Etsy is showing early but definitive signs of a successful turnaround, according to newly appointed CEO Kruti Patel Goyal, a company veteran who started in the top job in January. Key growth factors have been AI-generated buyer profiles that are helping inspire discovery, deepen engagement and increase add-to-cart rates.
“What gives me confidence is not just what we’re seeing in our metrics, but what’s driving them,” Goyal told investors on the company’s Q1 earnings call Wednesday, April 29. “We have a clearer understanding of how Etsy works at its best. We’re rebuilding the marketplace based on that understanding, and we’re executing with greater focus and discipline than we have in the past.”
Gross merchandise sales (GMS) for the Etsy marketplace reached $2.5 billion during Q1, which ended March 31, representing a 5.5% increase year over year. This marks a 540 basis-point improvement compared to the GMS growth seen in the fourth quarter of 2025.
Revenue increased 7.6% to $631 million and the platform’s take rate — the commission Etsy earns on each transaction — expanded to 25.7%, up 180 basis points from the prior year, driven largely by improvements in Etsy Ads and Etsy Payments.
On the bottom line, net income was $105 million, while adjusted EBITDA reached $185 million, yielding an adjusted EBITDA margin of 29.3%.
Furthermore, active buyers returned to sequential growth for the first time in two years, reaching 86 million.
From Search Algorithms to Machine Learning
The positive momentum in Q1 stems from several coordinated product and marketing improvements. Etsy has historically relied on search algorithms that prioritized immediate conversion. Now, the company is leveraging machine learning to match shoppers with highly personalized, relevant inventory.
By utilizing AI-generated buyer profiles, Etsy is inspiring discovery across new shopping missions. This shift is already driving deeper engagement and increasing add-to-cart rates.
Related: Etsy Head of Global Merchandising Mary Andrews on Merchandising a Marketplace
On the seller side, Etsy is reducing friction by rolling out AI-powered listing tools. These tools automate the historically manual process of managing shops, allowing sellers to spend less time on administration and more time creating unique products. The platform is also testing conversational AI agents designed to help buyers find the perfect gift while assisting sellers with operational insights.
Mobile App Growth Outstrips Non-App Increases
The Etsy mobile app continues to be a central pillar of the company’s growth strategy. App users historically visit more frequently, engage more deeply and convert at higher rates than desktop users.
“The work has been really shifting what we show you in the app home feed, from popular inventory to items that are really based on buyer interests that are going to inspire new discovery,” Goyal said. “We’re really excited about the work that we’ve done there and the evolution of that home feed, and it’s starting to show real traction in engagement.”
In the first quarter, mobile app GMS growth increased to 11.2% year over year, up from 6.6% in the previous quarter. The app now represents approximately 47% of total GMS, gaining roughly 240 basis points in share year over year.
Non-app GMS also showed improvement, growing 1.0% year over year compared to a 4.8% decline in the last quarter. This broad-based improvement is supported by targeted marketing efficiency, optimized search engine visibility and scaled-owned channels like email and push notifications.
Domestic vs. International Results
Despite concerns about global economic stability, consumer behavior on Etsy remained resilient across both domestic and international markets, Goyal said.
The U.S. domestic trade lane was particularly strong at the start of the year; U.S. buyer GMS grew on a trailing 12-month basis, showing resilience across various income cohorts.
Internationally, non-U.S. currency-neutral GMS grew for the first time since 2023, indicating that Etsy’s efforts to optimize the buyer experience and adapt to local market dynamics are beginning to yield positive results overseas.
Etsy’s Focus Going Forward
Looking to the rest of 2026, Etsy is reaffirming its commitment to a focused capital allocation strategy and disciplined operational growth.
The anticipated sale of Depop to Ebay for $1.2 billion will allow Etsy to focus entirely on its core $10 billion GMS marketplace. The company plans to use excess cash to accelerate share repurchases, having already bought back $145 million in stock during the first quarter.
Operationally, the focus remains on expanding discovery, reinforcing trust through better customer support and purchase protection, and leaning heavily into agentic commerce.
Looking ahead, Etsy execs expect sustained gains in gross merchandise sales and revenue throughout 2026, with continued focus on mobile app adoption, international expansion and operational efficiency following the divestiture of non-core assets.
