Etsy Inc.

10/28/2026 | Press release | Distributed by Public on 10/28/2026 06:17

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and with the audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 19, 2026 (the "Annual Report"). This discussion, particularly information with respect to our outlook, key trends and uncertainties, our plans and strategy for our business, and our performance and future success, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, particularly in Part II, Item 1A, "Risk Factors." We also believe that our performance and future success depend on a number of factors that present significant opportunities for us, as discussed in Part I, Item 1, "Business," in our Annual Report, which we incorporate by reference.
Overview
Business
Etsy operates a two-sided online marketplace that connects millions of creative entrepreneurs with buyers around the world. The Etsy marketplace is the global destination for unique, creative goods from independent sellers, connecting artisans with thoughtful consumers seeking items that reflect their tastes and values.
We generate revenue primarily from marketplace activities, including transaction fees (inclusive of offsite advertising), payments processing fees, and listing fees, as well as from optional seller services, which include on-site advertising and shipping labels.
On August 3, 2026, the Audit Committee approved a restructuring plan intended to better align the organization with Etsy's long-term strategic priorities, including by simplifying Etsy's structure to improve coordination and speed of decision-making (the "Restructuring Plan"). The Restructuring Plan included an approximately 12% reduction of the Etsy marketplace workforce, or approximately 220 employees. Charges of $33.9 million related to restructuring and other exit costs were incurred in the third quarter of 2026, and the execution of the Restructuring Plan was substantially complete by the end of the third quarter of 2026. See Part I, Item 1, "Note 15-Restructuring and Other Exit Costs" for more information regarding the Restructuring Plan.
On July 30, 2026 (the "Closing Date"), we closed on the sale of 100% of Depop Limited ("Depop"), our fashion resale marketplace, to eBay Inc. ("eBay") for cash consideration of $1.4 billion. We recognized a gain on the sale of Depop of $839.7 million, which together with Depop's results of operations through the Closing Date, are included in income (loss) from discontinued operations before income taxes for the three and nine months ended September 30, 2026. Depop results are presented as discontinued operations for all periods through the Closing Date. See Part I, Item 1, "Note 2-Discontinued Operations" for further information. Unless otherwise noted, all financial results and other metrics discussed in this report are for continuing operations only.
On June 2, 2025, we completed the sale of Reverb Holdings, Inc. ("Reverb"), our musical instrument marketplace. The results of Reverb, until its sale on June 2, 2025, are included in all financial results and other metrics discussed in this report, unless otherwise noted.
Key Operating and Financial Metrics
We collect and analyze operating and financial data to evaluate the health and performance of our business and allocate our resources (such as capital, people, and technology investments). Our key operating and financial metrics are presented on a continuing operations basis in the tables below for all periods presented, since Depop is presented as a discontinued operation. Due to the sale of Reverb on June 2, 2025, continuing operations for the nine months ended September 30, 2025 includes Etsy marketplace and Reverb marketplace until the date of sale, while all other periods reflect the Etsy marketplace only. This makes year-over-year continuing operations results not directly comparable for the nine months ended September 30, 2026 and 2025, while the three months ended September 30, 2026 and 2025 are directly comparable. To provide investors with a meaningful basis for comparing our nine months ended September 30, 2026 results year-over-year, we have presented Etsy marketplace results for the nine months ended September 30, 2025. Our calculation of trailing twelve months free cash flow includes activity for combined continuing and discontinued operations. See "Non-GAAP Financial Measures" for more information regarding our use of Etsy marketplace financial metrics, Adjusted EBITDA, Adjusted EBITDA margin, and free cash flow, and reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure.
Our key operating and financial metrics are (in thousands, except percentages):
Three Months Ended
September 30, 		% Growth (Decline)
Y/Y
2026 2025
Continuing Operations Continuing Operations
GMS (1) $ 2,646,888 $ 2,432,587 8.8 %
Revenue $ 692,469 $ 624,153 10.9 %
Revenue take rate (2) 26.2 % 25.7 % 50 bps
Marketplace revenue $ 468,143 $ 429,081 9.1 %
Services revenue $ 224,326 $ 195,072 15.0 %
Gross profit $ 503,145 $ 457,923 9.9 %
Operating expenses $ 391,712 $ 346,918 12.9 %
Net income $ 113,637 $ 104,596 8.6 %
Net income margin 16.4 % 16.8 % (40) bps
Adjusted EBITDA (Non-GAAP) $ 210,364 $ 183,607 14.6 %
Adjusted EBITDA margin (Non-GAAP) 30.4 % 29.4 % 100 bps
Active sellers (3) 5,836 5,478 6.5 %
Active buyers (4) 87,506 86,610 1.0 %
Nine Months Ended
September 30, 		% Growth / (Decline)
Y/Y for Continuing Operations 		% Growth
Y/Y for the Etsy Marketplace
(Non-GAAP) (5)
2026 2025
Continuing Operations Continuing Operations Etsy Marketplace
(Non-GAAP)
GMS (1) $ 7,689,975 $ 7,549,052 $ 7,167,704 1.9 % 7.3 %
Revenue $ 1,992,059 $ 1,865,488 $ 1,822,252 6.8 % 9.3 %
Revenue take rate (2) 25.9 % 24.7 % 25.4 % 120 bps 50 bps
Marketplace revenue $ 1,356,990 $ 1,292,343 $ 1,256,763 5.0 % 8.0 %
Services revenue $ 635,069 $ 573,145 $ 565,489 10.8 % 12.3 %
Gross profit $ 1,442,788 $ 1,362,834 $ 1,341,037 5.9 % 7.6 %
Operating expenses $ 1,086,241 $ 1,161,602 $ 1,031,475 (6.5) % 5.3 %
Net income $ 332,638 $ 115,147 $ 223,393 188.9 % 48.9 %
Net income margin 16.7 % 6.2 % 12.3 % 1,050 bps 440 bps
Adjusted EBITDA (Non-GAAP) $ 590,433 $ 527,427 $ 521,848 11.9 % 13.1 %
Adjusted EBITDA margin (Non-GAAP) 29.6 % 28.3 % 28.6 % 130 bps 100 bps
Active sellers (3) 5,836 5,478 5,478 6.5 % 6.5 %
Active buyers (4) 87,506 86,610 86,610 1.0 % 1.0 %
(1)Excluded from the tables above is gross merchandise sales ("GMS") for Depop, which was $199.8 million and $292.1 million for the three months ended September 30, 2026 and 2025, respectively, and $1,004.4 million and $775.2 million for the nine months ended September 30, 2026 and 2025, respectively. GMS is the dollar value of items sold in our marketplaces, excluding shipping fees and net of refunds, within the applicable period. GMS does not represent revenue earned by us.
(2)Revenue take rate is revenue divided by GMS.
(3)Active sellers for the three and nine months ended September 30, 2026 and 2025 represent the Etsy marketplace only as Reverb was sold on June 2, 2025 and Depop is presented as discontinued operations. An active seller is a seller who has had a charge or sale in the last 12 months. A seller is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple seller accounts and can count as a distinct active seller in each of our marketplaces. As part of our commitment to integrity and transparency, we continuously monitor, and from time to time adjust, the criteria for disqualifying a seller as an active seller.
(4)Active buyers for the three and nine months ended September 30, 2026 and 2025 represent the Etsy marketplace only as Reverb was sold on June 2, 2025 and Depop is presented as discontinued operations. An active buyer is a buyer who has made at least one purchase in the last 12 months. A buyer is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple buyer accounts and can count as a distinct active buyer in each of our marketplaces.
(5)% growth Y/Y for the Etsy marketplace is the change in continuing operations for the nine months ended September 30, 2026, which represents activity for the Etsy marketplace only, compared to the Etsy marketplace excluding Reverb for the nine months ended September 30, 2025, as Reverb was sold in the second quarter of 2025.
As of September 30, % Decline Y/Y
2026 2025
Continuing and Discontinued Operations Continuing and Discontinued Operations
Net cash provided by operating activities - trailing twelve months $ 598,110 $ 691,249 (13.5) %
Free cash flow - trailing twelve months (Non-GAAP) $ 557,125 $ 635,357 (12.3) %
We disclose key operating metrics because they provide meaningful insight into the performance and health of our business. GMS, active sellers, and active buyers each reflect core drivers of our business-seller success, buyer engagement, and the overall scale of our platforms. We believe these measures help investors and management evaluate our growth potential and the underlying strength of our marketplace.
GMS
GMS from continuing operations increased by $214.3 million to $2,646.9 million in the three months ended September 30, 2026 compared to the three months ended September 30, 2025, and increased by $140.9 million to $7,690.0 million in the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase in GMS between the nine months ended September 30, 2026 and 2025 reflects an increase of $522.2 million from the Etsy marketplace, partially offset by a decrease of $381.3 million from the sale of Reverb.
Etsy marketplace year-over-year GMS growth for the three and nine months ended September 30, 2026, which excludes Reverb from the prior year period, was up 8.8% and 7.3%, respectively. This growth was driven by continued progress against the Company's strategic priorities, reflected in improving buyer and seller trends and stronger marketplace health metrics. The Etsy marketplace GMS per active buyer on a trailing twelve month basis increased 3.9% year-over-year to $126, with a year-over-year increase of 1.0% of active buyers on the Etsy marketplace to 87.5 million.
U.S. buyer GMS is GMS from transactions in which the shipping address entered by the buyer at the time of sale is in the U.S., net of refunds. GMS from transactions in which the shipping address entered by the buyer at the time of sale is not in the U.S, net of refunds is non-U.S. buyer GMS. Percent U.S. buyer GMS for the periods presented below are as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2026 2025 2026 2025 (1)
Percent U.S. Buyer GMS - Continuing operations 75 % 74 % 75 % 75 %
(1)Percent U.S. Buyer GMS - Etsy marketplace was 74% for nine months ended September 30, 2025.
There is considerable uncertainty regarding macroeconomic conditions, including geopolitical conflicts, the evolving tariff landscape, and inflationary pressures, and the impact any of the foregoing might have on consumer demand and discretionary wallet share. Any circumstances that reduce consumer demand or hinder our sellers' cross-border trade may adversely affect our business. See Part II, Item 1A, "Risk Factors" for further detail.
Currency-Neutral GMS
We calculate currency-neutral GMS by translating current period GMS for goods sold that were listed in non-U.S. dollar currencies into U.S. dollars using prior year foreign currency exchange rates.
As reported and currency-neutral GMS growth (decline) for the periods presented below are as follows:
2026 2025
As Reported Currency-Neutral FX Impact As Reported Currency-Neutral FX Impact
Three months ended September 30,
GMS - Continuing operations 8.8 % 9.1 % (0.3) % (10.1) % (10.8) % 0.7 %
Nine months ended September 30,
GMS - Continuing operations 1.9 % 1.3 % 0.6 % (8.8) % (9.1) % 0.3 %
GMS - Etsy marketplace (1) 7.3 % 6.7 % 0.6 % (5.6) % (5.9) % 0.3 %
(1)As reported and currency-neutral GMS for the Etsy marketplace declined (2.4)% and (3.2)%, respectively, for the three months ended September 30, 2025. This resulted in an FX impact of 0.8%.
Results of Operations
Comparison of Three Months Ended September 30, 2026 and 2025
Revenue
Three Months Ended
September 30, 		Change
(in thousands, except percentages)
2026 2025 $ %
Revenue:
Marketplace $ 468,143 $ 429,081 $ 39,062 9.1 %
Percentage of total revenue 67.6 % 68.7 %
Services $ 224,326 $ 195,072 $ 29,254 15.0 %
Percentage of total revenue 32.4 % 31.3 %
Total revenue $ 692,469 $ 624,153 $ 68,316 10.9 %
Revenue increased driven by an increase in both marketplace and services revenue.
Marketplace revenue increased primarily due to a $19.6 million increase in Etsy transaction fee revenue and a $17.3 million increase in Etsy payments revenue, both driven by an increase in GMS.
Services revenue increased primarily due to a $30.9 million increase in advertising revenue, primarily driven by higher click volume on Etsy Ads.
Costs and Operating Expenses
Cost of Revenue
Three Months Ended
September 30, 		Change
(in thousands, except percentages)
2026 2025 $ %
Cost of revenue $ 189,324 $ 166,230 $ 23,094 13.9 %
Percentage of total revenue 27.3 % 26.6 %
Cost of revenue increased primarily due to an increase in payments fees, and to a lesser extent, an increase in hosting and bandwidth costs, capitalized website and app development amortization, and cash-based compensation and benefits.
Marketing
Three Months Ended
September 30, 		Change
(in thousands, except percentages)
2026 2025 $ %
Marketing $ 207,002 $ 173,369 $ 33,633 19.4 %
Percentage of total revenue 29.9 % 27.8 %
Marketing expenses increased primarily due to strong returns in specific channels which supported incremental spend. Paid GMS was 26% of overall GMS for the three months ended September 30, 2026 compared to 23% for the three months ended September 30, 2025.
Product development
Three Months Ended
September 30, 		Change
(in thousands, except percentages)
2026 2025 $ %
Product development $ 110,781 $ 99,766 $ 11,015 11.0 %
Percentage of total revenue 16.0 % 16.0 %
Product development expenses increased primarily due to increased cash-based compensation and benefits primarily related to severance associated with the Restructuring Plan, partially offset by a decrease in stock-based compensation expense.
General and administrative
Three Months Ended
September 30, 		Change
(in thousands, except percentages)
2026 2025 $ %
General and administrative $ 73,929 $ 73,783 $ 146 0.2 %
Percentage of total revenue 10.7 % 11.8 %
General and administrative expenses for the three months ended September 30, 2026 were flat when compared to the three months ended September 30, 2025.
Other Income (expense), net
Three Months Ended
September 30, 		Change
(in thousands, except percentages)
2026 2025 $ %
Other income, net:
Interest expense $ (5,617) $ (5,685) $ 68 (1.2) %
Interest and other income 19,452 14,282 5,170 36.2 %
Foreign exchange gain 3,433 548 2,885 526.5 %
Other income, net $ 17,268 $ 9,145 $ 8,123 88.8 %
Percentage of total revenue 2.5 % 1.5 %
Other income, net increased, driven by an increase in dividend income and to a lesser extent, changes in exchange rates that impact our non-functional currency cash and intercompany balances, which resulted in a higher gain for the three months ended September 30, 2026 when compared to the three months ended September 30, 2025.
Provision for Income Taxes
Three Months Ended
September 30, 		Change
(in thousands, except percentages)
2026 2025 $ %
Provision for income taxes $ (15,064) $ (15,554) $ 490 (3.2) %
Percentage of total revenue (2.2) % (2.5) %
The primary drivers of our income tax provision for the three months ended September 30, 2026 were tax expense on income before income taxes and state and local income taxes, partially offset by tax benefits from stock-based compensation due to a higher stock price upon exercise of stock options compared to the stock price upon grant.
The primary drivers of our income tax provision for the three months ended September 30, 2025 were tax expense on income before income taxes, partially offset by tax benefits from stock-based compensation due to a higher stock price upon exercise of stock options compared to the stock price upon grant.
Income (Loss) on Discontinued Operations
Three Months Ended
September 30, 		Change
(in thousands, except percentages)
2026 2025 $ %
Income (loss) on discontinued operations $ 739,880 $ (29,093) $ 768,973 (2,643.2) %
Income (loss) on discontinued operations for the three months ended September 30, 2026 primarily increased due to the gain on sale of Depop of $839.7 million, which was completed on July 30, 2026, partially offset by an increase in the operating loss of Depop. See Part I, Item 1, "Note 2-Discontinued Operations" for more information regarding the financial results of discontinued operations.
Comparison of Nine Months Ended September 30, 2026 and 2025
Revenue
Nine Months Ended
September 30, 		Change
2026 2025 $ %
(in thousands, except percentages)
Revenue:
Marketplace $ 1,356,990 $ 1,292,343 $ 64,647 5.0 %
Percentage of total revenue 68.1 % 69.3 %
Services $ 635,069 $ 573,145 $ 61,924 10.8 %
Percentage of total revenue 31.9 % 30.7 %
Total revenue $ 1,992,059 $ 1,865,488 $ 126,571 6.8 %
Revenue increased driven by an increase in both marketplace and services revenue.
Marketplace revenue increased primarily due to a $47.1 million increase in Etsy transaction fee revenue and an increase in payments revenue of $43.3 million, both driven by an increase in Etsy marketplace GMS. These increases in marketplace revenue were partially offset by a decrease of $35.6 million related to the sale of Reverb on June 2, 2025.
Services revenue increased primarily due to a $64.4 million increase in advertising revenue, primarily driven by higher click volume, and to a lesser extent, an increase in average price per click on Etsy Ads.
Costs and Operating Expenses
Cost of Revenue
Nine Months Ended
September 30, 		Change
2026 2025 $ %
(in thousands, except percentages)
Cost of revenue $ 549,271 $ 502,654 $ 46,617 9.3 %
Percentage of total revenue 27.6 % 26.9 %
Cost of revenue increased primarily due to an increase in payments fees and cost of refunds and, to a lesser extent, cloud-related hosting and bandwidth costs and capitalized website and app development amortization. This increase in cost of revenue was partially offset by the sale of Reverb on June 2, 2025.
Marketing
Nine Months Ended
September 30, 		Change
2026 2025 $ %
(in thousands, except percentages)
Marketing $ 572,169 $ 536,279 $ 35,890 6.7 %
Percentage of total revenue 28.7 % 28.7 %
Marketing expenses increased primarily due to strong returns in specific channels which supported incremental spend. This increase was partially offset by the sale of Reverb on June 2, 2025, which reduced marketing expenses. Paid GMS was 24% of overall GMS for the nine months ended September 30, 2026, compared to 23% for the nine months ended September 30, 2025.
Product development
Nine Months Ended
September 30, 		Change
2026 2025 $ %
(in thousands, except percentages)
Product development $ 310,754 $ 299,902 $ 10,852 3.6 %
Percentage of total revenue 15.6 % 16.1 %
Product development expenses increased primarily due to cash-based compensation and benefits from restructuring and other exit costs associated with the Restructuring Plan, partially offset by a decrease in stock-based compensation, and to a lesser extent, the sale of Reverb on June 2, 2025.
General and administrative
Nine Months Ended
September 30, 		Change
2026 2025 $ %
(in thousands, except percentages)
General and administrative $ 203,318 $ 223,718 $ (20,400) (9.1) %
Percentage of total revenue 10.2 % 12.0 %
General and administrative expenses decreased primarily due to the reversal of previously recognized Canadian digital services tax ("DST") expense in the first quarter of 2026, following the repeal of the DST in Canada in March 2026. Additionally, general and administrative expenses decreased due to the sale of Reverb on June 2, 2025.
Asset impairment charge
Nine Months Ended
September 30, 		Change
2026 2025 $ %
(in thousands, except percentages)
Asset impairment charge $ - $ 101,703 $ (101,703) NM
Percentage of total revenue - % 5.5 %
Asset impairment charge was $101.7 million in the nine months ended September 30, 2025, related to the impairment of the goodwill of Reverb. See Part I, Item 1, "Note 7-Goodwill" for more information.
Other Income (Expense), net
Nine Months Ended
September 30, 		Change
2026 2025 $ %
(in thousands, except percentages)
Other income (expense), net:
Interest expense $ (16,895) $ (12,862) $ (4,033) 31.4 %
Interest and other income 43,581 31,619 11,962 37.8 %
Foreign exchange gain (loss) 9,699 (40,424) 50,123 (124.0) %
Loss on sale of business
- (5,097) 5,097 NM
Other income (expense), net $ 36,385 $ (26,764) $ 63,149 (235.9) %
Percentage of total revenue 1.8 % (1.4) %
Other income, net increased from other expense, net, primarily driven by changes in exchange rates that impact our non-functional currency cash and intercompany balances, which resulted in a gain for the nine months ended September 30, 2026 as compared to a loss for the nine months ended September 30, 2025.
Provision for Income Taxes
Nine Months Ended
September 30, 		Change
2026 2025 $ %
(in thousands, except percentages)
Provision for income taxes $ (60,294) $ (59,321) $ (973) 1.6 %
Percentage of total revenue (3.0) % (3.2) %
The primary drivers of our income tax provision for the nine months ended September 30, 2026 were tax expense on income before income taxes and state and local income taxes, partially offset by a tax benefit related to research and development tax credits.
The primary drivers of our income tax provision for the nine months ended September 30, 2025 were tax expense on income before income taxes excluding the impairment charge and tax deficiencies from stock-based compensation due to a lower stock price at vesting of restricted stock units compared to the stock price upon grant.
Income (Loss) on Discontinued Operations
Nine Months Ended
September 30, 		Change
(in thousands, except percentages)
2026 2025 $ %
Income (loss) on discontinued operations $ 543,909 $ (62,900) $ 606,809 (964.7) %
Income (loss) on discontinued operations for the nine months ended September 30, 2026 primarily increased due to the gain on sale of Depop of $839.7 million, which was completed on July 30, 2026, partially offset by an increase in the operating loss of Depop. See Part I, Item 1, "Note 2-Discontinued Operations" for more information regarding the financial results of discontinued operations.
Non-GAAP Financial Measures
Other Key Financial Metrics
Given the sale of Depop on July 30, 2026, Etsy results are presented on a continuing operations basis, while Depop results are reported as discontinued operations for all periods presented through the Closing Date. Due to the sale of Reverb on June 2, 2025, continuing operations for the nine months ended September 30, 2025 includes Etsy marketplace and Reverb marketplace until the date of sale, while all other periods reflect the Etsy marketplace only. This makes year-over-year continuing operations results not directly comparable for the nine months ended September 30, 2026 and 2025, while the three months ended September 30, 2026 and 2025 are directly comparable.
To provide investors with a meaningful basis for comparing our ongoing operating results year-over-year, we have presented certain Etsy marketplace financial measures for the nine months ended September 30, 2025 in this Quarterly Report. These measures include the following non-GAAP financial measures for the nine months ended September 30, 2025 where we exclude the impact of Reverb: (1) Revenue and Revenue take rate, (2) Marketplace revenue, (3) Services revenue, (4) Gross profit, (5) Operating expenses, (6) Net income (loss) and Net income (loss) margin, and (7) Adjusted EBITDA and Adjusted EBITDA margin.
Management believes that presenting these Etsy marketplace non-GAAP financial measures is useful to investors because they:
•provide a clearer, normalized baseline to evaluate the organic growth, financial performance, and underlying trends of our remaining Etsy marketplace business;
•facilitate more direct year-over-year comparisons of our continuing operations by removing the impact of the divested Reverb marketplace; and
•align with how management evaluates the performance of the business, allocates resources, and sets internal operational targets moving forward.
These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for, financial information prepared in accordance with GAAP. Furthermore, our calculation of these non-GAAP measures may differ from similarly titled measures reported by other companies. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is provided in the following tables below (in thousands, except percentages):
Nine Months Ended September 30, 2025
Continuing Operations
(As Reported) 		Less: Reverb Marketplace Etsy Marketplace (Non-GAAP)
Revenue $ 1,865,488 $ 43,236 $ 1,822,252
Revenue take rate 24.7 % 11.3 % 25.4 %
Marketplace revenue $ 1,292,343 $ 35,580 $ 1,256,763
Services revenue $ 573,145 $ 7,656 $ 565,489
Gross profit $ 1,362,834 $ 21,797 $ 1,341,037
Operating expenses $ 1,161,602 $ 130,127 $ 1,031,475
Net income (loss) $ 115,147 $ (108,246) $ 223,393
Net income (loss) margin 6.2 % (250.4) % 12.3 %
Adjusted EBITDA
Adjusted EBITDA represents our net income adjusted to exclude: stock-based compensation expense and related payroll taxes; depreciation and amortization expense; provision for income taxes; interest and other non-operating (income) expense, net; foreign exchange (gain) loss; restructuring and other exit costs; acquisition, divestiture, and corporate structure-related expenses; asset impairment charge; loss on sale of business; and retroactive non-income tax income. The following tables reflect the reconciliation of net income (loss) to Adjusted EBITDA as well as the calculation of Adjusted EBITDA margin for continuing operations, the Etsy marketplace, and the Reverb marketplace for the periods indicated (in thousands, except percentages):
Three Months Ended
September 30,
2026 2025
Continuing Operations Continuing Operations
Net income $ 113,637 $ 104,596
Excluding:
Stock-based compensation expense and related payroll taxes 47,941 56,521
Depreciation and amortization expense 16,059 13,299
Provision for income taxes 15,064 15,554
Interest and other non-operating income, net (12,768) (7,680)
Foreign exchange gain (3,433) (548)
Restructuring and other exit costs 33,864 1,883
Acquisition, divestiture, and corporate structure-related expenses - (18)
Adjusted EBITDA $ 210,364 $ 183,607
Divided by:
Revenue $ 692,469 $ 624,153
Adjusted EBITDA margin 30.4 % 29.4 %
Nine Months Ended
September 30,
2026 2025
Continuing Operations Continuing Operations
(As Reported) 		Less: Reverb Marketplace Etsy Marketplace (Non-GAAP)
Net income (loss) $ 332,638 $ 115,147 $ (108,246) $ 223,393
Excluding:
Stock-based compensation expense and related payroll taxes 158,303 169,542 3,035 166,507
Depreciation and amortization expense 46,603 45,086 5,078 40,008
Provision for income taxes 60,294 59,321 109 59,212
Interest and other non-operating (income) expense, net (25,609) (17,521) 380 (17,901)
Foreign exchange (gain) loss (9,699) 40,424 (573) 40,997
Restructuring and other exit costs 33,864 1,480 - 1,480
Acquisition, divestiture, and corporate structure-related expenses 75 7,148 4,093 3,055
Asset impairment charge - 101,703 101,703 -
Loss on sale of business - 5,097 - 5,097
Retroactive non-income tax income (6,036) - - -
Adjusted EBITDA $ 590,433 $ 527,427 $ 5,579 $ 521,848
Divided by:
Revenue $ 1,992,059 $ 1,865,488 $ 43,236 $ 1,822,252
Adjusted EBITDA margin 29.6 % 28.3 % 12.9 % 28.6 %
Free Cash Flow
Free cash flow represents our net cash provided by operating activities, reduced by purchases of property and equipment and website and app development that are included in cash flows from investing activities. The following table reflects the reconciliation of operating activities to free cash flow for combined continuing and discontinued operations on a trailing twelve month basis (in thousands):
As of September 30,
2026 2025
Continuing and Discontinued Operations Continuing and Discontinued Operations
Net cash provided by operating activities $ 598,110 $ 691,249
Purchases of property and equipment (5,519) (18,154)
Website and app development (35,466) (37,738)
Free cash flow $ 557,125 $ 635,357
Liquidity and Capital Resources
Cash and cash equivalents and short-term investments were $2.3 billion as of September 30, 2026. Additionally, we have $150.4 million in long-term investments, a majority of which we can liquidate at short notice and with minimal penalties if needed. We also have the ability to draw down on our $400.0 million senior secured revolving credit facility (the "2023 Credit Agreement"). As of September 30, 2026, we had net working capital from continuing operations of $687.1 million and in the nine months ended September 30, 2026, we had positive operating cash flows of continuing operations of $511.3 million. We believe that this capital structure, as well as the nature and framework of our business, will allow us to meet all debt covenants, sustain our business operations, and be able to react to changing macroeconomic conditions.
As of September 30, 2026, a majority of our cash and cash equivalents, short-term, and long-term investments balance was held in the United States. Our cash and cash equivalents are held for future investments, working capital funding, and general corporate purposes. We fund our non-U.S. operations from our funds held in the United States on an as-needed basis.
We typically invest in short- and long-term instruments, which are intended to allow us to preserve our principal, maintain the ability to meet our liquidity needs, deliver positive yields across a balanced portfolio, and continue to provide us with direct fiduciary control. In accordance with our investment policy, all investments, other than investments made through our Impact Investment Fund, have maturities no longer than 37 months, with the average maturity of these investments maintained at 12 months or less.
On October 1, 2026, we paid $10.8 million in cash and recorded $1.3 million to additional paid-in capital to settle conversion notices of $12.1 million aggregate principal amount of outstanding 2019 Notes and paid $637.8 million in cash to settle the remaining aggregate principal amount of our outstanding 2019 Notes. The 2019 Capped Call Transactions expired on September 29, 2026, the second scheduled trading day immediately preceding the October 1, 2026 maturity date of the 2019 Notes. The 2019 Capped Call Transactions expired unexercised, and no shares of our common stock or cash were delivered to us. Our ability to pay our debt when due or to refinance our outstanding indebtedness, including the 2020 Notes, the 2021 Notes, and the 2025 Notes depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. See Part II, Item 1A, "Risk Factors."
Sources of Liquidity
We have the ability to draw down on the 2023 Credit Agreement. See Part I, Item 1, "Note 11-Debt" for more information on the 2023 Credit Agreement.
Upon completion of the sale of Depop to eBay, which closed on July 30, 2026, we received approximately $1.4 billion in cash. Depop has historically operated at a loss and required recurring capital investment by the Company to fund Depop operations. Going forward, we expect that the elimination of these cash outflows will contribute favorably to operating and free cash flow generation. See Part I, Item 1, "Note 2-Discontinued Operations" for more information.
We believe that our existing cash and cash equivalents and short- and long-term investments, together with cash generated from operations, will be sufficient to meet our anticipated operating cash needs for at least the next 12 months. While this belief is based on our current expectations and assumptions, in light of current macroeconomic conditions, our future capital requirements and the adequacy of available funds will depend on many factors, including those described in Part II, Item 1A, "Risk Factors" in this Quarterly Report.
Cash Flows
Nine Months Ended
September 30,
(in thousands)
2026 2025
Cash provided by (used in):
Operating activities of continuing operations $ 511,293 $ 394,879
Investing activities of continuing operations (60,772) 36,751
Financing activities (843,789) (4,582)
Operating activities of discontinued operations (230,307) (18,589)
Investing activities of discontinued operations 1,302,813 (5,222)
Net Cash Provided by Operating Activities of Continuing Operations
Our cash flows from continuing operations are largely dependent on revenue generation and net income from continuing operations, as well as working capital movements and non-cash items. Non-cash working capital at any specific point in time is subject to many variables, including variability in the timing of cash receipts and payments (including payment of taxes), and vendor payment terms. The increase in the nine months ended September 30, 2026 of $116.4 million, compared to the same period in 2025, was primarily due to an increase of $82.7 million in the change in working capital less cash and an increase of $33.7 million in net income, excluding non-cash items.
Net Cash (Used in) Provided by Investing Activities of Continuing Operations
Net cash (used in) provided by investing activities of continuing operations results from purchases and maturities of investments and capital expenditures, including investments in website and app development and purchases of property and equipment to support our business initiatives, and any proceeds from sale of business. The decrease in the nine months ended September 30, 2026 of $97.5 million, compared to the same period in 2025, was primarily due to the proceeds from sale of Reverb, net of cash in 2025.
Net Cash Used in Financing Activities
Net cash used in financing activities primarily consists of cash outflows for stock repurchases and payment of tax obligations on vested equity awards, and any cash inflows from the issuance of convertible notes. The increase in cash used in financing activities during in the nine months ended September 30, 2026 of $839.2 million, compared to the same period in 2025, was primarily due to the issuance of the 2025 Notes which resulted in cash inflow of $700.0 million in 2025, which did not reoccur in 2026, and to a lesser extent, an increase in stock repurchases.
Net Cash Used in Operating Activities of Discontinued Operations
Net cash used in operating activities of discontinued operations is related to net income from discontinued operations, as well as working capital movements and non-cash items. The increase in the nine months ended September 30, 2026 of $211.7 million, compared to the same period in 2025, was primarily due to an increase of $268.6 million in net loss from discontinued operations, excluding non-cash items, offset by an increase of $56.9 million in the change in working capital less cash.
Net Cash Provided by (Used in) Investing Activities of Discontinued Operations
Net cash provided by (used in) investing activities of discontinued operations primarily consists of cash inflows of $1.4 billion from the sale of Depop, net of cash sold of $78.8 million, in the third quarter of 2026.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. We continue to monitor the effects of global macroeconomic and geopolitical factors on our results of operations, cash flows, and financial position. We believe we have used reasonable estimates and assumptions in preparing the condensed consolidated financial statements. Our actual results could differ from these estimates.
There have been no significant changes to our critical accounting policies and estimates included in our Annual Report.
Recent Accounting Pronouncements
See Part I, Item 1, "Note 1-Basis of Presentation and Summary of Significant Accounting Policies" for information regarding recently adopted and recently issued accounting pronouncements.
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