Etsy's Q1 Earnings Miss Estimates, Challenging Q2 View Raises Concerns

Etsy’s ETSY shares tumble 19.7% year to date, trailing both the Zacks Retail and Wholesale sector and the Zacks Internet-Commerce industry’s 3.6% and 7.1% decline, respectively.

The company reported first-quarter 2025 earnings of 46 cents per share, which missed the Zacks Consensus Estimate by 8% and decreased 4.2% year over year.

On the other hand, first-quarter 2025 revenues increased 0.8% year over year to $651.2 million. The figure also exceeded the Zacks Consensus Estimate by 1.33%. This growth was primarily driven by strong on-site advertising revenues from both Etsy and Depop, a full quarter impact of the seller set-up fee and continued benefit from payments expansion.

Under its stock repurchase program, Etsy repurchased an aggregate of approximately $189 million or 3.7 million shares of its common stock in the first quarter of 2025.

Etsy, Inc. Price, Consensus and EPS Surprise

Etsy, Inc. price-consensus-eps-surprise-chart | Etsy, Inc. Quote

ETSY has a mixed earnings surprise history. The company’s earnings beat the Zacks Consensus Estimate in one of the trailing four quarters and missed in the remaining three, the average negative surprise being 6.78%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

ETSY’s Top-Line Details

Marketplace revenues were $458.5 million (70.4% of total revenues), down 1.8% from the year-ago quarter’s level. This decline was caused by a decrease in Gross Merchandise Sales (“GMS”), partially offset by higher payments revenues from Etsy and Depop, as well as increased seller setup fees, which were raised to $29 for new U.S. sellers.

ETSY acquired 4.8 million new buyers and the total number of active buyers on its marketplace was 88.5 million, which decreased 3.4% year over year.

Services revenues were $192.7 million (29.6% of total revenues), up 7.7% on a year-over-year basis.

ETSY’s Active User Base and GMS Decrease Y/Y

Etsy’s active buyer base decreased 1.7% from the prior-year quarter’s figure to 94.8 million. The figure beat the consensus mark of 94.4 million.

The active seller base was 8.1 million, down 11.3% year over year. The figure also missed the consensus mark of 8.9 million.

ETSY witnessed solid momentum in buyer reactivation. Reactivated buyers were a record 6.5 million, up 2.1% year over year.

Consolidated GMS of $2.8 billion was down 6.5% on a reported basis and 5.7% on a currency-neutral basis from the prior-year quarter. The reported figure also missed the Zacks Consensus Estimate by 0.04%.

The Etsy marketplace’s GMS was $2.3 billion, down 8.9% year over year on a reported basis and 8.1% on a currency-neutral basis.

ETSY’s Operating Results

In the first quarter of 2025, total operating expenses were $481.4 million, up 23.2% from the prior-year quarter. As a percentage of revenues, the figure expanded to 73.9% from 60.5% in the year-ago quarter.

Marketing expenses down 1.5% year over year to $189 million. As a percentage of revenues, marketing expenses contracted to 70 basis points (bps) year over year to 29%.
Product development expenses increased 0.6% year over year to $110.5 million. As a percentage of revenues, product development expenses remain unchanged year over year at 17%.

General and administrative (G&A) expenses decreased 9.9% year over year to $80.2 million. As a percentage of revenues, G&A expenses decreased 150 bps to 12.3%.

Adjusted EBITDA increased 1.9% year over year to $171.1 million in the reported quarter. The adjusted EBITDA margin improved 30 bps on a year-over-year basis to 26.3%.

ETSY reported an operating loss of $22.3 million against an operating income of $68.1 million in the prior-year quarter.

ETSY’s Balance Sheet

As of March 31, 2025, cash and cash equivalents totaled $649.2 million, which decreased from $811.2 million as of Dec. 31, 2024.

Short-term investments were $218.5 million, down from $228.3 million in the previous quarter.

Long-term debt was $2.3 billion at the end of the first quarter, unchanged from the figure reported at the end of the prior quarter.

ETSY’s Q2 Guidance

For the second quarter of 2025, Etsy anticipates the take rate to be 23.3%. Consolidated GMS is expected to decline at a rate similar to or slightly better than the year-over-year decline reported in the first quarter of 2025.

The adjusted EBITDA margin is expected to be 25%.

ETSY’s Zacks Rank and Stocks to Consider

Currently, Etsy carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader sector are Alibaba BABA, Carvana CVNA and Canada Goose GOOS, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Alibaba is scheduled to report fourth-quarter fiscal 2025 results on May 15. Carvana is set to report first-quarter 2025 results on May 7, whereas Canada Goose is scheduled to report fourth-quarter fiscal 2025 results on May 15.

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This article originally published on Zacks Investment Research (zacks.com).

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