ETSY 10-K & 10-Q changes, risk factors and insider trading

•inflation, interest rates, recessionary factors, foreign exchange rate volatility, tariffs and other trade barriers, disruptions to the banking industry, changing consumer shopping preferences, continued pressure on consumer discretionary product spending, weather, domestic and global geopolitical uncertainties, various types of cultural events, public health crises, supply-chain disruptions, an increasingly competitive retail environment, and employment levels, among other factors (collectively, “Macro Conditions”).;

•our success in executing on our strategystrategy, the effectiveness of our strategy, and the impact of any changes in our strategy;

•the success of our “Houseacquisitions, ofdispositions, Brands”or strategypartnerships;

Our guidance includes forward-looking statements based on projections prepared by our management. Projections are based upon a number of assumptions and estimates that are based on information known when they are issued. While presented with numerical specificity, projections are inherently subject to significant business, economic, and competitive uncertainties and contingencies relating to our business, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions and developments, some of which may prove incorrect and/or may change. Some of those key assumptions include the timing and impact of broad Macro Conditions, particularly in our core markets,geographies, and the resulting impact of these factors on future consumer spending patterns and our business. These assumptions are inherently difficult to predict, particularly in the long term.

The trustworthiness and safety of our marketplaces and the connections within our communities are important to our success. If we are unable to retainmaintain and expand that trust and keep our existingmarketplaces buyers and sellers and activate new ones,safe, our financial performancebusiness could decline.be adversely affected.

Creating trusted brands is one of the key elements of our strategy. We are focused on ensuring that our marketplaces embody our mission and values, and that we deliver trust and reliability throughout the buyer and seller experiences. Our reputation and brands depend, in part, upon our ability to maintain trustworthy marketplaces, and also upon our sellers, the quality of their offerings, their adherence to our policies, and their ability to deliver a trusted purchasing experience. We view the trustworthiness and reliability of our marketplaces, as well as the connections we foster in our buyer/seller communities, to be cornerstones of our business and key to our success. Many things could undermine these cornerstones, such as:

•a failure to enforce our policies effectively, consistently, and transparently, including, for example, by allowing the repeated widespread listing of prohibited items inthat are unsafe, infringe intellectual property rights, or otherwise violate our marketplacesmarketplace policies;

Our tools, processes, and controls overdesigned to detect and address potential fraud and policy violations are important to maintaining user trust, but they may not be adequate and may not be sufficient to keep up with quickly-shifting techniques used by those attempting to undertake fraudulent activity on our platforms. TheSellers, buyers, and other third parties use of increasingly sophisticated techniquestechniques, which has made, and may continue to make, fraudulent activity bymore sellers and buyers increasingly difficultchallenging to combat and may increase its impact. WeEven take action against sellers whoif we are awaresuccessful in defending against these tactics, we may havebe violatedrequired to spend significant resources on those efforts, which may distract our policiesmanagement orand engageotherwise innegatively fraud.impact Theour volumeresults of enforcement actions against sellers for such activities has increased at times, and may increase again in the future.operations. Furthermore, our actions may be insufficient, may not be timely, and may not be effective in creatingmitigating aharm good purchase experience forto our buyersbuyers, sellers, or other third parties or avoiding negative publicity. While we regularly update our processes for handling complaints and detecting policy violations and fraud, these processes are by their nature imperfect in a dynamic marketplace, and include risks to us, our sellers, and our buyers from both under-enforcement and over-enforcement, as well as potentially heightened friction on our marketplaces, which may reduce seller and buyer trust and engagement.

We continue to evolve our marketplaces and invest to improve our customer experience. If our efforts are unsuccessful, or if our customer service platforms or our trust and safety program fail to meet legal requirements or buyers’ and sellers’ expectations, we may need to invest in significant additional resources. If we are unable to maintain trusted brands and marketplaces, our ability to attract and retain buyers and sellers could be harmed.

Our business, financial performance, and growth depends on our ability to attractattract, retain, and retaindrive momentum with an active and engaged communities of buyers and sellers.

Our financial performance, specifically our GMS, revenue, and Adjusted EBITDA, has beenbeen, and will continue to bebe, significantly determined by our success in attracting and retaining active buyers and active sellers and increasing their engagement. Etsy marketplace active buyers and GMS per active buyer on a trailing twelve month basis have declined year-over-year, and to drive growth, we will need to drive active buyer momentum. We believe that many new buyers and sellers find us by word of mouth and other non-paid referrals from existing buyers and sellers. If existing buyers do not find our platforms appealing, for example, because of a negative experience, lack of competitive shipping charges, delayed shipping times, inadequate customer service, buyer fees or lack of buyer-friendly features, declining interest in the goods offered by our sellers, lack of desirable inventory,listings, or other factors, they may make fewer purchases and they may not refer others to us. Likewise, if existing sellers are dissatisfied with their experience on our platforms, or feel they have more attractive alternatives, they may stop listing items in our marketplaces and using our services and may stop referring others to us, which could negatively impact our financial performance. Further, if trends supporting self-employment and the desire for supplemental income were to reverse, the number of sellers offering their goods in our marketplaces and the number of goods listed in our marketplaces could decline.

A perception that our marketplaces’ levels of responsiveness and support for our sellers and buyers are inadequate could damage our reputation, and reduce our sellers’ willingness to sell and buyers’ willingness to shop on our marketplaces. In some situations, we may choose to reimburse our buyers for their purchases to help avoid harm to our reputation. For example, we offer Etsy Purchase Protection, a program that refunds buyers when a qualifying order is not received, is not as described, or arrives late or damaged. While we cover the reimbursement for qualifying orders under Etsy Purchase Protection, we also take steps to cover certain reimbursements that do not relate to qualified orders, such as requiring reserves from some sellers based on indications they may not be able to fulfill orders and other factors. Depop and Reverb have similar programs. Our cost toof refund qualifying ordersrefunds may exceed our expectations, and despite our efforts, we aredo not always, and in the future may not be, able toalways recover the funds we expend for reimbursements unrelated to qualified orders, both ofreimbursed, which could impact our financial performance. When we do recover buyer refund amounts from sellers, it may increase general seller dissatisfaction and reduce their desire to continue selling using our platforms. In addition, buyers may not be refunded the full amount of their purchase, which could negatively impact their experience with, or perception of, our marketplaces. In addition, we have used, expect to continue to use, and may expand use of, disbursement holds and other fraud prevention and enforcement mechanisms to prevent and mitigate losses from fraud even though these restrictions may impact our value proposition for sellers. Although we are focused on enhancing customer service, our efforts may be unsuccessful, and our sellers and buyers may be disappointed in their experience and not return.

In addition, our GMS and revenue are concentrated in our most active buyers and sellers. If we lose a significant number of buyers or sellers, or our buyers or sellers do not maintain their level of activity for any reason, our financial performance could be harmed. Even if we are able to attract new buyers and sellers to replace the ones that we may lose, we may not be able to do so at comparable levels, they may not maintain the same level of activity, and the GMS and revenue generated from new buyers and sellers may not be as high as the GMS and revenue generated from the ones who leave, or reduce their activity level on our marketplaces. If we are unable to attract and retain buyers and sellers, or our buyers or sellers do not maintain their level of activity, our business and financial performance could be harmed.

Additionally, the demand for the goods listed inon our marketplaces is dependent on consumer preferences and available discretionary spending, which can and do change quickly and may differ across generations, genders, cultures, and cultures.other demographic characteristics. If demand for the goods that our sellers offer declines, or if demand for goods falls and is not replaced by demand in new or different categories, we may not be able to attract and retain buyers and our business could be harmed. Further, a shift in trends away from unique or vintage goods, socially-conscious consumerism, or second-hand fashion, or specialty items such as musical instruments, could also make it more difficult to attract new buyers and sellers. Under any of these circumstances,If we mayare haveunable difficultyto attractingattract newand retain buyers and sellers, or our buyers or sellers withoutdo incurringnot additionalmaintain expense.their level of activity, our business and financial performance could be harmed.

Our sellers manage their shops, certain shop policies, products and product descriptions, shipping, and returns. As a result, we do not have the ability to control important aspects of buyers’ experiences on our platforms. For example, buyers may report that they have not received the items they purchased, that the items received were not as represented by a seller, or that a seller has not been responsive to their questions. In addition, popular or trending sellers may experience an influx of orders that may be beyond their ability to fulfill in a timely manner. While we have introduced features designed to protect buyers, there can be no assurance that these measures will be effective in combating fraudulent transactions or improve overall buyer satisfaction. Further, anything that prevents the timely processing of orders or delivery of goods to our buyers could harm our sellers. If buyers have a negative purchase experience, whether due to service interruptions or other reasons, or if sellers are unable to timely fulfill their orders from buyers, our reputation could be harmed. In addition, negative publicity and sentiment generated as a result of these types of complaints, or any associated enforcement action taken against sellers, could reduce our ability to attract and retain our sellers and buyers or damage our reputation.

We track certain operational metrics, including active buyers and active sellers, GMS, GMS from specific categories of goods, classes of buyers or sellers, or specific platforms, and other information about our communities and the performance of our platforms, with internal systems and tools or manual processes. These metrics are not independently verified by a third party. The methodologies used to measure certain of these metrics require significant judgment, are susceptible to errors, may change over time, and may differ from estimates or metrics published by third parties due to differences in sources, methodologies, or the underlying assumptions. We also use surveys to collect and track information about our buyers and sellers and rely on third-party data, which we do not independently verify, to evaluate and report on our opportunity. Our internal systems, tools, and processesprocesses, and our surveys or data collection methodologies have a number of limitations,limitations and may have errors or could change over time, any of which could result in unexpected changes to our metrics, including the metrics we publicly disclose. Similarly, our third-party data sources have in the past and may in the future revise the historical data provided as a result of adjustments to their prior estimates or for other reasons. If the internal systems and tools, processes, or surveys we use to track these metrics under count or over count performance or contain algorithmic or other technical errors, the data we report may not be accurate. While these numbers are based on what we believe to be reasonable estimates of our metrics, there are inherent challenges in measuring this data. In addition, limitations or errors with respect to how we measure data or with respect to the data that we measure or obtain from third parties may affect our understanding of certain details of our business or our opportunity, which could affect our long-term strategies. If our operating metrics are not accurate, or if investors do not perceive them to be accurate, investors may lose confidence in our operating metrics and business, and we expect that we could be subject to legal claims, and our business, reputation, financial condition, and results of operations wouldcould be adversely affected.

If we experience a technology disruption or failure that results in a loss of information, if personal data or sensitive information about members of our communities or employees is misusedmisused, exfiltrated, or disclosed, or if we or our third-party providers are unable to protect against software and hardware vulnerabilities, service interruptions, cyber-related events, ransomware, security incidents, or other security breaches, then members of our communities may curtail use of our platforms, we may be exposed to liability or incur additional expenses, and our reputation might suffer.

Like all online services, we are vulnerable to power outages, telecommunications failures, phishing, social engineering, malware, credential stuffing, account takeover, and catastrophicother events,attempts to gain unauthorized access to member accounts or data, as well as computer viruses, break-ins, intentional or accidental actions or inaction by employees or others with authorized access to our networks, phishingcyber attacks, denial-of-service attacks, malicious or destructive code, malware, ransomware or other extortion attacks,breaches, and other cyber attacks, breaches and security incidents. We also rely on service providers and other third-party vendors, who are subject to the same vulnerabilities, and whose security and data protection practices we do not control. We and our third-party vendors regularly experience data incidents and cyber-related events that may result in technology disruptions and/or security breaches, including intentional, inadvertent, or social engineering breaches occurring through Etsy or third-party service provider technical issues, vulnerabilities, or employees.breaches. Any of these occurrences could lead toto, among other things, interruptions or shutdowns of one or more of our platforms, loss of data, unauthorized disclosure or use of our employees’ or members’ personal or financial information of our members or employees, ordata, theft of our intellectual property or user data.data, Furthermore,unauthorized ifaccess ourto employees,member contractors,accounts, or third-partydisruption serviceof providers fail to comply with our internal security policies and practices, member or employee data may be improperly accessed, used, or disclosed. Additionally, employees, contractors, or service providers have and may inadvertently misconfigure resources or misdirect certain communications in manners that may lead to security incidents, which could be expensive and time-consuming to correct.transactions. As we strive to reignite growth in our business, expand internationally, and gain greater public visibility, we may continue to face a higher risk of being targeted by cyber attacks.

Although we have integrateduse a variety of processes, technologies, and controls to assist in our efforts to assess, identify, and manage material cybersecurity-related risks, these are not exhaustive, and we cannot assure that they will be adequate to prevent or detect service interruption, system failure, data loss or theft, or other material adverse consequences, directly or through our vendors. Additionally, these measures have not always been in the past, and in the future may not be, sufficient to prevent or detect a cyber attack, system failure, or security breachbreach, particularly given the increasingly sophisticated tools and methods used by hackers, state actors, organized cyber criminals,cybercriminals and cyberother terrorists.bad actors. The costs and effort to respond to a security breach and/or to mitigate any security vulnerabilities that may be identified could be significant, and our efforts to address these problems may not be successful, and these problemswhich could result in unexpected interruptions, delays,impair cessationour ofability service,to negativeoperate publicity,our negative seller or buyer sentiment,marketplaces, and cause other harm to our business and our competitive position. We could be required to fundamentally change our business activities and practices in response to a security breach or related regulatory actions or litigation, which would have an adverse effect on our business.

In addition, the industry has generally moved to online remote infrastructure for core work and, as a result, we and our partners may be more vulnerable to cyber attacks. If a natural disaster, power outage, connectivity issue, or other event that impacted our employees’ ability to work remotely were to occur, it may be difficult or, in certain cases, impossible, for us to operate our business for a substantial period of time. The prevalence of remote working for employees, vendors, or contractors may also result in increased consumer privacy, IT security, and fraud concerns and/or increased administrative costs.

If we experience, or are perceived to experience, security breaches that result in marketplace performance or availability problems or the loss, compromise or unauthorized disclosure of personal data or other sensitive information, or if we or our vendors fail to respond appropriately to any security breaches that we or they may experience, or are perceived to do so, people may become unwilling to provide us the information necessary to set up an account with us to become a new seller or buyer. Existing sellers and buyers may also stop listing new items for sale, decrease their purchases,purchases or use of our websites, or close their accounts altogether. We could also face damage to our reputation, potential liability, regulatory investigations in multiple jurisdictions, and costly remediation efforts and litigation, which may not be adequately covered by, and which may impact our future access to, insurance. Any of these results could harm our growth prospects, our business, and our reputation for maintaining trusted marketplaces.

The software underlying our platforms is highly interconnected and complex. It contains vulnerabilities and may contain undetected errors that may only be discovered after the code has been released. We rely heavily on a software engineering practice known as “continuous deployment,” meaning that we frequently release software code to our platforms. For the Etsy marketplace platform we typically release software code many times per day. This practice may result in the more frequent introduction of errors or vulnerabilities into the software underlying our platforms, which can impact the user experience and functionality of our marketplaces. Additionally, due to the interconnected nature of the software underlying our platforms, updates to parts of our code, third-party and open source code, and application programming interfaces, on which we rely and that maintain the functionality of our marketplaces and business, could have an unintended impact on other sections of our code, which may result in errors or vulnerabilities to our platforms that negatively impact the user experience, functionality or accessibility of our marketplaces. In some cases, such as our mobile apps, errors may only be correctable through updates distributed through slower, third-party mechanisms, such as app stores, and may need to comply with third-party policies and procedures to be made available, which may add additional delays due to app review and user delay in updating their mobile apps. In addition, our systems are increasingly reliant on artificial intelligence, machine learning systems,AI and large language models, which are complex, subject to increasing litigation and regulatory scrutiny, and may have errors or inadequacies that are not easily detectable. In some instances, we may make use of third-party artificial intelligenceAI models, including foundational models, that have been pre-trained on data which may be insufficient, erroneous, stale, contain biased information, or infringe intellectual property or other rights. These models may inadvertently reduce our efficiency, or may cause unintentional or unexpected outputs that are incorrect, do not match our business goals, do not comply with our policies or applicable legal requirements, including the E.U. Artificial Intelligence Act and similar U.S. state and international regulations, or otherwise are inconsistent with our brands, guiding principles, and mission. Any errors or vulnerabilities discovered in our code after release could also result in damage to our reputation, lossbuyer ofor membersseller of our communities,attrition, loss of revenue, or liability for damages, any of which could adversely affect our growth prospects and our business.

Google Cloud provides a distributed computing infrastructure as a service platform for the Etsy marketplace’s business operations. Our products and services rely in significant part on continued access to, and the continued stability, reliability, and flexibility of Google Cloud. Any significant disruption of, or interference with, our use of Google Cloud would negatively impact our operations, and our business would be seriously harmed. In addition, if hosting costs increase over time, and if we require more computing or storage capacity, our costs could increase disproportionately. If we are unable to grow our revenues faster than the cost of utilizing the services of Google or similar providers, our business and financial condition could be adversely affected. Further, any transition of the cloud services currently provided by Google Cloud to another cloud provider would be difficult to implement and would cause us to incur significant time and expense. Reverb and Depop relyrelies on Amazon Web Services for theirits primary production environment, and thosethat marketplacesmarketplace areis thus subject to analogous risks.

Our business operations depend upon a number of third-party service providers, such as cloud service providers, marketing platforms and providers, payments and shipping providers, contingent labor teams, background and identity check providers, and network and mobile infrastructure providers. Any disruption in the services provided by third parties, any failure on their part to deliver their services in accordance with our scale and expectations, or any failure on our part to maintain appropriate oversight on these third-party providers during the course of our engagement with them, or appropriate redundancies, could significantly harm our business.

In addition, our sellers rely on continued and unimpeded access to postal services and shipping carriers to deliver their goods reliably and timely to buyers. Our sellers have at times experienced transportation service disruptions and delays in the delivery of their goods. In particular, recent volatility in the global tariff environment has pressured delivery times or carrier service availability as carriers adapt to keep pace with new requirements relating to the calculation, collection, and remittance of tariffs and related fees. If these shipping delays or interruptions continue or worsen, or if shipping rates and fees increase significantly, our sellers may have increased costs,costs or elect not to ship into particular markets, and/or our buyers may have a poor purchasing experience and may lose trust in our marketplaces, which could negatively impact our business, financial performance, and growth prospects.

Our sellers and buyers rely on access to the internet or mobile networks to access our marketplaces. We also depend on widely adopted third-party platforms to reach our customers, such as popular mobile, social, search, and advertising offerings. Internet service providers may choose to disrupt or degrade access to our platforms or increase the cost of such access. Mobile network operators or operating system providers could block or place onerous restrictions on the ability to download and use our mobile apps or deny or condition access to application programming interfaces or documentation, limiting the functionality of our products or services on the platform, including in ways that could require us to make significant changes to our marketplaces, websites, or mobile apps. If we are not able to deliver a rewarding experience on these platforms, if our or our sellers’ or buyers’ access to these platforms is limited, if the cost or terms of accessing these platforms increases or changes, or if these large platforms implement features that compete with us or our sellers, then our business may suffer.

Internet service providers, mobile network operators, operating system providersproviders, and/or app stores regularly place technical and policy restrictions on applications and platforms that use their services, which restrictions change over time. They have also and could in the future attempt to charge us for, or restrict our ability to access or provide access to, certain platforms, features, or functionality that we use in our business, and such changes may adversely affect our marketplaces.

Our payments systems have both operational and compliance risks, including in-house execution risk and dependencydependence on third-party service providers.

We rely upon third-party service providers to perform key functions for our payments platforms, including payments processing and payments disbursing, compliance, currency exchange, identity verification, sanctions screening, tax collection, and fraud analysis. Failure of these service providers to perform adequately, or changes to or termination of our relationships with these service providers, has and could again negatively affect our sellers’ ability to receive payments.payments, Foror example,potentially result in thelegal first quarter of 2023, Silicon Valley Bank, one of our payment disbursement providers, collapsed and, as a result, approximately 0.5% of our active sellers experienced a delay (generally one business day) receiving their payments while we engineered a new process flow to enable those sellers to receive payments from another disbursement account.liability.

The global scope of our business subjects us to risksmacroeconomic associatedand withgeopolitical operations abroad.risks.

•complying with different (and sometimes conflicting) laws and regulatory standards (particularly including those related to the use and disclosure of personal information, online payments and money transmission, intellectual property, product safety and liability, consumer protection, online platform liability, minors’ online safety, e-commerce marketplace regulation, artificial intelligence,AI, labor and employment laws, business practices, including those related to corporate social responsibility and sustainability, and taxation of income, goods, and services), including attempts to apply these laws and regulatory standards extra-territorially;

•barriers to international trade, such as tariffs, customs, or other taxes, or, when applicable, cross-borderreductions limitsto placedor onthe U.S.elimination technologyof companiesthe use of de minimis entry thresholds;

•uncertainties around the continuing impact on operations of supply chain disruptionsdisruptions, interruptions of order or payment processing, interruptions in sellers’ supply chains, transportation and shipping disruptions, customs delays, public health crises, political unrest, and geopolitical events such as natural disasters, pandemics, terrorism, and acts of war;

•uncertainties and instability in the U.K. and E.U. markets caused by the patchwork of cross-border service agreements triggered by Brexit.

Our ability to recruit and retain a talented and broadly diverse group of employees and retaindeploy keythat employeestalent effectively is important to our success. Significant attrition or turnover could impact our ability to grow our business.

Our ability to attract, retain, engage, and engageeffectively deploy a talented and broadly diverse group of employees, including our management team,employees is important to our success. We strive to attract, retain, and engage employees who share our dedication to our buyer and seller communities and our mission to “Keep Commerce Human.” We cannot guarantee we will be able to continue to attract and retain the number or caliber of employees we need to maintain our competitive position, particularly given the uncertainty of the current macroeconomic environment.

•continuing ability to offer competitive compensation and benefits, including stock-based compensation, for our employees, given our historical stock price volatility and as more external scrutiny is placed on stock-based compensation expenses;

We operate in a flexible work model in which a significant percentage of our workforce works remotely while others work from our offices on a hybrid schedule. It is possible that these arrangements could have a negative impact on our employee engagementengagement, on our ability to effectively deploy our talent, and on the execution of our business plans and operations. We have structured our work modes to reinforce our workplace culture, and optimize the natural creativity and innovation that arises from live cross-functional and team gatherings in our offices. If our work modes are not aligned with our employees’ preferences, or if we are unsuccessful in optimizing our hybrid work environment, it may adversely affect our ability to recruitrecruit, retain, and retaineffectively deploy employees. If we continue to operate with a significant portion of our employees located outside of our offices, and we are unable to adapt to new hybrid work modes, it could negatively impact our company culture.

If we experience increased voluntary attrition in the future, and/or if we are unable to attract and retain qualified employees in a timely fashion or on reasonable terms, particularly in critical areas of operations such as engineering, and/or if we are otherwise not able to place the right employees in the right roles to drive execution of our business plans, we may not achieve our strategic goalsgoals, and our business and operations could be harmed.

Our intellectual property is an essential asset of our business. To establish and protect our intellectual property rights, we rely on a combination of copyright, trademark, and patent laws, as well as confidentiality procedures and contractual provisions. We also rely on trade secret protection for parts of our technology and intellectual property. The efforts we have taken to protect our intellectual property may not be sufficient or effective. We generally do not elect to register our copyrights, relying instead on the laws protecting unregistered intellectual property, which may not be sufficient. We rely on both registered and unregistered trademarks, which may not always be comprehensive in scope. In addition, our copyrights, trademarks, and patents may be held invalid or unenforceable if challenged, and may be of limited territorial reach. While we have obtained or applied for patent protection with respect to some of our intellectual property, patent filings may not be adequate alone to protect our intellectual property, and may not be sufficiently broad to protect our proprietary technologies. Additionally, it is expensive to maintain these rights, both in terms of application and maintenance costs,costs and the time and cost required to defend such rights, if necessary. From time to time, we acquire or license intellectual property from third parties, but these acquired assets, like our internally developed intellectual property, may lapse, be abandoned, be challenged or circumvented by others, be held invalid, be unenforceable, or may otherwise not be effective in protecting our platforms.

In addition, we may not be effective in policing unauthorized use of our intellectual property and authorized uses may not have the intended effect. Even when we do detect violations, enforcing our rights may require us to engage in litigation, use of takedowns and similar procedures, or licensing. Any enforcement efforts we undertake, including litigation, could be time-consuming and expensive and could divert our management’s attention. In addition, our efforts may be met with defenses and counterclaims challenging the validity and enforceability of our intellectual property rights or may result in a court determining that our intellectual property rights are invalid or unenforceable. If we are unable to adequately prevent unauthorized use or misappropriation of our intellectual property by third parties, the value of our brand and other intangible assets may be diminished and customers may lose trust in Etsy. Any of these events could have an adverse effect on our business.

We attempt to protect our intellectual property and confidential informationinformation, in partpart, through confidentiality, non-disclosure, and invention assignment agreements with employees, advisors, service providersproviders, and other third parties who develop intellectual property on our behalf, or with whom we share information. However, we cannot guarantee that we have entered into such agreements with each party that has developed intellectual property on our behalf or that has or may have had access to our confidential information, trade secretssecrets, and other intellectual property. These agreements may also be breached, or may not effectively prevent unauthorized use, disclosure, or misappropriation of our confidential information or intellectual property. Moreover, these agreements may not provide an adequate remedy for breaches or in the event of unauthorized use or disclosure of our confidential information or infringement of our intellectual property. The legal framework surrounding protection of intellectual property changes frequently throughout the world, particularly as to technologies used in e-commerce, and these changes may impact our ability to protect our intellectual property and defend against third-party claims. If we are unable to cost-effectively protect our intellectual property rights, our business could be harmed.

In the ordinary course of our business, there are numerous transactions and calculations for which the ultimate tax determination is uncertain. Although we believe that our tax positions and related provisions reflected in the financial statements are fully supportable, we recognize that these tax positions and related provisions may be challenged by various tax authorities. These tax positions and related provisions are reviewed on an ongoing basis and are adjusted as additional facts and information become available, including progress on tax audits, changes in interpretation of tax laws, developments in case law, and closing of statute of limitations. To the extent that the ultimate results differ from our original or adjusted estimates, our actual tax liability and/or effective tax rate cancould be adversely affected.

You should read the following discussion and analysis of our financial condition and results of operations together with our Consolidated Financial Statements and related notes and other financial information included elsewhere in this Annual Report. This discussion, particularly information with respect to our outlook, key trends and uncertainties, and our plans and strategy for our business, and our performanceperformance, 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 Annual Report, particularly in Part I, Item 1A, “Risk Factors.” We have omitted discussion of 20222023 results and year-to-year comparisons of 2024 and 2023 where it would be redundant to the discussion previously included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.2024.

Our primaryThe Etsy marketplace is the global destination for unique, creative goods from independent sellers.sellers, It connectsconnecting artisans and entrepreneurs with thoughtful consumers seeking items that reflect their tastes and values. We aimalso tooperate createDepop Limited (“Depop”), a virtuousleading cyclefashion thatresale benefitsmarketplace allacquired ofin our stakeholders. Ultimately, our success is tied to our sellers; we make money when they do. In addition to providing them with access to tens of millions of buyers, we offer tools and services to help sellers grow. For buyers, we surface quality listings that offer great value and provide a reliable shopping experience. When buyers are satisfied, it fuels this cycle.2021.

TheOn resultsJune 2, 2025, we completed the sale of Reverb Holdings, Inc. (“Reverb”), our musical instrument marketplace, and on August 10, 2023, we completed the sale of the parent holding company of Elo7 Serviços de Informática S.A. (“Elo7”), a Brazil-based marketplace for handmade and unique items. The results of Reverb, until its sale on June 2, 2025, and Elo7, through its sale on August 10, 2023, are included in all financial results and other metrics discussed in this report, unless otherwise noted.

We generate revenue primarily from marketplace activities, including transaction fees (inclusive of offsite advertising), payments processing,processing fees, and listing fees, as well as from optional seller services, which primarily include on-site advertising and shipping labels.

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). The financial results of Elo7 have been included in our consolidated financial results (“Consolidated”) until August 10, 2023 (the date of sale). We are providingprovide Etsy marketplace standalone information in certain instances where particularly relevant. TheSee “Non-GAAP Financial Measures” for more information regarding our use of Adjusted EBITDA, Adjusted EBITDA margin, and free cash flow, and reconciliation of these non-GAAP financial measures andto keythe operatingmost metricsdirectly wecomparable useGAAP are:financial measure.

Percent 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.SU.S., net of refunds is referred to as non-U.S. buyer GMS. Percent U.S. buyer GMS for the periods presented below are as follows:

Currency-Neutral GMS Growth

We calculate currency-neutral GMS growth 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 (decline) / growth for the periods presented below are as follows:

Components of Our Results of Operations

Our revenue is diversified and generated from a mix of marketplace activities and other optional services we provide primarily to sellers to help them generate more sales and scale their businesses. Marketplace revenue is primarily comprised of the fees a seller pays for marketplace activities, including transaction fees (inclusive of offsite advertising), payments processing fees, and listing fees. Services revenue is primarily comprised of the fees a marketplace seller pays us for our optional services, including on-site advertising and shipping labels.

•inflation, interest rates, recessionary factors, foreign exchange rate volatility, fuel price and other commodity price volatility, tariffs and other trade barriers, disruptions to the banking industry, changing consumer shopping preferences, continued pressure on consumer discretionary product spending, weather, domestic and global geopolitical volatility or uncertainties,uncertainties including military conflicts, various types of cultural events, public health crises, supply-chain disruptions, an increasingly competitive retail environment, and employment levels, among other factors (collectively, “Macro Conditions”);

•our ability to manage our operating expenses and our Adjusted EBITDA margin as we continue to invest in our marketplacesmarketplace;

•disruptions or defects in our marketplaces,marketplace, such as privacy or data security breaches, errors in our software, or other incidents that impact the availability, reliability, or performance of our platforms;

•the impact of competitive developments and our response to those developments; and

These events may also impact our sellers’ ability to run their businesses on our marketplaces,marketplace, which could negatively impact our business and financial performance.

Fluctuations in our quarterly operating results, key metrics, and the price of our common stock may be particularly pronounced during periods of economic uncertainty,uncertainty or volatility, including uncertainty caused by Macro Conditions. Consumer purchases of discretionary items, including the goods that our sellers offer, generally decline during recessionary periods or periods of economic uncertainty, when disposable income is reduced, or when there is a reduction in consumer confidence. In the event of a prolonged economic downturn or acute recession, significant inflation, or increased supply chain disruptions impacting our communities of sellers and the economy as a whole, consumer spending habits could be materially and adversely affected, as could our business, financial condition, operating results, and ability to execute and capitalize on our strategies.

We may fail to meet our publicly announced guidanceoutlook or other expectations about our business and future operating results, which could cause our stock price to decline.

Our guidanceoutlook includes forward-looking statements based on projections prepared by our management. Projections are based upon a number of assumptions and estimates that are based on information known when they are issued. While presented with numerical specificity, projections are inherently subject to significant business, economic, and competitive uncertainties and contingencies relating to our business, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions and developments, some of which may prove incorrect and/or may change. Some of those key assumptions include the timing and impact of broad Macro Conditions, particularly in our core geographies, and the resulting impact of these factors on future consumer spending patterns and our business. These assumptions are inherently difficult to predict, particularly in the long term.

We generally state possible outcomes as high and low ranges, which are intended to provide a sensitivity analysis as variables are changed, but are not intended to imply that actual results could not fall outside of the suggested ranges. Furthermore, analysts and investors develop and publish their own projections for our business, which may form a consensus about our future performance. Our actual business results may vary significantly from such guidanceoutlook or consensus due to Macro Conditions or other factors, many of which are outside of our control, which could adversely affect our business and future operating results. Furthermore, if we make downward revisions of our previously announced guidance,outlook, or if our publicly announced guidance of future operating resultsit fails to meet expectations of securities analysts, investors, or other interested parties as it has in the past, the price of our common stock could decline.

GuidanceOur outlook is necessarily speculative in nature, and guidanceoutlook offered in periods of significant uncertainty is inherently more speculative in nature than guidanceoutlook offered in periods of relative stability. It can be expected that some or all of the assumptions underlying theour guidance furnished by usoutlook will not materialize or will vary significantly from actual results. Accordingly, our guidanceoutlook is only an estimate of what management believes is realizable as of the date of release. Actual results may vary from our guidanceoutlook, and the variations may be material. In light of the foregoing, investors are urged to putconsider our guidanceoutlook in context and not to place undue reliance on it in making an investment decision regarding our common stock.

The trustworthiness and safety of our marketplacesmarketplace and the connections within our communities are important to our success. If we are unable to maintain and expand that trust and keep our marketplacesmarketplace safe, our business could be adversely affected.

Our reputation and brandsbrand depend, in part, upon our ability to maintain a trustworthy marketplaces,marketplace, and also upon our sellers, the quality of their offerings, their adherence to our policies, and their ability to deliver a trusted purchasing experience. We view the trustworthiness and reliability of our marketplaces,marketplace, as well as the connections we foster in our buyer/seller communities, to be cornerstones of our business and key to our success. Many things could undermine these cornerstones, such as:

•disruptions or defects in our marketplaces,marketplace, privacy or data security incidents, website outages, payment disruptions, or other incidents that impact the reliability of our platforms;

Our business also depends on our ability to provide a safe experience for our buyers and sellers. For example, we are and may continue to be an attractive target to bad actors and fraudsters targeting our marketplaces,marketplace, users, and our communities. These bad actors use a variety of tactics, including social engineering, coordinated phishing attacks, spam, and website and social media spoofing, which frequently involve attempts to exploit, defraud, obtain financial or other data from our buyers and sellers, or otherwise harm them. These tactics may be amplified by advances in artificial intelligence and generative artificial intelligence, machine learning, and similar tools and technologies (collectively, “AI”), including the use of automated content generation and impersonation techniques.

Our tools, processes, and controls designed to detect and address potential fraud and policy violations may not be adequate and may not be sufficient to keep up with quickly-shifting techniques used by those attempting to undertake fraudulent activity on our platforms. Sellers, buyers, and other third parties use increasingly sophisticated techniques, which has made, and may continue to make, fraudulent activity more challenging to combat and may increase its impact. Even if we are successful in defending against these tactics, we may be required to spend significant resources on those efforts, which may distract our management and otherwise negatively impact our results of operations. Furthermore, our actions may be insufficient, may not be timely, and may not be effective in mitigating harm to our buyers, sellers, or other third parties or avoiding negative publicity. While we regularly update our processes for handling complaints and detecting policy violations and fraud, these processes are by their nature imperfect in a dynamic marketplace, and include risks to us, our sellers, and our buyers from both under-enforcement and over-enforcement, as well as potentially heightened friction on our marketplaces,marketplace, which may reduce seller and buyer trust and engagement.

We continue to evolve our marketplacesmarketplace and invest to improve our customer experience. If we are unable to maintain a trusted brandsbrand and marketplaces,marketplace, our ability to attract and retain buyers and sellers could be harmed.

Our financial performance, specifically our GMS, revenue, and Adjusted EBITDA, has been, and will continue to be, significantly determined by our success in attracting and retaining active buyers and active sellers and increasing their engagement. Etsy marketplace active buyers and GMS per active buyer on a trailing twelve month basis have declined year-over-year, and toTo drive growth, we will need to drive active buyer momentum. We believe that many new buyers and sellers find us by word of mouth and other non-paid referrals from existing buyers and sellers. If existing buyers do not find our platforms appealing, for example, because of a negative experience, lack of competitive shipping charges, delayed shipping times, inadequate customer service, buyer fees or lack of buyer-friendly features, declining interest in the goods offered by our sellers, lack of desirable listings, or other factors, they may make fewer purchases and they may not refer others to us. Likewise, if existing sellers are dissatisfied with their experience on our platforms, or feel they have more attractive alternatives, they may stop listing items in our marketplacesmarketplace and using our services and may stop referring others to us, which could negatively impact our financial performance. Further, if trends supporting self-employment and the desire for supplemental income were to reverse, the number of sellers offering their goods in our marketplacesmarketplace and the number of goods listed in our marketplacesmarketplace could decline.

A perception that our marketplaces’marketplace’s levelslevel of responsiveness and support for our sellers and buyers are inadequate could damage our reputation, and reduce our sellers’ willingness to sell and buyers’ willingness to shop on our marketplaces.marketplace. In some situations, we may choose to reimburse our buyers for their purchases to help avoid harm to our reputation. Our cost of refunds may exceed our expectations, and we do not always recover the funds reimbursed, which could impact our financial performance. When we do recover buyer refund amounts from sellers, it may increase general seller dissatisfaction and reduce their desire to continue selling using our platforms. In addition, buyers may not be refunded the full amount of their purchase, which could negatively impact their experience with, or perception of, our marketplaces.marketplace. In addition, we have used, expect to continue to use, and may expand use of, disbursement holds and other fraud prevention and enforcement mechanisms to prevent and mitigate losses from fraud even though these restrictions may impact our value proposition for sellers. Although we are focused on enhancing customer service, our efforts may be unsuccessful, and our sellers and buyers may be disappointed in their experience and not return.

In addition, our GMS and revenue are concentrated in our most active buyers and sellers. If we lose a significant number of buyers or sellers, or our buyers or sellers do not maintain their level of activity for any reason, our financial performance could be harmed. Even if we are able to attract new buyers and sellers to replace the ones that we may lose, we may not be able to do so at comparable levels, they may not maintain the same level of activity, and the GMS and revenue generated from new buyers and sellers may not be as high as the GMS and revenue generated from the ones who leave, or reduce their activity level on our marketplaces.marketplace.

Additionally, the demand for the goods listed on our marketplacesmarketplace is dependent on consumer preferences and available discretionary spending, which can and do change quickly and may differ across generations, genders, cultures, and other demographic characteristics. If demand for the goods that our sellers offer declines, or if demand for goods falls and is not replaced by demand in new or different categories, we may not be able to attract and retain buyers and our business could be harmed. Further, a shift in trends away from unique or vintage goods,goods or socially-conscious consumerism, or second-hand fashion,consumerism could also make it more difficult to attract new buyers and sellers. If we are unable to attract and retain buyers and sellers, or our buyers or sellers do not maintain their level of activity, our business and financial performance could be harmed.

Although we use a variety of processes, technologies, and controls to assist in our efforts to assess, identify, and manage material cybersecurity-related risks, these are not exhaustive, and we cannot assure that they will be adequate to prevent or detect service interruption, system failure, data loss or theft, or other material adverse consequences, directly or through our vendors. Additionally, these measures have not always been in the past, and in the future may not be, sufficient to prevent or detect a cyber attack, system failure, or security breach, particularly given the increasingly sophisticated tools and methods used by cybercriminals and other bad actors. The costs and effort to respond to a security breach and/or to mitigate any security vulnerabilities that may be identified could be significant, and our efforts to address these problems may not be successful, which could result in unexpected interruptions, impair our ability to operate our marketplaces,marketplace, and cause other harm to our business and our competitive position.

In addition, the industry has generally moved to cloud basedcloud-based or other remote infrastructure and, as a result, we and our partners may be more vulnerable to cyber attacks. If a natural disaster, power outage, connectivity issue, or other event that impacted our employees’ ability to work remotely were to occur, it may be difficult or, in certain cases, impossible, for us to operate our business for a substantial period of time. The prevalence of remote working for employees, vendors, or contractors may also result in increased consumer privacy, IT security, and fraud concerns and/or increased administrative costs.

If we experience, or are perceived to experience, security breaches that result in marketplace performance or availability problems or the loss, compromise or unauthorized disclosure of personal data or other sensitive information, or if we or our vendors fail to respond appropriately to any security breaches that we or they may experience, or are perceived to do so, people may become unwilling to provide the information necessary to set up an account with us to become a new seller or buyer. Existing sellers and buyers may also stop listing new items for sale, decrease their purchases or use of our websites, or close their accounts altogether. We could also face damage to our reputation, potential liability, regulatory investigations in multiple jurisdictions, and costly remediation efforts and litigation, which may not be adequately covered by, and may impact our future access to, insurance. Any of these results could harm our growth prospects, our business, and our reputation for maintaining a trusted marketplaces.marketplace.

The software underlying our platforms is highly interconnected and complex. It contains vulnerabilities and may contain undetected errors that may only be discovered after the code has been released. We rely heavily on a software engineering practice known as “continuous deployment,” meaning that we frequently release software code to our platforms. For the Etsy marketplace platform weplatforms, typically release software code many times per day. This practice may result in the more frequent introduction of errors or vulnerabilities into the software underlying our platforms, which can impact the user experience and functionality of our marketplaces.marketplace. Additionally, due to the interconnected nature of the software underlying our platforms, updates to parts of our code, third-party and open source code, and application programming interfaces, on which we rely and that maintain the functionality of our marketplacesmarketplace and business, could have an unintended impact on other sections of our code, which may result in errors or vulnerabilities to our platforms that negatively impact the user experience, functionality or accessibility of our marketplaces.marketplace. In some cases, such as our mobile apps, errors may only be correctable through updates distributed through slower, third-party mechanisms, such as app stores, and may need to comply with third-party policies and procedures to be made available, which may add additional delays due to app review and user delay in updating their mobile apps. In addition, our systems are increasingly reliant on AI and large language models, which are complex, subject to increasing litigation and regulatory scrutiny, and may have errors or inadequacies that are not easily detectable. In some instances, we may make use of third-party AI models, including foundational models, that have been pre-trained on data which may be insufficient, erroneous, stale, contain biased information, or infringe intellectual property or other rights. These models may inadvertently reduce our efficiency, or may cause unintentional or unexpected outputs that are incorrect, do not match our business goals, do not comply with our policies or applicable legal requirements, or otherwise are inconsistent with our brands,brand, guiding principles, and mission. Any errors or vulnerabilities discovered in our code after release could also result in damage to our reputation, buyer or seller attrition, loss of revenue, or liability for damages, any of which could adversely affect our growth prospects and our business.

Google Cloud provides a distributed computing infrastructure as a service platform for the Etsy marketplace’s business operations. Our products and services rely in significant part on continued access to, and the continued stability, reliability, and flexibility of Google Cloud. Any significant disruption of, or interference with, our use of Google Cloud would negatively impact our operations, and our business would be seriously harmed. In addition, if hosting costs increase over time, and if we require more computing or storage capacity, our costs could increase disproportionately. If we are unable to grow our revenues faster than the cost of utilizing the services of Google or similar providers, our business and financial condition could be adversely affected. Further, any transition of the cloud services currently provided by Google Cloud to another cloud provider would be difficult to implement and would cause us to incur significant time and expense. Depop relies on Amazon Web Services for its primary production environment, and that marketplace is thus subject to analogous risks.

Additionally, if any of our employees, contractors, consultants, vendors, or service providers use any third-party AI-enabled systems and software in connection with our business or the services they provide to us, it may lead to the inadvertent disclosure or incorporation of our confidential information into training sets, which may impact our ability to realize the benefit of, or adequately maintain, protect, and enforce our intellectual property or confidential information, harming our competitive position and business. Any outputs that we create using AI-enabled tools may not be subject to copyright protection, which may adversely affect our intellectual property rights in, or ability to commercialize or use, any such content. To the extent that we do not have sufficient rights to use the data or other material or content used in or produced by the AI-enabled systems used in our business, or if we experience cybersecurity incidentsincidents, including leaks of sensitive data, in connection with our use or any third party’s use of AI-enabled applications, it could adversely affect our reputation and expose us to legal liability or regulatory risk, including with respect to third-party intellectual property, data privacy, cybersecurity, publicity, contractual or other rights. Further, our competitors or other third parties may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively.

We are unable to exercise significant oversight over some of these providers, which increases our vulnerability to their financial conditions and to problems with the services they provide, such as technical failures, deprecation of key services, privacy and/or security concerns, and we have from time to time experienced such problems with the services provided by one or more third parties. Our efforts to update our infrastructure or supply chain may not be successful as we may not sufficiently distribute our risk across providers or geographies or our efforts to do so may take longer than anticipated. If we experience failures in our technology infrastructure or supply chain or do not expand our technology infrastructure or supply chain successfully, then our ability to run our marketplacesmarketplace could be significantly impacted, which could harm our business.

In addition, our sellers rely on continued and unimpeded access to postal services and shipping carriers to deliver their goods reliably and timely to buyers. Our sellers have at times experienced transportation service disruptions and delays in the delivery of their goods. In particular, recent volatility in the global tariff environment has pressured delivery times or carrier service availability as carriers adapt to keep pace with new requirements relating to the calculation, collection, and remittance of tariffs and related fees. Likewise, recent global conflict and instability, including in the Middle East, have caused and could continue to cause increases or volatility in fuel prices and other transportation costs, resulting in increased shipping costs for our sellers. If these shipping delays or interruptions continue or worsen, or if shipping rates and fees increase significantly or remain volatile, our sellers may have increased costs or elect not to ship into particular markets, and/or our buyers may have a poor purchasing experience and may lose trust in our marketplaces,marketplace, which could negatively impact our business, financial performance, and growth prospects.

Our sellers and buyers rely on access to the internet or mobile networks to access our marketplaces.marketplace. We also depend on widely adopted third-party platforms to reach our customers, such as popular mobile, social, search, and advertising offerings. Internet service providers may choose to disrupt or degrade access to our platforms or increase the cost of such access. Mobile network operators or operating system providers could block or place onerous restrictions on the ability to download and use our mobile apps or deny or condition access to application programming interfaces or documentation, limiting the functionality of our products or services on the platform, including in ways that could require us to make significant changes to our marketplaces,marketplace, websites,website, or mobile apps.app. If we are not able to deliver a rewarding experience on these platforms, if our or our sellers’ or buyers’ access to these platforms is limited, if the cost or terms of accessing these platforms increases or changes, or if these large platforms implement features that compete with us or our sellers, then our business may suffer.

Internet service providers, mobile network operators, operating system providers, and/or app stores regularly place technical and policy restrictions on applications and platforms that use their services, which restrictions change over time. They have also and could in the future attempt to charge us for, or restrict our ability to access or provide access to, certain platforms, features, or functionality that we use in our business, and such changes may adversely affect our marketplaces.marketplace.

In addition, the success of our marketplacesmarketplace has at times and could in the future also be harmed by factors outside our control, such as actions taken by providers of mobile and desktop operating systems, social networks, or search and advertising platforms, including:

•changes in mobile operating systems, such as iOS and Android, that degrade the functionality of our mobile website or mobile apps,app, our understanding of the data and usage related to our services, or that give preferential treatment to competitive products;

The payment offerings provided on each of our marketplacesmarketplace differ and, as such, are subject to varying degrees and types of risk. In particular, each payment offering has a different level of reliance on third parties to perform certain aspects of its services. We have invested, and plan to continue to invest, in our payments tools and infrastructure, and have, or may in the future, add or change payment tools and third-party service providers to maintain existing availability, expand into additional markets, and offer new payment methods, offerings, and tools to our buyers and sellers. If we fail to invest adequate resources into our payments platforms, or if our investment efforts are unsuccessful or unreliable, our payments services may not function properly, keep pace with competitive offerings, or comply with applicable laws and regulatory requirements, any of which could negatively impact their usage and our marketplaces,marketplace, as well as our trusted brands,brand, which, in turn, could adversely affect our GMS and results of operations.

Disruptions related to our third-party service providers could also potentially affect our sellers’ ability to receive orders, our buyers’ ability to complete purchases, and our ability to operate our payments program, including maintaining certain compliance measures, including fraud prevention and detection tools. This could decrease revenue, increase costs, lead to potential legal liability, and negatively impact our brandsbrand and business. If we (or a third-party payment processor) suffer a security breach affecting payment card information, we could be subjected to fines, penalties, and assessments arising out of the major card brands’ rules and regulations, contractual indemnification obligations or other obligations contained in merchant agreements and similar contracts, and we may lose our ability to accept payment cards as payment for our services and our sellers’ goods and services.

•complying with different (and sometimes conflicting) laws and regulatory standards (including those related to the use and disclosure of personal information, online payments and money transmission, intellectual property, product safety and liability,safety, consumer protection, online platform liability, minors’ online safety, e-commerce marketplace regulation, AI, labor and employment laws, business practices, including those related to corporate social responsibility and sustainability, and taxation of income, goods, and services), including attempts to apply these laws and regulatory standards extra-territorially;

•defending our marketplacesmarketplace against international litigation and regulatory matters, including in jurisdictions that may not offer judicial norms or protections similar to those found in the United States;

Our ability to attract, retain, engage, and effectively deploy a talented and broadly diverse group of employees is important to our success. We strive to attract, retain, and engage employees who share our dedication to our buyer and seller communities and our mission to “Keep Commerce Human.” In August 2026, we announced a Restructuring Plan intended to better align our organization with the Company’s long-term strategic priorities, including by simplifying our structure to improve coordination and speed of decision-making. We cannot guarantee we will be able to continue to attract and retain the number or caliber of employees we need to maintain our competitive position,position particularlyand givenmeet the uncertaintyfuture needs of theour current macroeconomic environment.Company.

•skepticism regarding our ability to reignitesustain GMS growth in the future;

•our continuing ability to offer competitive compensation and benefits, including stock-based compensation, for our employees, given our historical stock price volatility and limitations on our equity plan pool and as more external scrutiny is placed on stock-based compensation expenses;

Filling key strategic roles, including engineeringreallocating resources to deepen our investment in artificial intelligence and productmachine management,learning can be challenging at times, particularly for more specialized positions. Qualified individuals may be limited and in high demand, and we may incur significant costs to attract, develop, retainretain, and engage them. Even if we were to offer higher compensation and other benefits, people with suitable technical skills may choose not to join us or to continue to work for us. In addition, job candidates and existing employees often consider the value of the stock awards they receive in connection with their employment. The value of our stock awards in a volatile macroeconomic environment may adversely affect our ability to recruit and retain highly-skilled employees.

In general, our employees, including our management team, work for us on an at-will basis. The unexpected loss of or failure to retain one or more of our key employees, or unsuccessful succession planning, or loss of talent caused by our Restructuring Plan could adversely affect our business. Further, if members of our management and other key personnel in critical functions across our organization are unable to perform their duties, we may not be able to execute on our business strategy and/or our operations may be negatively impacted. Other companies, including our competitors, may be successful in recruiting and hiring our employees, and it may be difficult for us to find suitable replacements on a timely basis or on competitive terms.

If we experience increased voluntary attrition in the future, if we are unable to attract and retain qualified employees in a timely fashion or on reasonable terms, particularly in critical areas of operations such as engineering, and/or if we are otherwise not able to place or retain the right employees in the right roles to drive execution of our business plans, we may not achieve our strategic goals, and our business and operations could be harmed.

In addition, we may not be effective in policing unauthorized use of our intellectual property and authorized uses may not have the intended effect. Even when we do detect violations, enforcing our rights may require us to engage in litigation, use of takedowns and similar procedures, or licensing. Any enforcement efforts we undertake, including litigation, could be time-consuming and expensive and could divert our management’s attention. In addition, our efforts may be met with defenses and counterclaims challenging the validity and enforceability of our intellectual property rights or may result in a court determining that our intellectual property rights are invalid or unenforceable. If we are unable to adequately prevent unauthorized use or misappropriation of our intellectual property by third parties, the value of our brand and other intangible assets may be diminished and customers may lose trust in Etsy. Any of these events could have an adverse effect on our business.

The (provision) or benefit (as applicable) for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which we operate. Future changes in applicable laws, including any implementation of the Organization for Economic Cooperation and Development (“OECD”) “two pillar” project, projected levels of taxable income, and tax planning could change the effective tax rate and tax balances recorded by us. In addition, tax authorities periodically review income tax returns filed by us and raise issues regarding filing positions, timing and amount of income and deductions, and the allocation of income among the jurisdictions in which we operate. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. Any adjustments as a result of any examination may result in additional taxes or penalties against us. If the ultimate result of these audits differs from original or adjusted estimates, they could have a material impact on our effective tax rate and tax liabilities.

Operating an e-commerce marketplacesmarketplace is highly competitive, and we expect competition to increase in the future. We face competition from a wide range of online and offline competitors on both sides of our two-sided marketplace, which connects buyers and sellers to facilitate transactions. We compete for sellers with many companies and venues, including marketplaces, retailers, and social media commerce. For example, in addition to listing goods for sale on one of our marketplaces,marketplace, a seller can list goods with online retailers or sell goods through local consignment and vintage stores, as well as other venues or marketplaces, or through social networks and agentic experiences. They may also sell wholesale directly to traditional retailers, including large national retailers, who discover their goods in our marketplacesmarketplace or otherwise.

•the value, awareness, trustworthiness, reputation, and perception of our brandsbrand;

•the global scale of our marketplacesmarketplace and the breadth of our online presence;

•the effectiveness of our mobile appsapp;

•the breadth, value, and quality of items that sellers list in our marketplacesmarketplace;

•the value, awareness, trustworthiness, and perception of our brandsbrand;

Local companies or more established companies based in markets where we operate outside of the United States may also have a better understanding of local customs, providing them a competitive advantage. For example, in certain markets outside the United States, we compete with smaller, but similar, local online marketplaces with a focus on unique goods that are attempting to attract sellers and buyers in those markets.markets.If we are unable to compete successfully, or if competing successfully requires us to expend significant resources in response to our competitors’ actions, our business and results of operations could be adversely affected.

Etsy operates a two-sided online marketplacesmarketplace that connectconnects millions of creative entrepreneurs with buyers around the world.

On February 15, 2026, we entered intoexecuted a Sale and Purchase Agreement (the “Original Purchase Agreement”) with eBay Inc. (“eBay”) for eBay to purchasesell all of the outstanding equity interests of Depop Limited (“Depop”), our fashion resale marketplace, to eBay Inc. (“eBay”) for a base purchase price of $1.2 billion in cash, subject to certain purchase price adjustments as set forth in the Purchase Agreement. The saleOriginal Purchase Agreement, as supplemented May 21, 2026 (the “First Amendment”) and as amended July 12, 2026 (the “Second Amendment”), is currently expectedreferred to closeherein bycollectively as the end“Purchase Agreement.” The sale closed on July 30, 2026 (the “Closing Date”). See Part I, Item 1, “Note 2—Discontinued Operations” for further discussion of the third quarter of 2026, subject to regulatory approval and certain other closing conditions as set forth in theexecuted Purchase Agreement. We will continuecontinued to own and operate Depop through such time as the transactiondate isof completed,sale, with Depop’s assets and liabilities, results of operations, and related cash flows presented as discontinued operations in the Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, and Condensed Consolidated Statements of Cash Flows, respectively, for all periods presented. Unless otherwise noted, all financial results and other metrics discussed in this report are for continuing operations only. In keeping with our current capital allocation approach, we plan to utilize the proceeds from this transaction for general corporate purposes, continued share repurchases, and investment in the Etsy marketplace.

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 table below for all periods presented, since Depop is presented as a discontinued operation due to its pending sale.sale as of June 30, 2026. The sale closed on July 30, 2026. See Part I, Item 1, “Note 2—Discontinued Operations” for further discussion of the executed Purchase Agreement. Due to the sale of Reverb on June 2, 2025, continuing operations includes Reverb and Etsy marketplaces for the three and six months ended MarchJune 31,30, 2025,2025 includes Etsy marketplace and Reverb marketplace through the date of sale, but the three and six months ended MarchJune 31,30, 2026 reflects the Etsy marketplace only. This makes year-over-year continuing operations results not directly comparable. To provide investors with a meaningful basis for comparing our results year-over-year, we have presented Etsy marketplace results for the three and six months ended MarchJune 31,30, 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.

(1)% growth (decline) Y/Y for the Etsy marketplace is the change in continuing operations for the three and six months ended MarchJune 31,30, 2026, which represents activity for the Etsy marketplace only, compared to the Etsy marketplace excluding Reverb for the three and six months ended MarchJune 31,30, 2025, as Reverb was sold in the second quarter of 2025.

(2)Excluded from the tabletables above is gross merchandise sales (“GMS”) for Depop, which was $348.9$455.7 million and $233.5$249.6 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $804.6 million and $483.1 million for the six months ended June 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.

(4)Active sellers for the three and six months ended June 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.

(5)Active buyers for the three and six months ended June 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.

GMS from continuing operations decreased by $99.6 million to $2,460.2 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025, reflecting a decrease of $228.4 million from the sale of Reverb, partially offset by an increase of $128.7 million from the Etsy marketplace. Etsy marketplace year-over-year GMS growth,growth for the three and six months ended June 30, 2026, which excludes Reverb from the prior year period, was up 5.5%,7.5% and 6.5%, respectively. This growth was driven by continued progress against our strategic priorities, which are beginning to translatetranslating into underlying improvements across our marketplace, asreflected wellin asimproving buyer and seller trends and stronger marketplace health. The first quarter of 2026 also benefited from foreign exchange tailwinds.tailwinds We also benefited fromand softer performance in the prior year comparable period. The Etsy marketplace GMS per active buyer on a trailing twelve month basis increased 1.5%2.8% year-over-year to $122,$124, partially offset by a year-over-year decline of 2.1%0.4% of active buyers on the Etsy marketplace to 86.687.0 million.

There is considerable uncertainty regarding macroeconomic conditions, including geopolitical conflicts andconflicts, the evolving tariff landscape, howand recentinflationary changes to de minimis exemptions may play out,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.

As reported and currency-neutral GMS growth (decline) growth for the periods presented below are as follows:

Comparison of Three Months Ended MarchJune 31,30, 2026 and 2025

Revenue increased primarily driven by an increase in services revenue, and, to a lesser extent, an increase inboth marketplace and services revenue.

Marketplace revenue increased primarily due to an $11.5 million increase in Etsy payments revenue and a $9.7$17.8 million increase in Etsy transaction fee revenue and a $14.5 million increase in Etsy payments revenue, both driven by an increase in Etsy marketplace GMS. These increases in marketplace revenue were partially offset by a decrease of $21.3$14.3 million related to the sale of Reverb on June 2, 2025.

The increase in cost of revenue was primarily driven by an increase in payments fees, cost of refunds, paymentsand, fees,to anda lesser extent, cloud-related hosting and bandwidth costs, partially offset by the sale of Reverb on June 2, 2025.

Marketing expenses increaseddecreased primarily due to the sale of Reverb on June 2, 2025, offset by an increase due to targeted shifts in portfolio mix, in which strong returns in specific channels supported incremental spend. Marketing expenses also increased due to increased stock-based compensation, mainly resulting from forfeitures related to an executive departure in the three months ended March 31, 2025 that did not recur in the three months ended March 31, 2026. These increases were partially offset by the sale of Reverb on June 2, 2025. Paid GMS was 21%25% of overall GMS for the three months ended MarchJune 31,30, 2026 compared to 23%24% for the three months ended MarchJune 31,30, 2025.

ProductGeneral developmentand administrative expenses decreaseddecreased, primarily due to the sale of Reverb on June 2, 2025, lower professional services expenses, and net favorable non-income tax items. These decreases are partially offset by increasedan Etsyincrease marketplacein employeestock-based compensation-relatedcompensation expenses.expense.

Asset impairment charge was $101.7 million in the threesix months ended MarchJune 31,30, 2025, related to the impairment of the goodwill of Reverb. See Part I, Item 1, “Note 67—Goodwill” for more information. There was no asset impairment charge in the three months ended March 31, 2026.

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 threesix months ended MarchJune 31,30, 2026 as compared to a loss for the threesix months ended MarchJune 31,30, 2025.

The primary driverdrivers of our income tax provision for the threesix months ended MarchJune 31,30, 2026 waswere tax expense on income before income taxes and state and local income taxes.

The primary drivers of our income tax provision for the threesix months ended MarchJune 31,30, 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.

Loss on discontinued operations for the threesix months ended MarchJune 31,30, 2026 and 2025 was $35.0$196.0 million and $17.0$33.8 million, respectively, reflecting operating results from Depop. The increase was primarily due to investments that Etsy made in the Depop business which after period end were recovered through purchase price adjustments at the Closing Date. See Part I, Item 1, “Note 2—Discontinued Operations” for more information.information regarding the financial results of discontinued operations.

Given that the pending sale of Depop,Depop was pending as of June 30, 2026, Etsy results are presented on a continuing operations basis, while Depop results are reported as discontinued operations acrossfor all periods presented. Due to the sale of Reverb on June 2, 2025, continuing operations for the three and six months ended MarchJune 31,30, 2025 includes ReverbEtsy marketplace and EtsyReverb marketplaces,marketplace through the date of sale, but the three and six months ended MarchJune 31,30, 2026 reflects the Etsy marketplace only. This makes year-over-year continuing operations results not 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 three and six months ended MarchJune 31,30, 2025 in this Quarterly Report. These measures include the following non-GAAP financial measures for the three and six months ended MarchJune 31,30, 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) income and Net income (loss) income margin, and (7) Adjusted EBITDA and Adjusted EBITDA margin.

Adjusted EBITDA represents our net income (loss) adjusted to exclude: stock-based compensation expense (income) and related payroll taxes; depreciation and amortization expense; provision (benefit) for income taxes; interest and other non-operating (income) expense, net; foreign exchange (gain) loss; acquisition, divestiture, and corporate structure-related expenses; asset impairment charge; loss on sale of business; restructuring and other exit costsincome; and retroactive non-income tax income. The following tabletables reflectsreflect the reconciliation of net income (loss) from continuing operations to Adjusted EBITDA from continuing operations and the Etsy marketplace. The tabletables also reflectsreflect the calculation of Adjusted EBITDA margin from continuing operations and the Etsy marketplace for each of the periods indicated (in thousands, except percentages):

Cash and cash equivalents and short-term investments were $1.4$1.1 billion as of MarchJune 31,30, 2026. Additionally, we have $150.6$160.7 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 MarchJune 31,30, 2026, we had net working capital from continuing operations of $520.3$230.7 million and in the threesix months ended MarchJune 31,30, 2026, we had positive operating cash flows of continuing operations of $102.5$268.4 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 MarchJune 31,30, 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.

Upon completion of the Purchasesale Agreementof for eBayDepop to purchase Depop,eBay, which isclosed expectedon toJuly close by the end of the third quarter of30, 2026, we anticipate receivingreceived approximately $1.2$1.4 billion in cash, net of certain purchase price adjustments.cash. See Part I, Item 1, “Note 2—Discontinued Operations” for more information on the Purchase Agreement.information.

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 threesix months ended MarchJune 31,30, 2026 of $52.7$99.6 million, compared to the same period in 2025, was primarily due to aan $28.8increase of $76.0 million in net income, excluding non-cash items and an increase of $23.7 million in the change in working capital less cash and an increase of $24.0 million in net income, excluding non-cash items.cash.

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.initiatives, and any proceeds from sale of business. The decrease in the threesix months ended MarchJune 31,30, 2026 of $5.6$99.2 million, compared to the same period in 2025, was primarily due to athe decreaseproceeds from sale of Reverb, net of cash in net purchases of investments.2025.

Net Cash (Used in) Provided by Financing Activities

Net cash (used in) provided by financing activities primarily consists of cash outflows for stock repurchases and payment of tax obligations on vested equity awards.awards, and any cash inflows from the issuance of convertible notes. The decrease in the threesix months ended MarchJune 31,30, 2026 of $46.3$551.4 million, compared to the same period in 2025, was primarily due to athe decreaseissuance of the 2025 Notes in 2025 offset in part by an increase in stock repurchases.