Etsy Surges As Active Buyers Rebound for First Time in Two Years, AI Search Sparks Turnaround

Etsy Inc. (NYSE:ETSY) stock gained on Wednesday morning following strong third-quarter results that surpassed Wall Street expectations on both the top and bottom lines. Here’s what investors need to know.

Marketplace Momentum and Operational Streamlining

The e-commerce platform reported quarterly earnings of $1.00 per share, beating the analyst consensus estimate of 76 cents. Total sales for the period reached $692.47 million, rising 10.9% year-over-year, topping the $667.23 million estimate.

Marketplace revenue rose 9.1% Y/Y to $468.14 million. Services revenue grew 15.0% Y/Y to $224.33 million.

The Etsy marketplace saw gross merchandise sales (GMS) rise 8.8% Y/Y to $2.6 billion.

Active buyers grew year over year for the first time in two years, rising 1.0% to about 88 million on a trailing-12-month basis.

The company also added roughly 540,000 active buyers from the second quarter of 2026, marking faster sequential growth.

GMS per buyer increased 3.9% Y/Y on a trailing-12-month basis, and accelerated sequentially.

The company generated $242.85 million in operating cash flow for the quarter, up from $226.07 million Y/Y.

Etsy held $2.5 billion in cash, cash equivalents and short- and long-term investments as of Sept. 30.

Executives Highlight Growth Drivers, AI Strategy and Outlook

CEO Kruti Patel Goyal said the marketplace has returned to growth as personalization, better search, stronger marketing and improved buyer engagement increasingly contribute to performance. Active buyers grew year over year for the first time in two years, while GMS per active buyer also accelerated.

Goyal said Etsy’s personalization efforts contributed about 2 percentage points to annualized year-over-year GMS growth by the third quarter. The company is also using AI to improve product discovery, assist sellers and make marketing more relevant to individual shoppers.

CFO Lanny Baker said internal initiatives now account for a larger share of growth as earlier benefits from inflation, tariffs and favorable currency movements fade. He highlighted better search relevance, higher-quality listings, personalization and improved marketing efficiency as key internal drivers.

Management also sees gifting as an important opportunity, with roughly 30% of GMS tied to purchases made for others. Etsy plans to broaden its AI-powered shopping assistant beyond gifting as it learns how conversational shopping can help buyers narrow complex searches.

Etsy is also working with AI discovery platforms so seller products can appear wherever shoppers begin their buying journey. Goyal said those partnerships remain early, while Etsy continues to prioritize its own on-site AI and personalization capabilities.

The company completed the sale of Depop on July 30, with proceeds contributing to its quarter-end cash balance. Etsy subsequently used cash to repay $649 million of outstanding debt and continued accelerated share repurchases.

Management still sees challenges from modestly lower purchase frequency, tougher prior-year comparisons, currency headwinds and some weakness in computer-related demand, while emphasizing improving engagement, retention and buyer spending as longer-term growth indicators.

CFO Change

CFO Lanny Baker will leave the company on March 1, 2027, to pursue opportunities outside Etsy.

Etsy expects Baker to remain as an adviser through July 1, 2027, to support the transition. The company has hired an executive recruiting firm to find a successor, who it expects will be based in New York.

Outlook

Etsy expects fourth-quarter GMS of $3.46 billion to $3.52 billion, implying growth of 5% to 7% Y/Y.

It expects fiscal 2026 GMS growth of almost 7% Y/Y.

ETSY Shares Climb Wednesday Morning

ETSY Stock Price Activity: Etsy shares are trading higher by 3.64% at $90.85 at the time of publication on Wednesday, according to Benzinga Pro data.

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