Here's our initial take on Etsy's (ETSY +0.06%) fiscal 2025 first-quarter financial report.
Key Metrics
| Metric | Q1 2024 | Q1 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $646 million | $651.2 million | 0.8% | Beat |
| Earnings per share (adjusted) | $0.48 | $1.03 | 115% | Beat |
| Gross merchandise sales (GMS) | $3 billion | $2.8 billion | -6.5% | n/a |
| Revenue take rate | 21.6% | 23.3% | 170bps | n/a |
Lower Sales but a More Efficient Business
As you can see in the table, Etsy beat expectations on both revenue and earnings in the first quarter. But the real story is how the company did it.
Gross merchandise sales declined 6.5% year over year, a significant amount. This was fueled by a 3.4% decline in active buyers and a 3.5% decline in spending per average active buyer, indicating that consumers are more hesitant to spend money right now. What's more, the number of "habitual buyers," Etsy's most frequent customers, declined by 11% year over year, and the number of active sellers on the platform declined sharply from 9.1 million to less than 8.1 million.
However, Etsy's revenue actually grew slightly thanks to higher take rates (percentage of sales that go to Etsy), higher on-site advertising revenue, and expansion of Etsy's Payments business.
Beyond Etsy's core platform, the company's Depop apparel platform grew strongly, and while the Reverb musical instrument platform has been generally performing well, Etsy announced that it plans to sell this part of its business about a week before the earnings release.
Looking ahead, Etsy's guidance called for second-quarter GMS to decline at a "rate similar to, to potentially slightly better than" what was reported for this quarter. Given the economic uncertainty that has heated up in the second quarter, that's a rather positive outlook.
Finally, Etsy was rather active with stock buybacks during the quarter, spending $189 million (equal to about 2% of its total market cap). It ended the quarter with just under $1 billion in cash and investments, so it's fair to say that management can continue to be opportunistic with repurchases.
NYSE: ETSY
Key Data Points
Immediate Market Reaction
Although the stock jumped initially after the earnings release, it didn't stay there for long. At 8:50 a.m. EDT, Etsy's stock was up by about 1%. The revenue beat and mildly strong guidance seem to be encouraging to investors, but the tariff concerns and declining sales metrics are likely keeping the stock from soaring.
What to Watch
Etsy's marketplace is truly an international one, so it will be interesting to keep an eye on the evolving tariff/trade war situation and its potential impact on the company. While CEO Josh Silverman recently said that Etsy isn't very dependent on China, it does have quite a few buyers and sellers outside of the U.S.
