Etsy Inc. Reports Q1 2026 Financial Results: Navigating Changes Amid Growth

Etsy's revenue saw an increase in the first quarter of 2026, primarily driven by higher service revenues. Notably, advertising revenue rose by $14.4 million due to increased average prices per click on Etsy Ads. Marketplace revenue also increased, with a rise of $11.5 million in Etsy payments revenue and $9.7 million in Etsy transaction fee revenue, both linked to higher gross merchandise sales (GMS).

Despite an overall increase in revenue, GMS from continuing operations decreased by $99.6 million to $2.46 billion compared to the same period in 2025. This decline was primarily due to the $228.4 million reduction from the sale of Reverb, Etsy's musical instrument marketplace, although it was partially offset by a $128.7 million increase in GMS from the Etsy marketplace. Year-over-year growth for the Etsy marketplace, excluding Reverb, stood at an encouraging 5.5%.

Etsy's active buyer count saw a decline of 2.1% year-over-year, totaling 86.6 million. However, GMS per active buyer increased by 1.5% to $122, indicating that while the base of active buyers has shrunk slightly, those remaining are spending more.

The cost of revenue faced an upward trend, attributed to higher refund and payment processing fees, along with increased cloud hosting expenses. This was partially offset by the sale of Reverb. Marketing expenses increased due to strategic shifts and higher stock-based comp, particularly following an executive departure in the previous year.

Etsy reported losses from discontinued operations of $35.0 million for the three months ended March 31, 2026, compared to $17.0 million in the same period last year. This reflects the operating results from Depop, Etsy's fashion resale marketplace, which is slated for acquisition by eBay Inc. for $1.2 billion.

As of March 31, 2026, Etsy's financial position remains robust. The company reported cash and cash equivalents and short-term investments totaling $1.4 billion, alongside $150.6 million in long-term investments. The company maintains access to a $400 million senior secured revolving credit facility, providing a safety net for future operations.

Etsy recorded positive operating cash flows of $102.5 million for the quarter, despite a net change in cash of -$100.8 million, reflecting strategic investments and share repurchases.

Etsy's Q1 2026 results reflect a company at the crossroads of growth and strategic transition. While challenges such as declining active buyers and losses from discontinued operations persist, the firm is focusing on enhancing its marketplace and leveraging its strong cash position to invest in future opportunities. The impending sale of Depop is anticipated to further strengthen Etsy's balance sheet, positioning it for growth in a competitive e-commerce landscape.

Etsy continues to emphasize its commitment to connecting creative entrepreneurs with a global audience, highlighting its role as a key player in the evolution of online marketplaces. As the company navigates these changes, stakeholders will be keenly watching its strategic moves and operational performance in the coming quarters.