stockrowWhat it does
Etsy operates an online marketplace where independent sellers offer creative goods to buyers around the world. It was founded in 2005, is headquartered in Brooklyn and is led by Chief Executive Officer Kruti Patel Goyal.
The marketplace brings together sellers ranging from hobbyists to professional merchants and buyers looking for items such as handcrafted goods, vintage pieces and personalized products. Its main categories include home and living, jewelry and personal accessories, apparel, craft supplies, paper and party supplies, and toys and games. Sellers make, curate, source or design the items; Etsy provides the platform on which they list and sell them.
Etsy does not hold physical inventory. Instead, it builds and maintains the technology that helps buyers discover listings, pay for purchases and interact with sellers. It also provides sellers with tools for managing their shops and promoting their products. Search, recommendations, customer support and marketplace policies are part of how Etsy operates the platform.
Etsy also owned Depop, a fashion resale marketplace, during 2025. It completed the sale of Depop to eBay on July 30, 2026. Etsy’s 2025 consolidated figures included Depop and, until its sale, the Reverb musical instrument marketplace; later continuing-operations figures have a different scope.
How it makes money
Etsy earns revenue primarily from fees charged to sellers. Marketplace revenue includes transaction fees, payment-processing fees and listing fees. Transaction fees include fees associated with offsite advertising. Services revenue comes primarily from optional products, including on-site advertising and shipping labels.
The business does not need to buy goods for resale to earn these fees. Its revenue depends instead on activity across the marketplace and sellers’ use of its services. Sellers can pay for advertising that places their listings within Etsy, while Etsy also markets listings away from its own site. Advertising revenue increased in 2025, largely because the average price per click on Etsy Ads rose.
In FY2025, marketplace revenue was $2.0 billion and services revenue was $876.3 million. In Q3 2026, total revenue was $692 million. The annual figures included businesses that Etsy subsequently sold, so their scope differs from the later quarter.
Gross merchandise sales, or GMS, measures the value of items sold through the marketplaces, excluding shipping fees and net of refunds. It is not Etsy’s revenue. Etsy marketplace GMS was $2.6 billion in Q3 2026, and the revenue take rate was 26.2%. The take rate is revenue divided by GMS; it reflects the combination of marketplace fees and services, rather than a single fee paid on every order.
In 2025, Etsy generated $693.4 million of cash from operating activities and $638.8 million in consolidated free cash flow. Free cash flow is a supplemental measure that deducts certain investment spending from operating cash flow.
| Product or service | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| Marketplace revenue | $2.0 billion | 69.6% | −0.67% |
| Services revenue | $876.3 million | 30.4% | 11.3% |
Customers and how it sells
Etsy serves two groups: independent sellers looking for customers and buyers looking for creative, vintage or personalized goods. As of December 31, 2025, the Etsy marketplace had 86.5 million active buyers and 5.6 million active sellers. An active buyer is someone who made at least one purchase in the preceding twelve months; an active seller had a charge or sale in that period.
In 2025, 74% of Etsy marketplace GMS came from U.S. buyers and 26% came from buyers outside of the United States. Separately, the United States accounted for 50.8% of Etsy’s FY2025 revenue and the United Kingdom for 10.3%. Buyer location by GMS and revenue by geography are different measures.
Buyers use Etsy through its website and app. In 2025, 45% of Etsy marketplace GMS was transacted through the app. Shopping occasions include gifts, holidays, weddings and other personal milestones, as well as purchases for a specific item or need. Custom or made-to-order merchandise comprised about 30% of total Etsy marketplace GMS in 2025.
Etsy’s seller community includes small businesses and individual creators. In its 2024 Seller Census, about half of surveyed sellers sold exclusively on Etsy, while others also used additional sales channels.
| Region | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| United States | $1.5 billion | 50.8% | −0.12% |
| All Other | $1.1 billion | 38.9% | 9.97% |
| United Kingdom | $296.2 million | 10.3% | −7.71% |
Suppliers and costs
Etsy’s sellers provide the goods listed on its marketplace; Etsy does not manufacture or hold those goods as inventory. Sellers source their own supplies, and Etsy’s 2024 Seller Census found that 90% source supplies domestically.
Etsy’s cost of revenue includes interchange and other payment-processing fees, cloud hosting and bandwidth, chargebacks, and refunds that it cannot collect from sellers or otherwise covers. It also includes depreciation and amortization and third-party customer support services. Cost of refunds and cloud-related hosting and bandwidth costs increased in 2025.
Marketing costs include paid digital advertising aimed at acquiring and retargeting buyers, as well as television, digital video and brand marketing. Etsy also uses its own channels, including personalized emails and push notifications, to reach customers. Product development costs include employee compensation for people building and maintaining the platform; some website and app development costs are capitalized. General and administrative costs include facilities, professional services, taxes and other corporate expenses.
Etsy had 2,375 employees worldwide on December 31, 2025, including approximately 475 Depop employees. Its costs and revenue generally rise in the fourth-quarter holiday shopping season.
- Revenue$2.9B
- Cost of revenue−$817.8M
- Research and development−$450.2M
- Selling, general and administrative−$1.2B
- Other operating costs−$101.7M
- Operating income$266.2M
Competitive position
Etsy competes for sellers as well as buyers. Sellers can list goods with online retailers, sell through social networks, craft fairs and local markets, or use software and services to sell from their own websites. Buyers can choose other online marketplaces, retail chains, local stores and resale venues.
Amazon is named as a participant in the competition for product-listing advertising. Etsy said Amazon’s withdrawal changed the competitive dynamic in those advertising placements. Competition for media placements can affect the cost Etsy pays to reach shoppers.
Etsy seeks to distinguish itself through its seller community, the goods listed on its marketplace, search and discovery, its brand, and the experience of buying from individual sellers. It also competes on fees, seller tools, customer service, payment, shipping and the effectiveness of its app.
Our reading: The breadth of Etsy’s seller and buyer communities provides a meaningful marketplace advantage because each group has a reason to participate when the other is active. Our reading: Its creative and personalized listings provide another source of differentiation, but that advantage depends on buyers trusting what they see and sellers continuing to offer goods there. Our reading: The brand and discovery tools support those advantages, although shoppers and sellers have alternatives.
| Competitor | Where they compete | Threat (our reading) |
|---|---|---|
| Amazon | Competition for product-listing advertising placements | Medium |
Growth opportunities
Etsy’s growth plans focus on attracting and reactivating buyers, improving retention and giving existing customers more reasons to shop. The company estimates an approximately $600 billion online market opportunity across relevant retail categories in its core geographies, and an approximately $2 trillion opportunity when offline sales are included. These are Etsy’s estimates, based on its own calculations and assumptions.
The company is investing in search and recommendations that use machine learning to understand buyer intent and listing attributes. It is also testing loyalty features and making seller stories, reviews and details about how items are made more visible. Its AI-powered seller assistant is in beta and provides personalized shop insights and suggested actions.
Etsy is working to reach shoppers through social, streaming and AI-enabled discovery channels. It has established partnerships intended to surface sellers’ items in AI-enabled shopping experiences. The company is also testing ways to reward buyers for shopping across categories and regions.
In Q3 2026, Etsy marketplace GMS grew 8.8% year-over-year. Active buyers increased 1% year-over-year to approximately 88 million on a trailing 12-month basis, while purchase frequency remained modestly down year-over-year. Etsy said personalization improvements contributed approximately 2 percentage points to its annualized year-over-year GMS growth rate by the third quarter.
- $2.3BFY2021
- $2.6BFY2022
- $2.7BFY2023
- $2.8BFY2024
- $2.9BFY2025
Structural risks
- Consumer demand and seasonality: Discretionary spending, inflation, interest rates, tariffs and changing shopping preferences can affect marketplace activity. Etsy’s sales and service use also increase during the fourth-quarter holiday season, making results seasonal.
- Buyer and seller retention: Results depend on Etsy’s ability to attract and retain both sides of its marketplace and convert visits into sales. Active buyers and habitual buyers declined in 2025, and purchase frequency remained modestly down year-over-year in Q3 2026.
- Trust and marketplace quality: Fraud, unsatisfactory customer service, sellers failing to fulfill orders, or inconsistent enforcement of marketplace policies can damage trust. Etsy is investing in tools to identify misleading or potentially fraudulent listings earlier.
- Technology and outside platforms: Outages, payment disruptions, security incidents and software defects can impair the marketplace. Changes by operating systems, social networks, search engines or advertising platforms can also limit functionality or increase costs.
- International and regulatory exposure: Etsy faces different and sometimes conflicting laws across jurisdictions, as well as exchange-rate movements, trade barriers, customs delays and shipping disruptions. Compliance can require changes to business practices and substantial management attention.
- Competition and AI: Etsy competes for buyers, sellers and advertising placements. Its use of AI also creates legal, regulatory, reputational and cost risks.
Bottom line
Our reading
Etsy is a fee-funded marketplace whose business depends on bringing independent sellers and buyers together, rather than owning the goods sold. [item1, item7]
Our reading: Its creative inventory and established community support its position, but sustaining that position depends on trust, discovery and repeat purchasing as both buyers and sellers have alternatives. [item1, item1a]
Our reading: Recent growth has improved, while softer purchase frequency and the changing scope after divestitures remain important context for assessing performance. [call_prepared, item7]