Online marketplace Etsy (NASDAQ:ETSY) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 3.8% year on year to $672.7 million. Its GAAP profit of $0.25 per share was 49.3% below analysts’ consensus estimates.
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Etsy (ETSY) Q2 CY2025 Highlights:
- GMS (Gross Merch Sales): $2.8 million, slight beat vs analyst estimates (4.8% year-on-year decline)
- Revenue: $672.7 million vs analyst estimates of $645.1 million (3.8% year-on-year growth, 4.3% beat)
- EPS (GAAP): $0.25 vs analyst expectations of $0.49 (49.3% miss)
- Q3 guidance: GMS of $2.65 billion at the midpoint (miss)
- Operating Margin: 11.4%, in line with the same quarter last year
- Free Cash Flow Margin: 16.6%, up from 5.4% in the previous quarter
- Active Buyers: 93.33 million, down 3.28 million year on year
- Market Capitalization: $6.29 billion
"We are encouraged by our second quarter performance, which reflects tangible progress in our key investment areas," said Josh Silverman,
Company Overview
Founded by a struggling amateur furniture maker Robert Kalin and his two friends, Etsy (NASDAQ:ETSY) is one of the world’s largest online marketplaces, focusing on handmade or vintage items.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Etsy grew its sales at a sluggish 5.5% compounded annual growth rate. This fell short of our benchmark for the consumer internet sector and is a poor baseline for our analysis.
This quarter, Etsy reported modest year-on-year revenue growth of 3.8% but beat Wall Street’s estimates by 4.3%.
Looking ahead, sell-side analysts expect revenue to decline by 2.4% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and indicates its products and services will see some demand headwinds.
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Active Buyers
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 were flat at 93.33 million. 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 Q2, Etsy’s active buyers decreased by 3.28 million, a 3.4% drop since last year. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t moving the needle for buyers 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 3.2%. This raises questions about its platform’s health when paired with its flat 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 $7.21. It grew by 7.5% year on year, faster than its active buyers.
Key Takeaways from Etsy’s Q2 Results
It was encouraging to see Etsy beat analysts’ EBITDA expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its number of active buyers slightly missed and GMS guidance for next quarter fell slightly short. Overall, this was a mixed quarter. Still, the stock traded up 4.5% to $62.96 immediately after reporting.
Big picture, is Etsy a buy here and now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.