stock issuable upon such conversion of the Notes could adversely affect prevailing market prices of our common stock. See Part I, Item 1, “Notes to Condensed Consolidated Financial Statements—Note 10—Debt” for more information on the Notes.
Our stock repurchases are discretionary and, even if effected, they may not achieve the desired objectives.
We have from time to time repurchased shares of our common stock under stock repurchase programs approved by our Board of Directors or in connection with our issuances of convertible senior notes. On October 30, 2024, our Board of Directors approved a stock repurchase program authorizing us to repurchase up to $1 billion of our common stock. On December 16, 2025 our Board of Directors approved a new stock purchase program authorizing us to repurchase up to an additional $750 million of our common stock. Approximately $828 million remained available for repurchases under the approved programs as of March 31, 2026. The market price of our common stock has at times declined below the prices at which we repurchased shares, and there can be no assurance that any repurchases pursuant to our stock repurchase program will enhance stockholder value. In addition, there is no guarantee that our stock repurchases in the past or in the future will be able to successfully mitigate the dilutive effect of recent and future employee stock option exercises and restricted stock vesting or of any issuance of common stock in connection with the conversion of Notes. The amounts and timing of the repurchases may also be influenced by our liquidity profile, general market conditions, regulatory developments, and the prevailing price and trading volumes of our common stock. If our financial condition deteriorates or we decide to use our cash for other purposes, we may suspend repurchase activity at any time.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:
•any derivative action or proceeding brought on our behalf;
•any action asserting a breach of fiduciary duty;
•any action asserting a claim against us arising pursuant to the Delaware General Corporation Law; and
•any action asserting a claim against us that is governed by the internal affairs doctrine.
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This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act of 1933, as amended (the “Securities Act”) creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. While the Delaware courts have determined that choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than that designated in our exclusive forum provision. In such an instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provision of our certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees and may discourage these types of lawsuits. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
Our business could be negatively affected as a result of actions of activist stockholders.
The actions of activist stockholders could adversely affect our business. Specifically, responding to common actions of an activist stockholder, such as requests for special meetings, potential nominations of candidates for election to our Board of Directors, requests to pursue a strategic combination, or other transaction or other special requests, could disrupt our operations, be costly and time-consuming, or divert the attention of our management and employees. In addition, perceived uncertainties as to our future direction in relation to the actions of an activist stockholder may result in the loss of potential business opportunities or the perception that we are unstable as a company, which may make it more difficult to attract and retain qualified employees. Our ability to continue to commit to our mission, guiding principles, and culture may also be questioned, which could impact our ability to attract and retain buyers and sellers. Actions of an activist stockholder may also cause fluctuations in our stock price based on speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, could limit attempts to make changes in our management and could depress the price of our common stock.
Provisions in our certificate of incorporation and bylaws and the Delaware General Corporation Law may have the effect of delaying or preventing a change in control of our company or limiting changes in our management. Among other things, these provisions:
•provide for a classified board of directors so that not all members of our Board of Directors are elected at one time;
•permit our Board of Directors to establish the number of directors and fill any vacancies and newly created directorships;
•provide that directors may only be removed for cause;
•authorize the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan;
•eliminate the ability of our stockholders to call special meetings of stockholders;
•prohibit stockholder action by written consent, which means all stockholder actions must be taken at a meeting of our stockholders;
•provide that our Board of Directors is expressly authorized to amend or repeal any provision of our bylaws; and
•require advance notice for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
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These provisions may delay or prevent attempts by our stockholders to replace members of our management by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management. In addition, Section 203 of the Delaware General Corporation Law may delay or prevent a change in control of our company by imposing certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock. Anti-takeover provisions could depress the price of our common stock by acting to delay or prevent a change in control of our company.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities.
The table below provides information with respect to repurchases of shares of our common stock during the three months ended March 31, 2026 (in thousands, except per share amounts):
| Period | Total Number of Shares Purchased | Average Price Paid per Share(1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)(3) | Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs(2) | ||||||||||
| January 1 - 31 | 793 | $ | 60.06 | 793 | $ | 925,556 | ||||||||
| February 1 - 28 | 880 | 51.41 | 880 | 880,318 | ||||||||||
| March 1 - 31 | 995 | 52.64 | 995 | 827,938 | ||||||||||
| Total | 2,668 | 2,668 | ||||||||||||
(1)Average price paid per share excludes broker commissions and excise tax.
(2)In October 2024, our Board of Directors approved a stock repurchase program that authorizes repurchases of up to $1 billion of our common stock. The table also reflects the authorization, in December 2025, of a new stock repurchase program that authorizes repurchases of up to an additional $750 million of our common stock. These stock repurchase programs have no expiration date.
(3)These shares were purchased pursuant to a 10b5-1 trading plan. Share repurchases may be executed through open market repurchases, privately negotiated transactions or by other means, including repurchase plans designed to comply with Rule 10b5-1 and other derivative, accelerated share repurchase and other structured transactions. The timing and exact amount of any common stock repurchases will depend on various factors, including market conditions, common stock trading price, our liquidity and financial performance and legal considerations.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
(c) Adoption or Termination
On February 20, 2026 , Fred Wilson , our Lead Independent Director , adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act under which an aggregate of up to 100,000 shares of Etsy common stock held by Mr. Wilson may be sold. The plan terminates on the earlier of the date all the shares covered by the plan are sold and May 19, 2028 .
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Item 6. Exhibits.
| Exhibit Number | Incorporated by Reference | Filed Herewith | ||||||||||||||||||||||||||||||||||||||||||||||||
| Exhibit Description | Form | File No. | Exhibit | Filing Date | ||||||||||||||||||||||||||||||||||||||||||||||
10.1 | Amended and Restated Compensation Program for Non-Employee Directors, effective February 4, 2026 | X | ||||||||||||||||||||||||||||||||||||||||||||||||
31.1 | Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended | X | ||||||||||||||||||||||||||||||||||||||||||||||||
31.2 | Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended | X | ||||||||||||||||||||||||||||||||||||||||||||||||
32.1† | Certification of Chief Executive Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350 | X | ||||||||||||||||||||||||||||||||||||||||||||||||
32.2† | Certification of Chief Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350 | X | ||||||||||||||||||||||||||||||||||||||||||||||||
| 101.INS | Inline XBRL Instance Document** | X | ||||||||||||||||||||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Schema Linkbase Document | X | ||||||||||||||||||||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Definition Linkbase Document | X | ||||||||||||||||||||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Labels Linkbase Document | X | ||||||||||||||||||||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File - the cover page interactive data is embedded within the Inline XBRL document*** | X | ||||||||||||||||||||||||||||||||||||||||||||||||
† These certifications are not deemed to be filed with the SEC and are not to be incorporated by reference into any filing of Etsy, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
** The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
*** The cover page interactive data file is embedded within the inline XBRL document and included in Exhibit 101.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ETSY, INC. | |||||
| Date: April 29, 2026 | /s/ Merilee Buckley | ||||
| Merilee Buckley Chief Accounting Officer | |||||
| (Principal Accounting Officer) | |||||
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