Online marketplace Etsy (NASDAQ:ETSY) announced better-than-expected revenue in Q3 CY2025, with sales up 2.4% year on year to $678 million. Its GAAP profit of $0.63 per share was 21.1% above analysts’ consensus estimates.
Revenue: $678 million vs analyst estimates of $656.6 million (2.4% year-on-year growth, 3.3% beat)
EPS (GAAP): $0.63 vs analyst estimates of $0.52 (21.1% beat)
Adjusted EBITDA: $171.9 million vs analyst estimates of $164.7 million (25.4% margin, 4.4% beat)
Q4 EBITDA margin guidance of 24%, well below expectations of 27%
Operating Margin: 12.2%, in line with the same quarter last year
Free Cash Flow Margin: 27.1%, up from 13.4% in the previous quarter
Active Buyers: 93.16 million, down 3.55 million year on year
Market Capitalization: $7.41 billion
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.
A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Etsy grew its sales at a sluggish 4.9% compounded annual growth rate. This was below our standard for the consumer internet sector and is a rough starting point for our analysis.
Etsy Quarterly Revenue
This quarter, Etsy reported modest year-on-year revenue growth of 2.4% but beat Wall Street’s estimates by 3.3%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and implies its products and services will face some demand challenges.
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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 93.16 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.
Etsy Active Buyers
In Q3, Etsy’s active buyers decreased by 3.55 million, a 3.7% 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.
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 3.6%. 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.
Etsy ARPB
This quarter, Etsy’s ARPB clocked in at $7.28. It grew by 6.3% year on year, faster than its active buyers.
We enjoyed seeing Etsy beat analysts’ revenue and EBITDA expectations this quarter. On the other hand, its number of buyers declined and the company guided to EBITDA margin of 24% next quarter, well below expectations of 27%. This margin outlook is weighing on shares, and the stock traded down 8% to $68.85 immediately following the results.
