Etsy Q1 2026 Earnings: GMS Growth, Agentic AI Tests & Depop Sale Delay
New Etsy CEO Kruti Patel Goyal is pointing to early signs of stabilization as Q1 2026 results show modest revenue and GMS growth, with the company narrowing its focus back to the core marketplace as it moves away from its prior “house of brands” strategy.
In a letter to shareholders today, Patel Goyal laid out the Q1 performance with figures for the main Etsy marketplace broken out separately to reflect the sale of Reverb last year and pending sale of Depop to eBay.
Highlights from the letter:
- Total Q1 revenue reached $631 million, with Etsy marketplace up more than 6% to nearly $433 million and Etsy services up more than 10% to nearly $200 million.
- Q1 net income reached $105 million, with Etsy marketplace net income up roughly $33 million year over year, as gross merchandise sales (GMS) rose more than 5% to $2.5 billion.
- The number of active buyers fell more than 2% year on year to 86.6 million, but higher spend per buyer drove GMS growth.
Unsurprisingly, Etsy continues to lean into AI, recently developing an Etsy App in ChatGPT, aligned with OpenAI’s shift toward retailer-run apps for agentic shopping, while also testing agentic experiences on the platform for both buyers and sellers.
Patel Goyal says the conversational AI functionality for buyers will initially focus on helping them find great gifts, while the one for sellers will bring together insights from across the platform intended to help them make better decisions, access the right resources, and reduce operational friction.
“We see just so much exciting opportunity for us to leverage this technology to build a much better, much more personalized experience on Etsy,” Patel Goyal said, adding that AI will help the company understand inventory, customer tastes and interests, and buying intent.
But Etsy Chief Financial Officer Lanny Baker also assured analysts that AI expenses will be controlled with “a very rigorous ROI discipline:”
“The investments we’re making in AI and the features that we roll, and the costs associated with the compute behind that, is all going to be framed with reference to its impact on GMS growth and long-term user growth and frequency growth. And we’ll manage that with a mind toward long-term profitability.”
Patel Goyal also echoed her past sentiments that AI is not incompatible with the company's motto to "Keep Commerce Human", encouraging sellers to use AI tools to support their businesses while continuing to deliver human creativity, innovation, and service.
“Really, the most important things that our sellers can do to add value to the marketplace is continue to innovate at really new inventory to the marketplace and continue to provide really great human service to our buyers,” she said. “These are the places that we’re really focused on investing in.”
Many sellers, however, remain unconvinced that Etsy's AI future is as bright as Patel Goyal suggests.
Liz Morton
The Q1 earnings release also revealed that Etsy's sale of fashion marketplace Depop to eBay has been pushed back, with the expected closing shifting from Q2 to the end of Q3 2026.
The deal has cleared regulatory hurdles in the US and Germany but remains under review in the UK and Australia.
The Australian Competition & Consumer Commission launched an assessment of the Depop acquisition earlier this month as eBay subsidiary second-hand fashion marketplace Tise also quietly entered the Australian market.
Liz Morton
And the UK Competition & Markets Authority followed last week, seeking public comment on how the eBay Depop deal will impact consumers and competitors.
Liz Morton
While the sale will likely still ultimately go through, it will be interesting to see if eBay will be forced to make any operational changes in those countries to appease regulators - and we may hear more details about that when eBay reports Q1 2026 earnings at 5:30 PM Eastern this afternoon.
For now, investors appear encouraged by early signs of stabilization under new leadership, with shares rising more than 7% in premarket trading.
