管理層發言
Hi, everyone, and welcome to Etsy's First Quarter 2026 Earnings Conference Call. I'm Debra Wasser, VP of Investor Relations. Today's prepared remarks have been prerecorded. Joining me today are Kruti Patel Goyal, CEO; and our CFO, Lanny Baker. This quarter, we've changed our earnings process to feature a shareholder letter, which we encourage you to read in detail and have shortened our prepared remarks to enable more time for Kruti and Lanny to take questions from our publishing sell-side analysts. We hope you find that this shift helps drive efficiency and transparency in our process, both for us and for all of you. Please keep in mind that our remarks today include forward-looking statements related to our financial outlook, our business and operating results as noted in the shareholder letter posted to our website for your reference. Our actual results may differ materially. Forward-looking statements involve risks and uncertainties, some of which are described in today's shareholder letter and our most recent periodic report and which will be updated in future periodic reports that we file with the SEC. Any forward-looking statements that we make on this call are based on our beliefs and assumptions today, and we disclaim any obligation to update them. Also during the call, we'll present both GAAP and non-GAAP financial measures, which are reconciled to GAAP financial measures in today's shareholder letter posted on our IR website, along with the replay of this call. With that, I'll turn it over to Kruti.
Thanks, Deb, and good morning, everyone. Thank you for joining us. I stepped into my first quarter as CEO after more than 15 years at Etsy, with a deep understanding of what makes this marketplace special and a clear view of where we can unlock more of its potential. At our core, Etsy has a differentiated value proposition that remains deeply resonant with buyers and sellers. Our focus is now translating that strength more consistently into the customer experience. Over the past year, we've been clear about what needs to change and the priorities that we're executing against to close that gap — namely expanding how and where buyers discover us, connecting them with items that feel personal and relevant and building relationships that go beyond transactions. That's how we drive engagement and frequency and ultimately turn the uniqueness and scale of our marketplace into a lasting advantage. In the first quarter, we saw encouraging signals that this strategy is beginning to take hold. All of our key performance indicators came in at or ahead of our expectations with GMS at $2.5 billion, up 5.5% year-over-year for the Etsy Marketplace. Revenue of $631 million on a take rate of 25.7% and adjusted EBITDA of $185 million or 29.3% adjusted EBITDA margin. And more importantly, we're starting to see early positive changes tied to customer behavior on Etsy. Active buyers grew sequentially for the first time in two years. We delivered year-over-year growth in new buyers and active sellers. GMS per active buyer grew year-over-year for the first time since 2022, and momentum in our mobile app continued to strengthen. These are early indicators, but they matter. They show the marketplace is getting healthier, and we have confidence this will translate into the top line over time because creating real value for buyers and sellers is what ultimately drives value for the marketplace. Let me briefly remind you how we're thinking about the business. Our strategy is built around four priorities: showing up where shoppers discover, matching them with the right inventory, retaining and rewarding our most valuable customers, both buyers and sellers, and amplifying human connection, one of our core differentiators. These aren't independent initiatives. They operate as a system. Discovery and matching bring buyers in and help them find items and shops they love. Loyalty and human connection give them reasons to come back. We believe that investing in this system is how we'll rebuild frequency over time. Today, we're seeing the clearest progress in discovery and matching, where coordinated investments are already driving meaningful impact across both the customer experience and our financial results. Our app is the centerpiece of this transformation. It's where personalization, machine learning and direct relationships come together most effectively, and we're seeing that show up in the numbers. App GMS is continuing to significantly outpace non-app growth and now makes up about 47% of total GMS, expanding 240 basis points year-over-year. Mobile app GMS was up 11.2% year-over-year in the first quarter of 2026 versus up 6.6% last quarter. As we keep improving the app through levers like better personalization, more effectively using our owned marketing channels and increased adoption, we see a clear opportunity to continue to grow app share and drive frequency over time. This matters because app users engage more deeply, convert at higher rates and come back more often. It's one of the clearest indicators that our flywheel is starting to turn. When it comes to matching, we talk a lot about search, and that's because Etsy's core job is to help shoppers find things that feel personal, relevant and worth coming back for. Historically, our systems prioritized what was most likely to convert in the moment, often favoring popular items over the ones that were truly tailored to a specific buyer. We're changing that. We're shifting toward a more personalized, relevance-driven approach, powered by machine learning and AI that better understands what a buyer is looking for right now, their taste over time, and the vast inventory offered by sellers on Etsy. We're already starting to see positive signals from models that bring these elements together, with early tests showing improvements in add-to-cart rates and conversion. We're also expanding the role of our personalized home feed. In Q1, we introduced AI-generated buyer profiles that help us go beyond the shopper's past activity with the goal of expanding the categories they explore and inspiring new purchases. And finally, we're strengthening our direct relationships with buyers through our own channels, using better timed and more relevant push and email communications to drive higher engagement. Turning to loyalty and human connection. Our most valuable buyers and sellers drive a disproportionate share of our marketplace. And we're focused on earning their continued engagement. For buyers, we see an opportunity to both deepen loyalty and retention with our most valuable customers and to nurture those with the potential to become them by making shopping on Etsy easier, more rewarding and giving them more reasons to come back. We believe that long-term loyalty isn't built through a single program or initiative but across every interaction. So our approach spans the full experience — from more personalized recommendations to targeted offers to programs like our Etsy Insider beta. We're also moving toward more intentionally serving our highest value buyers. And importantly, we're expanding ownership of our loyalty initiatives across product, engineering, marketing and operations because all of those moments together determine whether a customer chooses to return. For sellers, we're looking to reduce friction and enable growth with plans to build on our AI-powered tools to simplify listing and shop management so they can spend more time creating and connecting with buyers. And for both buyers and sellers, we're strengthening trust through improvements to Etsy Purchase Protection and better support for our top customers. The final part of our strategy that I'll discuss today leans into what makes Etsy fundamentally different: human connection. Buyers come to Etsy not just for what they buy, but for who they buy it from. This is one of our most defensible advantages and one that we haven't fully delivered on. We've begun taking a more structured approach to understanding how seller identity, craftsmanship and stories influence behavior. And we now have early evidence that when we make those things more visible, buyers engage more deeply and make decisions with greater confidence. So you can expect to see us integrating those elements more directly into the core shopping experience this year. We are also intentional early movers in agentic tech, deeply focused on developing integrated experiences. We're encouraged by early engagement and traffic signals from Etsy's integrations with OpenAI, Microsoft and Google. We recently developed an integrated Etsy app for ChatGPT. At the same time, we're testing conversational AI experiences directly on Etsy because we see agents as a powerful way to simplify discovery and decision-making for both buyers and sellers, particularly when paired with our own data and insights. In Q1, we built two agents, one focused on helping buyers find the perfect gift and another that brings together insights for sellers to make better decisions, access the right resources and reduce operational friction. These are early examples of how ML and AI can make the marketplace meaningfully better for our customers. Just as importantly, they're allowing us to move faster, building and iterating in weeks, not months, which helps us learn more quickly and drive growth. Stepping back, we've now delivered two consecutive quarters of year-over-year Etsy marketplace growth, and our outlook points to growth again this quarter. But our progress won't always be linear. There's still a lot more work to do. What gives me confidence is not just what we're seeing in our metrics, but what's driving them. We have a clear understanding of how Etsy works at its best. We're rebuilding the marketplace based on that understanding, and we're executing with greater focus and discipline than we have in the past. Etsy has always stood for something different — creativity, human connection and meaningful commerce. As technology evolves, we believe these qualities matter more, not less. Our focus now is simple: execute against what we know works, measure progress clearly and build the foundation for durable growth. With that, I'll turn it over to Lanny.
Great to connect with all of you today. As Kruti just described, we've had an encouraging start to the year, and I will discuss some of the drivers of that progress, as well as what it means for our outlook going forward. As you review our shareholder letter and 10-Q, please keep in mind that on February 15, we entered into an agreement to sell Depop to eBay for $1.2 billion. We have received regulatory clearance for the transaction in the United States and Germany, and reviews are in progress and on track for other markets, including the U.K. and Australia. We expect to close the transaction by the end of the third quarter of 2026. Given the pending sale, Etsy's results are presented on a continuing operations basis, while Depop's results are now presented within discontinued operations. I also want to note that Reverb, which we sold in June of last year, is included in Q1 2025 continuing operations, whereas Q1 2026 reflects only the Etsy marketplace. This makes year-over-year continuing operations results not directly comparable, and we have included stand-alone Etsy marketplace comparisons where most relevant in order to provide investors with a more meaningful basis for evaluating our go-forward operations. Kruti covered our top KPIs, so I'll provide a bit more color on Etsy Marketplace GMS, which advanced to solid year-over-year growth in the quarter. Q1 '26 Etsy marketplace GMS was up 5.5% year-over-year, which represents a 540 basis point improvement to the GMS growth achieved in the fourth quarter of 2025. On a currency-neutral basis, GMS growth was 3.6%. Progress in both product development and marketing are beginning to translate into underlying improvements across marketplace fundamentals. And we also benefited from foreign exchange tailwinds and softer performance in the prior year comparable period. Our key customer metrics are continuing to move in a healthier direction. Q1 '26 trailing 12-month active buyer count was 86.6 million, representing the first quarter of sequential growth in the past two years. Combined gross buyer additions, new plus reactivated, were 11.9 million, up 4.8% year-over-year. Encouragingly, GMS per active buyer improved sequentially for the fourth consecutive quarter and grew year-over-year for the first time since 2022, reaching $122 on a trailing 12-month basis. Purchase frequency remained modestly lower than prior year while average order value increased year-over-year. Several factors, some of which we expect to be temporary, contributed to higher AOV, including foreign currency exchange tailwinds and the expiration of the de minimis tariff exemption and subsequent seller listing price increases. We anticipate that these benefits and the resulting impact to AOV will moderate as the year progresses. That said, product improvements have also benefited AOV, including changes to our search and discovery algorithms that better surface higher quality, more relevant and differentiated inventory. Repeat buyer and habitual buyer figures, while still down year-over-year, continue to see sequential stabilization. On the seller front, Q1 '26 was the first period of year-to-year growth in total seller count since we introduced the seller setup fee. Active sellers grew 3.3% to 5.6 million. Turning to take rate drivers. Our shareholder letter depicts the primary factors that help drive our quarterly take rate to 25.7%, up 180 basis points year-over-year. 130 basis points of this increase was due to the impact of the Depop divestiture last June. Meanwhile, Etsy marketplace take rate expansion was led by Etsy Ads where we continue to benefit from machine learning-driven improvements to relevance and seller budget pacing. Offsite ads and Etsy Payments also contributed to take rate expansion. Although our current strategic priorities center on driving sustainable long-term growth in GMS, we're encouraged by the way investments in ads, payments and services continue to provide durability to Etsy's take rate. We're pleased to be executing against our near-term priorities while improving the ways we work, continuously looking for operational efficiencies and keeping a tight control on expenses. This is visible in Etsy Marketplace operating expenses for the quarter with product development, marketing and G&A all gaining leverage on a year-over-year basis. In product development, modestly higher employee costs were offset by savings in other areas. Marketing leverage was achieved by targeted shifts in portfolio mix to better meet customers where they discover and a continued focus on efficiency. Growth of GMS derived from Etsy's owned marketing channels also supported marketing leverage. Turning to our strong first quarter balance sheet, Etsy held $1.6 billion in cash, cash equivalents and short- and long-term investments at the end of the quarter. Net cash provided by operating activities of continuing operations was $102.5 million. We converted 50% of adjusted EBITDA to free cash flow, more than twice the rate of conversion realized in the year-ago quarter. We also repurchased a total of $145 million of stock, which reduced the outstanding share count by approximately 2.7 million shares. As of March 31, we have $828 million remaining on our current board-authorized share repurchase programs. We took the opportunity in our shareholder letter to reaffirm and explain our approach to capital structure and capital allocation, which is based on four enduring priorities. Number one, maintaining financial strength to fully support organic investment in the Etsy marketplace. Two, preserving strategic flexibility to selectively pursue opportunities to strengthen our business. Three, ensuring we effectively manage our financial commitments; and four, enhancing returns for our equity holders as made possible by our strong free cash flow generation. Given this framework, the pending sale of Depop will allow us to further accelerate the direct return of capital to shareholders via repurchases. Turning to our outlook for the Etsy marketplace, we assume that overall macroeconomic factors remain relatively consistent and currency tailwinds moderate. We also note that prior year comparisons will become less favorable as we move through the year. We currently anticipate that Etsy Marketplace second quarter GMS will be between $2.48 billion and $2.53 billion, representing year-over-year growth of approximately 3% to 5% for the quarter. We expect second quarter take rate to be approximately 25.7% and adjusted EBITDA margin to be 27% to 29%. For the full year, we now anticipate that GMS growth will be in the low single-digit range as our outlook for the Etsy marketplace has improved relative to the full year commentary provided in mid-February. Our updated full year view incorporates stronger-than-expected first quarter GMS as well as the progress we're making on our growth priorities. We continue to expect year-over-year growth in Etsy GMS in each quarter of 2026. We currently expect full year take rate to be roughly equal to that of the first half of the year, and our full year adjusted EBITDA margin outlook of 28% to 30% remains unchanged. We're pleased to be executing on our plan and delivering better results. And as Kruti stated up front, we believe there is significant potential yet to be unlocked. With that, we'll now turn it over to the operator to take your questions.
分析師問答
Our first question will come from Michael Martin with Matt Mason.
Thank you for the question. Clearly, I wanted to ask about the most impactful changes you've made to the app. In the letter, you talked about expanding the role of personalized home feed recommendations. Is this driving a measurable increase in frequency as you're putting the app in more buyers' hands? For Etsy, growing frequency is the holy grail. So any leading indicators you're seeing there within the app would be great to hear.
Great, thank you so much for the question. So you're right. We're really focused on the app. This is our highest-value platform. As we mentioned, our app users have 40% higher LTV than non-app users, and that's because they visit more, they engage more deeply and they convert at higher rates. Our focus has really been around making the app much more personalized and a much better discovery jumping-off point. The work there has been shifting what we show in the app home feed from popular inventory to items that are really based on buyer interests that are going to inspire new discovery. We're really excited about the evolution of that home feed, and it's starting to show real traction in engagement. As we talked about in the last call, we've introduced a new model that reflects a much deeper buyer understanding. Basically, it develops a profile of a buyer that maps to their interests over time and then maps those interests to inventory so that we can present, when you first open the app, items that clearly connect to your taste but introduce you to new shopping missions and new categories. We're excited about the traction we see so far. It's delivering deeper engagement, and that's the precursor to greater frequency. Frequency is really our ultimate goal, and it's what our strategic priorities are designed to drive. We're not seeing frequency fully inflect yet because it requires a full end-to-end experience shift, not a single fix or a single platform fix. To explain what I mean: first, we have to show up consistently where our shoppers are with content that feels relevant in context to get them to consider and visit Etsy more. Then we need to match them with items that are personalized to them so they engage more deeply. For the inventory we show them, we want to consistently highlight what makes that inventory unique and valuable — the human touch behind it — so buyers have confidence to purchase more. And throughout, we have to show buyers that we know them and value them so they feel rewarded for every interaction and want to come back again. That's the flywheel. Right now, we're in the early stages of driving that consideration and deeper engagement. That deeper engagement is what you're seeing in the app, which we view as an important early and encouraging sign. But it's going to take time for these changes to compound into sustained frequency and retention.
Your next question will come from Trevor Young with Barclays.
Kruti, maybe a bit bigger picture one. Core Etsy has a very healthy take rate for a transactional marketplace. How do you think about the path for take rate over, say, three to five years now that ads and payments have been pretty well optimized? Are there new services you could offer buyers or sellers where there's a fair exchange of value which could push take rate higher? And on the opposite side, what about opportunities to be a little more surgical on take rate to remove some friction in the marketplace that could help drive purchase frequency?
Thanks for the question. Your question is about take rate, but let's talk about revenue first because often, when we talk about take rate, it's about how we're really going to grow revenue. The first thing I want to say is our focus is very much on growing revenue through GMS growth. We think that is the healthiest long-term lever to drive revenue growth — by getting more people to buy from Etsy more often. We have a very healthy take rate and we offer services that are valuable to our sellers. In the near to medium term, we'll continue to invest in making those services better and more effective for sellers, and as we do that, we expect to see some modest improvement in take rate. Over the longer term, we're open to exploring other opportunities for delivering new services that would be valuable to sellers, but that's not the focus right now. The immediate focus remains on growing GMS to drive long-term durable revenue growth.
Your next question will come from Nikhil Devnani with Bernstein.
I wanted to follow up, Kruti, on a related topic around frequency. The letter talks about inspiring discovery beyond a shopper's immediate intent. I'm curious what trends you've seen or progress you've seen on cross-category shopping on Etsy and introducing customers to more use cases and occasions on the platform. If you step back and look at the progress made over the past couple of years, anything you can point to with respect to that trend line would be helpful.
I think we're in really early days here, but we are seeing encouraging signs from the changes we're making to the home feed in terms of anchoring on buyers' tastes and interests and using that to introduce them not just to new shopping missions, but to new categories. More broadly, one of the shifts we've made is understanding that buyers think about us in terms of shopping missions that are often horizontal and span across categories. Our approach has been to serve those shopping-occasion needs more effectively. We believe that approach will help us show up in ways that are more relevant to more people, more of the time, and help them consider different categories relevant to a shopping occasion.
Your next question will come from Maria Ripps with Canaccord.
I just wanted to ask about active buyer growth. As we think about the key initiatives — personalization, the mobile app — were the largest drivers. Is there anything closer to the lower funnel initiatives that you can talk about? And more broadly, how should we think about the lag between product improvement and sustained growth inflection in active buyers?
When we think about active buyers, it really is about two components. Existing recurring repeat users drive most of GMS. All the work we're doing on the product experience, personalization, and improvements to customer service, support and trust and safety are top priorities to build an environment that existing repeat purchasers become loyal to, so we can drive their frequency and engagement. To grow the total buyer pool, we have to do more than serve existing buyers well. We have to bring in more new buyers and reactivate prior buyers. That's why our strategic priorities emphasize showing up where customers are starting their shopping missions. We're pleased with the momentum in gross additions between new and reactivated users — it's been a couple of quarters now of positive year-over-year comparisons, not only in percent but in absolute numbers. In the long term, accelerating growth in new and reactivated users, combined with retaining existing buyers, will drive active buyer growth. On marketing, we've modified our mix to show up more strongly in places like social media, refine how we show up in classic search, lean into generative commerce early, and emphasize the mobile app, which reaches a younger demographic. We've also focused on being ROI-driven in paid channels and are seeing early benefits in both paid and owned channels.
One more thing I'd add: it's about the front end and the back end together. Personalized product experiences and better discovery drive engagement, and then retention levers — loyalty, communication, trust — help keep them. The changes we made in product and marketing are designed to drive both acquisition and retention, and that combination is what will drive sustained active buyer growth over time.
Your next question will come from Nick Jones with BNP Paribas.
Great. A question on internal AI at Etsy. If AI is going to unlock bigger, more persistent context on your active buyer base, how should we think about where you are and the evolution of building rich customer context to deliver customization at scale? Will there be an impact on expenses if you need to pay for more compute or tokens to deploy this to drive conversion higher? I'm curious where you are in terms of using the technology to drive meaningful improvement in conversion.
Great question. We see a lot of opportunity to leverage AI to build a much better, more personalized experience. We think about bringing together a deep understanding of three things: our inventory, which is diverse and unique; our understanding of buyers' interests and taste over time, which is where we're investing heavily to create persistent context; and intent in the moment, which is session-level context. We've made progress on richer inventory understanding with LLMs and on building buyer profiles that persist over time. We're still early but making good progress mapping deeper buyer understanding to our inventory. The conversational agent we introduced to help buyers find gifts is an example of using this tech to get a lot more context from a single interaction. Marrying these three contexts — inventory, persisted taste profile, and in-the-moment intent — allows us to provide a far richer and more effective personalized experience. We're at different stages of maturity across those areas but excited about the opportunity.
To the second part of your question about managing tokens and compute, we want to embrace experimentation with these new tools and learn quickly. We'll fund and invest to learn, but we'll apply a rigorous ROI discipline we use across the business. The investments in AI, the features we roll out, and the compute costs will be framed by their impact on GMS growth, long-term user growth and frequency. We'll manage these investments with an eye toward long-term profitability as we've done elsewhere.
Our next question will come from Marvin Fong with BTIG.
I'll ask about consumer health. You mentioned in the letter that trends are relatively stable. Is there anything granular to call out about impacts from higher fuel prices? And relatedly, it looks like there may be fuel surcharges in postage costs; do you expect any impact on seller behavior as they try to manage that embedded cost, and is that reflected in your guidance?
The consumer environment has remained relatively stable overall. There's a tension between softer survey data and the hard consumer data, and the hard data has held up. Our U.S. buyers have been resilient and we've seen broad strength across household income cohorts, with some of the strongest growth in higher-income households but it's relatively broad-based. When we segment GMS by trade lanes, the U.S. domestic trade lane was the strongest at the start of this year. The U.S. import trade lane slowed with the imposition of tariffs last year but returned to positive growth in Q1. Non-U.S. currency-neutral GMS grew for the first time since 2023, so we're seeing resilience overseas as well. U.S. buyers grew on a trailing 12-month basis in Q1 versus Q4, and international buyers were about even. Netting out tariffs, foreign currencies, and oil prices, it's hard to point to any one thing — overall, consumers remain fairly resilient, and we remain cautious about the forward outlook.
A little higher-level on the macro: we're obviously in a period of macro uncertainty. We're monitoring consumer confidence closely, but our focus is on what we can control. First, we're building a culture of learning quickly and adapting in real time — we showed that last year responding to tariffs and emerging generative commerce. Second, we're executing with clarity and discipline on our strategy — accelerating product innovation, evolving how we show up for customers, and reinforcing trust across the experience. That's how we aim to reinforce the resiliency of our marketplace.
Your next question will come from Bryan Smilek with JPMorgan.
Kruti, curious about OpenAI's shift toward discovery and SDK integration, and your integrated Etsy app for ChatGPT. Can you talk about the initial impact to conversions? I believe last quarter you discussed traffic being up multiples year-on-year, but is AI traffic still driving meaningful on-platform marketplace conversions?
I want to clarify that the integrated app is not widely launched yet. Broadly, we think the shift toward discovery reinforces our hypothesis that generative shopping can become a meaningful discovery channel over time, but right now it's primarily a discovery channel. We continue to see strong traffic growth and high-intent traffic from these integrations, which is encouraging, but it's still very small — a fraction of a percent of total traffic. Over time it could be a high-value discovery channel, but it's a longer-term opportunity. We're committed to being early movers and showing up where our shoppers discover so we can learn and adapt in real time, and you'll see us continue to do that.
Your next question will come from Nathaniel Feather with Morgan Stanley.
Encouraged by the stabilization in habitual buyers. What are you seeing that's allowing that to normalize, especially as frequency hasn't yet inflected in the hall? Do you have line of sight to that returning to sequential growth through the year?
The stabilization in habitual buyers, repeat buyers and frequency is the fruit of the strategic work Kruti described and the accumulation of product and marketing changes over the last several quarters. The habit numbers are still lower year-over-year, but they were pretty stable in Q1 versus Q4. We hope stability turns into modest growth and then stronger growth longer term as we continue to execute. Importantly, a drop in habitual buyer counts typically reflects users falling below a frequency threshold rather than leaving the platform entirely. With the work we're doing to re-engage them and improve the experience, we expect to bring many back above that threshold, which should grow the cohort over time.
Your next question will come from Bernard McTernan with Needham.
Acknowledging the good app progress and double-digit app GMS growth, I wanted to ask about the non-app acceleration. The sequential acceleration was actually stronger outside the app. What's driving that — product work, marketing efficiencies, paid search, or other factors?
It's a combination. Product work is having an effect across the whole system and is having the biggest impact on the mobile app where we can go deepest. But marketing activities were also effective in Q1. We increased marketing spend year-over-year and gained operating leverage on GMS and revenue. That came from more efficient spending, mix optimization, our owned channels becoming a bigger driver of activation and reactivation, and some competitive dynamics in paid search. We leaned into PLAs and search engine marketing, and changes in Google algorithms helped us in that channel. Owned channels like push notifications and email continue to grow at double-digit rates year-over-year in terms of driving GMS without a corresponding increase in spend. We also had some SEO wins that helped desktop and non-app performance.
Your next question will come from Anna Andreeva with Piper.
Congrats. Nice to see steady improvement. On seller metrics: Q1 was the first quarter of growth in quite a while. Kruti mentioned better retention of the seller base in the shareholder letter. What key initiatives are resonating with sellers, and should we expect stability in the seller metrics as embedded in the guide?
Sellers are fundamental to our marketplace; the breadth and depth of inventory they bring is what differentiates Etsy. Our product work is focused on bringing forward the human connection and emphasizing creativity and craftsmanship that differentiate Etsy sellers. As buyer traction grows, we're seeing improvement in seller counts.
We haven't invested deeply in the seller experience in recent years, and we're shifting more focus there. We're focused on making it easier for sellers to manage their shops and listings — those operational tasks that take time but don't add as much value. We're investing in AI tools like shop management assistance and listing assistance to simplify those processes so sellers can spend more time creating and connecting with buyers. We expect positive impact from these investments.
Retention of sellers has started to improve, and that's helping the overall seller number. We're seeing healthier seller quality — more sellers completing sales and having stronger GMS results, and a higher percentage staying year-to-year. The product work taking friction out is starting to have an effect.
Your next question will come from Youssef Squali with Truist Securities.
Lanny, with mid-single-digit GMS growth in Q1, what are the main drivers pulling that growth rate toward the low single-digit percentage you expect for the year? With the changes you're making, do you believe you have line of sight to positive active buyer growth this year? What's baked into the low single-digit GMS growth for the full year?
Our outlook anticipates a gradual improvement in underlying fundamentals, but it will take time to get all metrics back into positive year-over-year territory. Comparisons get trickier later in the year and the FX tailwind that helped in Q1 will moderate. Q1 GMS was helped by an increase in average order value; FX will slow and the AOV benefit from the de minimis exemption expiry will moderate. Those external factors will be less favorable as the year progresses. At the same time, product improvements that surface more relevant, higher-quality inventory continue to support growth. Our full year view reflects stronger-than-expected Q1 GMS and progress on our growth priorities, but we expect some moderation of the external benefits through the year.
Your next question will come from Shweta Khajuria with Wolfe Research.
Could you talk about the balance of AOV and frequency? You mentioned frequency may take time to inflect. From your prior data, what is the typical lag once you start seeing improvement in other fundamental metrics like buyer engagement when you then see uplift in frequency? Similarly for retention, what are you looking for from personalized recommendations and targeted offers that gives you confidence in driving better retention?
One encouraging thing is that despite higher AOV in Q1, buyer numbers and frequency have been stable or improving, which suggests buyer behavior is holding up. There are early signs that personalization and the mobile app are benefiting retention and frequency and that those benefits will compound over time. It's challenging to predict exact timing of inflections, so expect progress to be gradual: we've stabilized, started to show growth in some areas and will continue to monitor results and report on inflection points as they become clearer.
I'll add that it's difficult to predict exact timing, but we're confident in continued growth over time even though progress won't be linear. We're taking a systematic approach across our priorities, which we expect will lift all metrics that drive GMS. The early signals from personalization in the app home and marketing communications are promising and are the precursors to improving retention and frequency.
Your next question will come from Naved Khan with B. Riley.
I wanted to dig into AOV. If you look at FX-neutral AOV and strip out the impact of the de minimis exemption expiration and listing price changes, how would underlying AOV growth look excluding those extraneous factors?
If you strip out the FX tailwinds and the de minimis-related listing price changes, you would still find AOV growth coming from product optimizations. Changes in search and discovery that surface higher-quality, more relevant and differentiated items are elevating AOV. However, most of the increase in AOV in Q1 was driven by FX and listing price changes, though product work is contributing meaningfully as well.
Your next question will come from Jason Helfstein with Oppenheimer.
Around AI, every company is thinking about scale and cost and whether to build internally or partner. Can you talk about where Etsy is in that decision process? Should we expect you to get more aggressive about bringing AI automation into workflows, and if so, at what point?
There are two parts to that. First, on the internal versus external mix: we're proactive and holistic in our approach. We use a hybrid of open-source models, commercial models and our internal models, balancing capability with cost. We'll continue to use the best tools to solve problems. Second, on how we're applying these tools internally: we see them as force multipliers across functions — they accelerate build times and time to learning. We've already seen this with the agents we built quickly last quarter. As we see opportunities to accelerate work using these tools, we will deploy them actively. Expect a disciplined but proactive approach rather than one big drop; we'll invest where we see clear ROI.
Thank you, Kruti. Thank you, Lanny. I'm going to call it there. We don't have time to take further questions. We appreciate everyone's time this morning, and we'll be following up with all of you. Thank you all so much.