Etsy Inc. (NASDAQ: ETSY) shares experienced a notable slide after the company presented its first-quarter 2025 financial results on April 30, 2025. Etsy reported revenue slightly ahead of expectations, a significant earnings miss and a continued decline in gross merchandise sales (GMS) weighed heavily on investor sentiment.
The e-commerce platform posted consolidated revenue of $651.2 million for the quarter ending March 31, 2025, marking a modest 0.8% increase year-over-year and narrowly beating analyst forecasts.
This slight revenue growth was achieved despite a 6.5% drop in consolidated GMS, which fell to $2.8 billion compared to the prior year. The revenue resilience was largely attributed to an increased take rate, which climbed to 23.3%, driven by growth in on-site advertising revenue and seller fees.
However, the positive revenue story was overshadowed by a substantial net loss. Etsy reported a GAAP loss of $0.49 per share, a stark contrast to analyst expectations of a profit around $0.47 per share.
This loss was primarily driven by a significant $101.7 million non-cash impairment charge related to the goodwill of Reverb, its musical instrument marketplace, which Etsy recently agreed to sell as it refocuses on its core platform and the Depop secondhand fashion site.
Despite the net loss, Etsy’s adjusted EBITDA remained solid at $171.1 million, surpassing analyst estimates and reflecting a healthy margin of 26.3%. Management attributed this to effective expense management and the higher take rate.
Beneath the headline figures, key metrics revealed ongoing challenges. GMS for the core Etsy marketplace declined 8.9% year-over-year. The number of active buyers on the platform also dipped, falling for the second consecutive quarter, while active sellers saw a decline for the fourth straight quarter.
These trends highlight the difficulties Etsy faces amidst a challenging macroeconomic environment impacting consumer discretionary spending and increased competition from rivals like Amazon, Temu, and Shein.
In response to the earnings release, Etsy’s stock price saw significant volatility. While initial pre-market trading showed slight gains, the stock ultimately declined, with reports indicating a drop of over 5% as investors digested the earnings miss and the persistent decline in sales volume.
Company executives acknowledged the pressures but expressed confidence in strategic initiatives. CEO Josh Silverman highlighted “green shoots” in app metrics and the company’s focus on leveraging AI and machine learning to enhance user experience and personalization.
CFO Lanny Baker noted the company is staying “nimble” amid uncertainty surrounding tariffs and consumer confidence, while continuing investments aimed at improving GMS trends. For the second quarter, Etsy anticipates a GMS decline similar to, or potentially slightly better than, the first quarter’s 6.5% drop.