Shares of Etsy, Inc. continued their upward trajectory in Friday's trading session, extending gains posted after the online marketplace operator disclosed a significant divestiture and delivered its latest quarterly earnings report. The stock's movement reflects investor reaction to the company's strategic shift and its financial outlook for the current quarter.
Strategic Sale and Financial Performance
Etsy announced an agreement to sell its resale apparel platform, Depop, to eBay Inc. for approximately $1.2 billion in an all-cash transaction. The company stated the deal is anticipated to close during the second quarter of 2026, subject to customary regulatory approvals. In a statement, Etsy CEO Kruti Patel Goyal indicated the sale would allow the company to concentrate resources on its core marketplace opportunity.
Concurrently, Etsy reported its financial results for the fourth quarter ending December 31, 2025. The company posted revenue of $881.6 million. Gross merchandise sales (GMS), a key metric for the platform, reached $3.59 billion for the period, with prior-year figures adjusted to exclude the earlier divestiture of Reverb. The company's take rate, representing the percentage of GMS captured as revenue, stood at 24.5%. Adjusted EBITDA was $222.5 million, and Etsy concluded the quarter with a strong balance sheet holding $1.8 billion in cash and marketable securities.
Forward-Looking Guidance and Market Focus
Management provided guidance for the first quarter of 2026, projecting gross merchandise sales to land between $2.38 billion and $2.43 billion. This forecast assumes current consumer spending trends persist. According to the company's CFO, Lanny Baker, the fourth-quarter results met or exceeded internal expectations.
Analysts suggest the market's positive response is partly driven by the valuation secured for Depop, which some investors had previously undervalued. The sale provides Etsy with a substantial cash infusion and simplifies its corporate narrative, shifting the investment thesis squarely onto the growth potential and operational execution of its primary Etsy marketplace.
With the Depop exit pending, investor attention is now intensely focused on the core platform's health. Key metrics under scrutiny include active buyer counts, seller conversion rates, and the sustainability of advertising revenue without imposing excessive fees on the seller community. The company's ability to generate organic growth without further acquisitions is a central question.
Market Context and Potential Risks
The broader market reaction saw eBay shares also move higher in early Friday trading. While Etsy's stock surged roughly 10% on Thursday following the announcements, analysts note the company's quarterly revenue still reflected some softness in demand for categories like gifts and home goods.
Several risks cloud the otherwise positive outlook. The company's first-quarter guidance is contingent on stable macroeconomic conditions and competitive dynamics. A deterioration in consumer sentiment or more aggressive moves by rival online retailers could pressure demand, making the projected "slight growth" more challenging to achieve.
Furthermore, the Depop sale carries execution risk. Any significant delay in obtaining regulatory clearance, potentially pushing the closure into the latter half of the year, could complicate financial comparisons and create uncertainty regarding the true growth rate of the standalone Etsy business.
In summary, Etsy's recent stock performance underscores a market reassessment based on strategic simplification and near-term financial targets. The coming quarters will be critical in determining whether the company can leverage its focused strategy to reignite sustainable growth on its main platform.
