ETSY

Business Context and Reporting Period

Company: Etsy, Inc.
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Overview: Etsy operates two-sided online marketplaces connecting creative entrepreneurs with buyers. The primary marketplace, Etsy, focuses on unique, creative goods. The company also operates Depop, a fashion resale marketplace. In 2025, Etsy completed the sale of its musical instrument marketplace, Reverb, on June 2, 2025. On February 15, 2026, Etsy entered into an agreement to sell Depop to eBay Inc. for approximately $1.2 billion in cash, expected to close in Q2 2026.

Key Financial Metrics

Note: GMS includes Etsy ($10.46B), Depop ($1.07B), and Reverb ($0.38B) for 2025. Revenue take rate increased to 24.2% from 22.3%.

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 2.7% year-over-year, driven primarily by an 11.3% increase in Services revenue (on-site advertising and shipping labels), which offset a 0.7% decline in Marketplace revenue.
• Profitability Decline: Net income decreased 46.3% to $163.0 million. This decline was significantly impacted by a $101.7 million non-cash goodwill impairment charge related to the Reverb reporting unit and a $40.4 million foreign exchange loss.
• Divestitures: The sale of Reverb in June 2025 resulted in a $5.1 million loss on sale and the removal of Reverb's GMS and revenue from the consolidated results post-closing.
• Capital Allocation: The company repurchased 14.4 million shares of common stock in 2025 at a total cost of $777.1 million. In December 2025, the Board approved a new $750 million stock repurchase program.
• Debt Issuance: In June 2025, Etsy issued $700 million of 1.00% Convertible Senior Notes due 2030.

Guidance, Outlook, and Risks

Management Commentary & Strategy:

• Leadership Transition: Kruti Patel Goyal was appointed CEO effective January 1, 2026, succeeding Josh Silverman, who remains Executive Chair through December 2026.
• Strategic Initiatives: Management is focused on four initiatives: showing up where shoppers discover (social/AI), matching people with content via machine learning, strengthening loyalty (Etsy Insider beta), and amplifying human connection.
• Depop Sale: Proceeds from the pending $1.2 billion sale of Depop to eBay are intended for general corporate purposes, share repurchases, and investment in the core Etsy marketplace.

Risks and Contingencies:

• Depop Transaction Risk: The sale of Depop is subject to regulatory approval and closing conditions; failure to close could result in disruption and potential termination fees.
• Macroeconomic Pressure: Ongoing pressure on consumer discretionary spending and evolving buyer behavior contributed to a 4% decline in Etsy marketplace GMS.
• Regulatory & Trade: Risks include evolving tariffs, the elimination of de minimis exemptions (impacting cross-border trade), and complex global privacy/AI regulations.
• Convertible Debt: The company holds significant convertible senior notes maturing between 2026 and 2030, creating potential dilution or cash repayment obligations.

Investor Verification Checklist

• Depop Sale Closing: Monitor regulatory approvals and the expected Q2 2026 closing date for the $1.2 billion eBay transaction.
• Reverb Impairment Impact: Verify the non-recurring nature of the $101.7 million goodwill impairment charge and its effect on future earnings guidance.
• Buyer Retention Trends: Assess the trajectory of active buyers (down 3% YoY) and the effectiveness of reactivation strategies (up 4% YoY) in stabilizing GMS.
• Debt Conversion Triggers: Review stock price performance relative to conversion prices of the 2019, 2020, 2021, and 2025 Convertible Notes to gauge dilution risk.
• Foreign Exchange Exposure: Evaluate the impact of currency fluctuations, which resulted in a $40.4 million loss in 2025, on future margins.