Etsy (ETSY)

Online marketplace Etsy (NYSE:ETSY) met Wall Street’s revenue expectations in Q4 CY2025, with sales up 3.5% year on year to $881.6 million. Its GAAP profit of $0.92 per share was 7.6% above analysts’ consensus estimates.

Company Overview

Founded by a struggling amateur furniture maker Robert Kalin and his two friends, Etsy (NYSE:ETSY) is one of the world’s largest online marketplaces, focusing on handmade or vintage items.

Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Etsy’s sales grew at a sluggish 4% compounded annual growth rate over the last three years. This fell short of our benchmark for the consumer internet sector and is a poor baseline for our analysis.

This quarter, Etsy grew its revenue by 3.5% year on year, and its $881.6 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 2.9% over the next 12 months, similar to its three-year rate. This projection is underwhelming and indicates its products and services will see some demand headwinds.

Buyer Growth

As an online marketplace, Etsy generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.

Etsy struggled with new customer acquisition over the last two years as its active buyers have declined by 1.4% annually to 93.54 million in the latest quarter. This performance isn't ideal because internet usage is secular, meaning there are typically unaddressed market opportunities. If Etsy wants to accelerate growth, it likely needs to enhance the appeal of its current offerings or innovate with new products.

In Q4, Etsy’s active buyers once again decreased by 1.92 million, a 2% drop since last year. The quarterly print isn’t too different from its two-year result, suggesting its new initiatives aren’t accelerating buyer growth just yet.

Revenue Per Buyer

Average revenue per buyer (ARPB) is a critical metric to track because it measures how much the company earns in transaction fees from each buyer. ARPB also gives us unique insights into a user’s average order size and Etsy’s take rate, or "cut", on each order.

Etsy’s ARPB growth has been mediocre over the last two years, averaging 3.9%. This raises questions about its platform’s health when paired with its declining active buyers. If Etsy wants to grow its buyers, it must either develop new features or lower its monetization of existing ones.

This quarter, Etsy’s ARPB clocked in at $9.43. It grew by 5.6% year on year, faster than its active buyers.

For online marketplaces like Etsy, gross profit tells us how much money the company gets to keep after covering the base cost of its products and services, which typically include payment processing, hosting, and bandwidth fees in addition to the costs necessary to onboard buyers and sellers, such as identity verification.

Etsy has robust unit economics, an output of its asset-lite business model and pricing power. Its margin is better than the broader consumer internet industry and enables the company to fund large investments in new products and marketing during periods of rapid growth to achieve higher profits in the future. As you can see below, it averaged an excellent 72% gross margin over the last two years. That means Etsy only paid its providers $27.98 for every $100 in revenue.

This quarter, Etsy’s gross profit margin was 73.1% , marking a 1.4 percentage point decrease from 74.5% in the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs have been stable and it isn’t under pressure to lower prices.

Consumer internet businesses like Etsy grow from a combination of product virality, paid advertisement, and incentives (unlike enterprise software products, which are often sold by dedicated sales teams).

Etsy does a decent job acquiring new users, spending 44% of its gross profit on sales and marketing expenses over the last year. This decent efficiency indicates relatively solid competitive positioning, giving Etsy the freedom to invest its resources into new growth initiatives.

Etsy has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer internet business, boasting an average EBITDA margin of 26.6%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Etsy’s EBITDA margin decreased by 2.5 percentage points over the last few years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Etsy generated an EBITDA margin profit margin of 25.2%, down 4.2 percentage points year on year. Since Etsy’s EBITDA margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Etsy’s full-year EPS flipped from negative to positive over the last three years. This is encouraging and shows it’s at a critical moment in its life.

In Q4, Etsy reported EPS of $0.92, down from $1.03 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 7.6%. Over the next 12 months, Wall Street expects Etsy’s full-year EPS of $1.29 to grow 98.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Etsy has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the consumer internet sector, averaging 24.4% over the last two years.

Taking a step back, we can see that Etsy’s margin dropped by 1.9 percentage points over the last few years. Continued declines could signal it is in the middle of an investment cycle.

Etsy’s free cash flow clocked in at $347.2 million in Q4, equivalent to a 39.4% margin. This result was good as its margin was 3.6 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

Etsy reported $1.63 billion of cash and $3.08 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $734.5 million of EBITDA over the last 12 months, we view Etsy’s 2.0× net-debt-to-EBITDA ratio as safe. We also see its $18.76 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Etsy beat analysts’ EPS expectations this quarter. Also, the company announced a definitive agreement to sell Depop to eBay for $1.2 billion. On the other hand, its number of buyers declined and its revenue was in line with Wall Street’s estimates. Zooming out, we think this was a mixed quarter, but the market is reacting positively to the Depop sale. The stock traded up 21.4% to $53.48 immediately after reporting.

Updated: February 19, 2026 at 7:29 AM EST

When considering an investment in Etsy, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Etsy has some positive attributes, but it isn’t one of our picks. Although its revenue growth was weak over the last three years and analysts expect growth to slow over the next 12 months, its impressive EBITDA margins show it has a highly efficient business model. Tread carefully with this one, however, as its active buyers have declined.

Etsy’s EV/EBITDA ratio based on the next 12 months is 9.5x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $66.26 on the company (compared to the current share price of $53.48).