Etsy (NYSE:ETSY) reported third-quarter 2026 results that showed accelerating marketplace growth, higher revenue and improved profitability, as the company emphasized gains from personalization, search improvements and marketing efficiency.
Marketplace gross merchandise sales, or GMS, rose 8.8% year over year to $2.6 billion. Revenue increased 10.9% to $692 million, while adjusted EBITDA rose 14.6% to $210 million, representing a 30.4% margin. Etsy said its results are presented on a continuing-operations basis following the July 30 sale of Depop.
CEO Kruti Patel Goyal said the company had recorded three consecutive quarters of accelerating growth in 2026 and had returned to active-buyer growth for the first time in two years. She said Etsy’s efforts to improve marketplace health, make its inventory more relevant and highlight the people behind sellers’ products were contributing to stronger operating trends.
Buyer and Seller Trends Improve
Active buyers increased 1% year over year to about 88 million on a trailing 12-month basis. Sequentially, Etsy added approximately 540,000 active buyers from the second quarter. Gross buyer additions grew 6.2% year over year, supported by new-buyer acquisition and reactivation, while retention among existing buyers also began to improve.
GMS per active buyer rose 3.9% year over year on a trailing 12-month basis, its third consecutive quarter of growth. However, purchase frequency remained modestly lower than a year earlier.
Chief Financial Officer Lanny Baker said the company was seeing early signs of stronger engagement, including increased responsiveness to recommendations, more favoriting of products and sellers, greater app usage, cross-category shopping and repeat visits. He said new and reactivated buyers typically purchase less frequently than established shoppers, while Etsy’s increased emphasis on differentiated and higher-priced merchandise can lead customers to be more selective even as they spend more on the platform.
Patel Goyal said Etsy views frequency as a long-term measure and is currently focused on building engagement and improving buyers’ end-to-end experience. She added that habitual and repeat buyers increased sequentially for a second consecutive quarter.
On the seller side, Etsy said its active seller base grew at its fastest rate in two years, while retention improved. Patel Goyal said the company is investing in tools intended to help sellers manage listings, customize products, access financial insights and operate their shops more efficiently. Its AI-powered seller assistant remains in beta and provides shop-specific insights and suggested actions.
Personalization and Search Drive Growth Efforts
Etsy said personalization improvements alone contributed an estimated 2 percentage points to its annualized year-over-year GMS growth rate by the third quarter. The company has used artificial intelligence and machine learning to develop richer buyer profiles and better match shoppers with relevant inventory.
Baker said Etsy is also placing greater weight on quality signals in search and recommendations, managing the prominence of physical versus digital goods according to inferred buyer intent, and focusing on special occasions where customers may seek more differentiated merchandise.
The company did not provide a breakdown of digital-item GMS or advertising revenue. Baker said that digital items can carry lower prices than physical goods and that better identification of a buyer’s intent has helped Etsy adjust product presentation in search results. He said this shift has also supported average order value.
Patel Goyal said Etsy initially tested deeper personalization in its app, where signed-in users provide more available data, and then expanded those learnings to web-based shopping. She said there were no significant technical obstacles to extending personalization beyond the app.
About 30% of Etsy’s GMS comes from gifting, according to Baker. The company’s Gifting Assistant, its first on-site shopping-agent application, is designed to help users narrow broad or complex gift-related searches through a conversational interface. Etsy plans to expand both its use cases and access points across the shopping experience.
Marketing Efficiency and Financial Position
Marketplace revenue increased 9.1% and services revenue rose 15%. Take rate was 26.2%, up 50 basis points year over year, primarily reflecting enhancements to Etsy Ads and, to a lesser extent, Offsite Ads.
Baker said changes to Etsy Ads’ matching, ranking and budget-pacing tools improved ad relevance, click-through rates and conversions. Marketing spending increased from a year earlier in the third quarter, but GMS attributed to marketing grew faster than spending, resulting in improved marketing return on investment, he said.
The company said it has broadened its marketing channels, including increased efforts on TikTok and YouTube to reach younger audiences. Baker said roughly half of Etsy’s TikTok impressions reached consumers between ages 18 and 29, an audience Etsy was not meaningfully targeting six months earlier. Social-media marketing has also supported buyer reactivation, he said.
As of Sept. 30, Etsy held $2.5 billion in cash equivalents and short- and long-term investments, including proceeds from the Depop sale. On Oct. 1, the company paid $649 million in cash to settle the remaining principal on its 2019 Notes, reducing total debt.
Cash from operating activities of continuing operations was $243 million during the quarter, and free cash flow represented 112% of adjusted EBITDA. Etsy repurchased approximately $395 million of stock during the quarter, reducing its share count by about 5.2 million shares. The company had $2.2 billion remaining under its repurchase authorization and said it expects to continue repurchasing shares at an accelerated rate.
Fourth-Quarter Outlook and Leadership Changes
For the fourth quarter, Etsy expects marketplace GMS of $3.46 billion to $3.52 billion, representing year-over-year growth of about 5% to 7%. It expects a take rate of about 25.6% and an adjusted EBITDA margin of approximately 30%.
For the full year, Etsy raised its outlook to approximately 7% GMS growth, a take rate of about 25.8% and an adjusted EBITDA margin of roughly 30%. Baker said foreign exchange is expected to be a modest growth headwind in the fourth quarter and year-over-year comparisons will become less favorable.
The company also said Baker will leave Etsy in early March. Etsy has hired an executive recruiting firm to identify a successor CFO based in Brooklyn. Patel Goyal also recognized Vice President of Investor Relations Deb Wasser, who is retiring after her final earnings call, and said Sarah Marx will lead investor relations.
Regarding recently announced policy changes around AI-generated product listings, Patel Goyal said Etsy will require sellers to include at least one unaltered photo of an item with a real background and will no longer allow AI-generated functional guides such as patterns and recipes. Baker said the company does not expect a material near-term GMS impact from the policy changes.
About Etsy (NYSE:ETSY)
Etsy, Inc operates an online marketplace that connects independent sellers with consumers seeking unique and creative goods. Its marketplace features products such as handmade items, personalized gifts, vintage merchandise, home décor, jewelry, clothing, craft supplies and other goods made, designed, selected or sourced by individual sellers and small businesses.
The company provides tools and services that support marketplace activity, including seller storefronts, search and discovery features, payment processing, advertising, shipping assistance and customer support.
