Etsy's Strong Margins Boost Results

Core Insights - Etsy's fiscal Q1 2025 financial report shows a mixed performance with revenue and earnings exceeding expectations, but a notable decline in gross merchandise sales (GMS) and active buyers [2][3][4]. Financial Performance - Revenue for Q1 2025 was $651.2 million, a 0.8$646 million in Q1 2024, beating expectations [2]. - Adjusted earnings per share rose significantly by 115% from $0.48 to$1.03, also surpassing forecasts [2]. - Gross merchandise sales decreased by 6.5% year over year, dropping from $3 billion to$2.8 billion [2][4]. - The revenue take rate improved from 21.6% to 23.3%, an increase of 170 basis points [2]. Business Efficiency - Despite lower sales, Etsy's revenue growth was attributed to higher take rates, increased on-site advertising revenue, and the expansion of Etsy's Payments business [5]. - The number of active buyers fell by 3.4%, and spending per average active buyer declined by 3.5%, indicating consumer hesitance [4]. - The number of habitual buyers decreased by 11%, and active sellers dropped from 9.1 million to less than 8.1 million [4]. Future Outlook - Etsy's guidance for Q2 suggests GMS will decline at a rate similar to or slightly better than Q1, which is viewed positively given current economic uncertainties [6]. - The company remains active in stock buybacks, spending $189 million, approximately 2$1 billion in cash and investments [7]. Market Reaction - Following the earnings release, Etsy's stock initially rose by about 1%, but concerns over tariff issues and declining sales metrics tempered further gains [8]. External Factors - The evolving tariff and trade war situation is a key area to monitor, as Etsy operates in an international marketplace with significant buyer and seller activity outside the U.S. [9].