Etsy (ETSY) Q3 2025: Depop U.S. GMS Soars 59%, Signaling Expanding Apparel Resale Momentum
Depop’s U.S. GMS growth of 59% year-over-year underscores Etsy’s deepening push into apparel resale and platform diversification. The quarter’s results highlight sequential improvement in Etsy’s core marketplace, a high-impact leadership transition, and early traction from AI-powered discovery and agentic commerce partnerships. With a disciplined approach to capital allocation and targeted investments in growth levers like Depop and loyalty, Etsy is positioning for sustainable multi-segment expansion amid evolving shopper behavior and macro uncertainty.
Summary
- Depop’s U.S. Surge: Apparel resale platform Depop’s U.S. GMS up 59% YoY, fueling group momentum.
- AI and Agentic Commerce: Early OpenAI integration and personalized discovery drive engagement and conversion.
- Leadership Transition: Incoming CEO Patel-Goyal signals continuity and renewed focus on growth priorities.
Performance Analysis
Etsy delivered sequential improvement in its core marketplace, with Etsy and Depop combined returning to year-over-year GMS growth, led by Depop’s breakout performance. Excluding the divested Reverb business, consolidated GMS grew 0.9% YoY, while consolidated revenue rose 6.1% YoY to $678 million, reflecting solid progress against internal targets. Adjusted EBITDA margin reached 25.4%, with Etsy’s marketplace margin just shy of 30%, highlighting continued profitability discipline even as Depop’s margin temporarily compressed due to stepped-up brand marketing investment.
Buyer and seller dynamics showed stabilization and early signs of reacceleration. Etsy’s active buyer count declined 5% YoY but new and reactivated buyers totaled 11.4 million in Q3, up slightly sequentially. GMS per active buyer held steady at $121, with higher purchase frequency and average item values since April. The app channel continues to outperform, with app GMS up 20% YoY and contributing 46% of total GMS, as app users visit more frequently and convert at higher rates. Seller growth resumed, with active sellers up 1.7% sequentially and strong double-digit growth in new sellers making a sale. Take rate expanded 220bps YoY to 24.9%, reflecting mix shift to services and ads.
- Depop Acceleration: Depop’s GMS up 39.4% YoY, with U.S. GMS up 59%, fueled by new user growth and conversion gains.
- AI-Driven Engagement: Machine learning-powered app discovery and recommendations drove double-digit engagement increases and higher conversion.
- Cost Structure Discipline: Product development and marketing spend grew modestly, with incremental Depop brand spend offset by leverage in Etsy’s own marketing channels.
Overall, Etsy’s multi-pronged approach—platform innovation, targeted investment, and operational discipline—drove a return to growth while maintaining profitability, setting the stage for continued improvement into Q4 and 2026.
Executive Commentary
"We're making steady progress improving our performance in 2025, with our third quarter results exceeding expectations on all three key financial metrics, GMS, revenue, and adjusted EBITDA. GMS for Etsy and Depop combined returned to year-over-year growth, with further sequential improvement expected at the midpoint of our fourth quarter guidance."
Josh Silverman, CEO
"We're showing up where shoppers find inspiration, matching them with items that feel tailor-made for them, working to deepen loyalty across our community and amplifying what sets us apart, the creativity and authenticity of our sellers. Each priority fuels the next, creating a cycle of discovery, engagement, and connection that truly differentiates Etsy."
Krithi Patel-Goyal, President and Chief Growth Officer (incoming CEO)
Strategic Positioning
1. Depop as a Growth Engine
Depop, Etsy’s apparel resale marketplace, has emerged as a core growth lever, with U.S. GMS up 59% YoY and total GMS up 39.4%. Leadership is doubling down on brand marketing to expand awareness and penetration, especially among younger demographics. This marks a shift from stabilization to aggressive scaling, leveraging product-market fit and momentum built over the last two years.
2. AI and Personalization Investment
AI and machine learning are central to Etsy’s discovery and engagement strategy. New models for buyer and item understanding are driving double-digit increases in app engagement and measurable conversion gains in search and ads. The OpenAI partnership, which enables agentic commerce, positions Etsy as an early mover in conversational and intent-driven shopping, with early data showing higher purchase intent from agentic traffic.
3. App-Centric User Experience
The Etsy app’s redesigned home screen and discovery feed are producing higher engagement and GMS growth versus non-app channels. App users visit five times more often, view three times more pages per visit, and convert at higher rates. This channel shift is deepening buyer relationships and increasing customer lifetime value, while also powering high-return owned marketing channels like email and push notifications.
4. Loyalty and Retention Initiatives
The Etsy Insider Loyalty Program, now in beta 2.0, is focused on rewarding frequent buyers with shipping discounts and 5% back in Etsy credit. Early results from version 1.0 showed increased purchase frequency, and the new iteration targets higher-value buyers to drive retention and GMS per buyer—a key long-term lever as marketplace competition intensifies.
5. Platform Resiliency and Seller Enablement
Etsy’s seller ecosystem is stabilizing, with active sellers growing sequentially and seller satisfaction up 10 points YoY. AI-powered tools for sellers and increased access to live support are reducing friction and enabling more time for creativity, reinforcing Etsy’s differentiation in a commoditized e-commerce landscape.
Key Considerations
This quarter marks a strategic inflection for Etsy, as the company leverages platform innovation and segment diversification to reignite growth. The leadership transition to Krithi Patel-Goyal is designed to maintain continuity while accelerating execution on key priorities.
Key Considerations:
- Depop’s U.S. Outperformance: Depop’s rapid GMS growth is driving group momentum, but requires sustained investment and marketing to scale profitably.
- Agentic Commerce Opportunity: Early OpenAI integration offers incremental high-intent traffic, but the long-term impact on direct traffic and profit pools is still evolving.
- App Engagement as a Growth Lever: The app’s rising share of GMS and superior engagement metrics are critical for deepening buyer relationships and increasing frequency.
- Loyalty Program Evolution: The new loyalty beta focuses on frequent buyers, aiming to lift GMS per buyer and retention in a maturing marketplace.
- Capital Allocation Discipline: Ongoing buybacks (17% share reduction since Dec 2023) and targeted Depop investment reflect a balanced approach to growth and shareholder return.
Risks
Macro uncertainty remains elevated, especially around consumer discretionary spending into the holiday season. Tariff and trade restrictions, particularly the expiration of the de minimis exemption, present ongoing headwinds, though Etsy’s large domestic inventory base provides some mitigation. Competitive intensity in digital marketing channels and evolving agentic commerce dynamics could pressure traffic acquisition costs and direct buyer relationships. Execution risk exists in scaling Depop profitably and maintaining high seller satisfaction amid rapid change.
Forward Outlook
For Q4 2025, Etsy guided to:
- Consolidated GMS between $3.5 billion and $3.65 billion, with sequential improvement expected at the midpoint.
- Take rate of approximately 24.5%, reflecting seasonality.
- Adjusted EBITDA margin of approximately 24%, with margin compression due to increased Depop brand marketing.
For full-year 2025, management maintained a disciplined outlook, highlighting:
- Stable profitability for the Etsy marketplace,
- Opportunistic, discretionary investment in Depop to expand U.S. market share,
- Continued focus on operational efficiency and strategic marketing reallocations.
Management emphasized that guidance assumes a stable macro environment, with higher than normal uncertainty around consumer health and holiday spending patterns.
Takeaways
Etsy’s Q3 showcased a multi-segment growth strategy, with Depop’s U.S. acceleration and AI-driven marketplace improvements offsetting ongoing macro and competitive pressures.
- Depop as a Value Multiplier: Sustained investment in Depop’s brand and product is transforming it from a turnaround story to a scalable growth engine, with potential to be a multi-billion dollar asset within the group.
- AI and App Engagement Drive Core Marketplace Differentiation: Machine learning-powered discovery and a redesigned app experience are deepening buyer engagement and conversion, positioning Etsy to benefit from both direct and agentic commerce trends.
- Strategic Focus for 2026: Investors should watch for continued Depop scaling, loyalty program traction, and the impact of AI-driven personalization on buyer frequency and retention, as well as management’s ability to navigate macro headwinds and competitive shifts.
Conclusion
Etsy’s Q3 2025 results confirm a return to growth, with Depop’s breakout U.S. performance and platform innovation driving sequential improvement. The leadership transition and disciplined capital allocation signal a clear strategy for sustainable, multi-segment expansion into 2026.
Industry Read-Through
Etsy’s success with Depop highlights the accelerating mainstream adoption of apparel resale and the value of niche, community-driven marketplaces within broader e-commerce. The company’s early move into agentic commerce via OpenAI integration signals a shift toward conversational and intent-based shopping, a trend likely to reshape traffic patterns and marketing ROI across the sector. AI-powered personalization and app-centric engagement are emerging as key differentiators for platforms seeking to deepen buyer relationships and defend against commoditization. Competitors in both general and vertical marketplaces will need to invest aggressively in discovery, loyalty, and seller enablement to keep pace with evolving consumer expectations and technology-driven disruption.