Why Etsy’s Q1 Beat Was Not Nearly Good Enough
Etsy shares tumbled Thursday after the e-commerce company released its first-quarter financial results late Wednesday.
Coverage ended
7 updates · Last at 10:43am ET
Live: Etsy (Nasdaq: ETSY) Beats Earnings & Shares Are Rising
Live Updates
Newest firstEtsy Shares Up 4%
Etsy opened at more than $66 per share but is currently tarding at a little under $63, which is a 4% gain. The company beat on earnings last quarter, but marginal guidance for next is limiting gains.
GDP Lift
GDP figures just came out which show the U.S. economy grew at 3% in Q2, higher than expectations. The news has pushed Etsy up higher, with shares now trading up 6.2%
More Details on Why Etsy Missed on EPS
Here’s what Etsy had to say about its earnings:
“Net income was $28.8 million, down $24.2 million year-over-year, reflecting a non-cash foreign exchange loss of $25.4 million as compared to a non-cash foreign exchange gain of $4.9 million in the second quarter of 2024. Consolidated net income margin was approximately 4.3% and diluted net income per share was $0.25.”
Without the foreign exchange loss, shares would have been roughly in line with GAAP EPS expectations.
The company beat on Gross Merchandise Sales, Take Rate, and Revenue last quarter.
We were a bit surprised at the outsized reaction when earnings were released with next quarter’s guidance being less bullish, but shares have retreated a bit since their initial jump. As of 7:25 a.m., Etsy shares are up about 5%.
Third Quarter Guidance
Etsy’s third quarter guidance looks like:
- Gross Merchandise Sales: $2.6 billion to $2.7 billion
- Take Rate: ~24.5%
- Adjusted EBITDA Margin: ~25%
That’s a drop from this quarter’s $2.8 billion in GMS and a slight dip from adjusted EBITDA margins of 25.1%.
Etsy Earnings Summary
Etsy, Inc. reported its Q2 2025 financial results, showing a revenue increase of 3.8% year-over-year to $672.7 million, driven by on-site ads and payment services. However, net income decreased to $28.8 million due to a non-cash foreign exchange loss.
The company completed the sale of Reverb, contributing $17.6 million to revenue.
Gross Merchandise Sales (GMS) were $2.8 billion, down 4.8% year-over-year.
Etsy’s CEO highlighted progress in key investment areas, particularly in enhancing the shopping experience through AI technologies. The company raised $700 million through convertible notes and repurchased $335 million in stock.
Etsy ended the quarter with $1.5 billion in cash and investments. The company aims to reignite GMS growth through strategic initiatives and expects continued strong free cash flow generation.
Etsy Shares are Soaring
Etsy earnings are out and the stock has immediately jumped more than 8%. We’ll post more details momentarily.
Wall Street Expectations for Q2
Once Etsy’s earnings hit the wires, here’s what Wall Street expects the company to deliver:
Q2 Wall Street Consensus
- Revenue: $647.6 million
- Adjusted EPS: $1.09
- Free Cash Flow: $165.6 million
For comparison, last year the company reported sales of $647.8 million in the first quarter so Wall Street is expecting revenue to be almost exactly flat.
That’s roughly in line with full-year growth rates. Wall Street expects Etsy to deliver revenue of $2.78 billion in 2025, which would be a slight decline from last year.
Once again, we expect Etsy earnings to hit the newswires around 7 a.m. ET.
Live coverage has ended. The full story is below.
Full Coverage
The story so farEtsy (NYSE: ETSY | ETSY Price Prediction) is expected to report its second-quarter earnings at about 7 a.m. ET this morning. The company has had a rocky 2025, but its shares are up 14% year-to-date after falling 49% across the past five years.
Will Etsy deliver strong enough earnings to sustain a rally that could last throughout 2025? We’ll be updating this live earnings blog with news & analysis after Etsy’s earnings hit.
Let’s look back at what the company delivered last quarter before turning our attention to what Wall Street expects in the second quarter.
First Quarter Earnings Highlights
Back in April, Etsy eported its Q1 2025 financial results, highlighting a slight increase in revenue to $651.2 million, up 0.8% from the same period last year, driven by growth in on-site advertising and the impact of a seller set-up fee.
However, the company faced a net loss of $52.1 million, primarily due to a $101.7 million impairment charge related to Reverb’s goodwill.
Gross merchandise sales (GMS) declined by 6.5% year-over-year, with active buyers decreasing by 3.4% to 88.5 million. Despite these challenges, Etsy’s adjusted EBITDA was $171.1 million, reflecting a margin of 26.3%.
CEO Josh Silverman expressed optimism about the company’s strategic initiatives, particularly in enhancing the app experience through AI and machine learning.
The company also announced plans to sell Reverb, expecting the transaction to close in the coming months. Etsy ended the quarter with $997.2 million in cash and equivalents, including investments, and repurchased approximately $189 million worth of its common stock.
Key CEO Quotes from Last Quarter
“Etsy’s first quarter 2025 financial results were aligned with our expectations, with solid adjusted EBITDA performance despite pressure on the top line” – Etsy CEO Josh Silverman
“We’re excited to see green shoots, particularly in our App metrics, indicating that our work to build deeper connections with buyers and encourage more frequent visits is taking hold.” – Etsy CEO Josh Silverman
“By leveraging the power of artificial intelligence and machine learning, we’re creating a more inspiring and engaging app experience that provides us with richer insights to personalize Etsy in meaningful ways for each buyer.” – Etsy CEO Josh Silverman
Contact [email protected] for any questions or corrections.
Eric Bleeker
Eric Bleeker has been investing for more than 20 years. He began his career working at Microsoft before joining Motley Fool, one of the largest publishers of financial research. In his 15 years at Motley Fool Eric served as the General Manager for Fool.com and led coverage in the Technology & Telecom sector. In addition, he was a featured columnist and has hosted dozens of investing seminars attended by more than a million total investors. Eric has more than 1,000 financial bylines to his name and has been featured in The Wall Street Journal, CNBC, Fox Business, and many other leading publications. He is currently focused on artificial intelligence investing and is a CFA Charterholoder.
