Etsy Posts First Sequential GMS Rise in Two Years as Mobile App Drives Q1 Growth

Etsy, Inc. has reported a 5.5% increase in Gross Merchandise Sales for the first quarter of 2026, marking the first sequential rise in active buyer counts in two years. The growth was driven by a strategic emphasis on discovery and matching, with the mobile app emerging as the primary engine for expansion. GMS via the app rose by 11.2% year-over-year, reflecting the platform's success in facilitating deeper personalisation and direct relationships between buyers and sellers.

To prioritise sustainable long-term growth and enhance shareholder returns, the company announced the divestiture of Depop for $1.2 billion. This move follows the earlier sale of Reverb in June 2025, which has already affected year-over-year comparisons for continuing operations. The pending sale is expected to close by the end of the third quarter of 2026, with the resulting capital infusion set to accelerate direct returns to shareholders via repurchases.

Management highlighted a significant shift in search algorithms that now prioritise relevance-driven results over simple popularity. By utilising machine learning to understand individual buyer tastes, Etsy aims to build buyer confidence through a 'human connection' strategy that integrates seller stories and craftsmanship directly into the shopping experience. While the frequency of purchase has not yet inflected, new AI-generated buyer profiles are driving deeper engagement as a necessary precursor to sustained growth.

The expiration of the de minimis tariff exemption has contributed to higher Average Order Values, as seller listing prices have increased accordingly. However, management noted that this factor may impact future volume comparisons. Looking ahead, full-year 2026 GMS is expected to grow in the low single-digit range, assuming stable macroeconomic conditions and moderating currency tailwinds.

Operational leverage was achieved through targeted shifts in the marketing portfolio and increased efficiency in product development, despite higher employee costs. The strategy for 2026 focuses on compounding early engagement gains into sustained purchase frequency, though management cautioned that progress may not be linear. Future revenue growth is expected to be driven primarily by GMS expansion rather than significant changes to the current take rate structure, which management considers healthy.

Etsy is also testing conversational AI agents for gift-finding and seller management to reduce friction, although Generative AI traffic currently represents less than 1% of total traffic and is viewed primarily as a discovery channel. With habitual buyer numbers stabilising, the platform aims to use personalisation and loyalty initiatives to push these cohorts back into higher-frequency purchasing patterns.