Etsy's Workforce Reduction Sends a Massive Signal on Its Growth Strategy. How to Play ETSY Stock Now.

Etsy (ETSY) recently posted its strongest sales growth in years. Days later, it told roughly 220 employees they were losing their jobs. Companies usually cut staff when business is struggling, not when revenue growth accelerates. 

But Etsy says the two events are directly connected, and the explanation offers a window into where CEO Kruti Patel Goyal wants to take the company next. Etsy framed the move as a reshaping of talent around artificial intelligence and machine learning skills, instead of a cost-cutting exercise.

Why Etsy's Sales Are Rising

To understand why Etsy would cut staff now, it helps to look at how far the business has come.

• Etsy's marketplace gross merchandise sales, the total dollar value of everything sold on the site, rose to $2.6 billion in the second quarter of 2026, up 7.5% from a year earlier.
• It reported revenue of $668 million, which indicates a take rate of almost 26%.
• Adjusted EBITDA, a measure of core profitability, stood at $195 million, indicating a margin of 29.2%. 

Goyal pointed to this turnaround directly in her memo to staff. "We have inflected Etsy's year-over-year (YoY) growth trajectory from high single-digit GMS declines in early 2025 to mid-single-digit growth anticipated for the full year 2026," she wrote in the shareholder letter, calling it more than a 10 percentage point swing in performance.

Three things typically move Etsy's sales: how many people shop on the website, how often they buy, and how much they spend per order.

Active buyers grew by about 350,000 during the quarter to roughly 87 million. Habitual and repeat buyers, the company's most valuable customers, each grew for the first time since 2023.

The mobile app is doing even more heavy lifting. App sales grew 12.5% from a year earlier, and the app now drives about 47% of total sales, CFO Lanny Baker said on the earnings call. Baker also noted that average order value remains the biggest driver of sales growth, mostly because sellers have raised their listing prices and buyers are still paying them.

A Focus on Restructuring

The restructuring will bring Etsy's headcount down to approximately 1,600 people, according to the shareholder letter. Etsy expects to record about $35 million in charges, mostly severance and benefits, and estimates the process to wrap up by the end of the third quarter of 2026.

"Our goal wasn't to cut costs," Goyal wrote in her memo to employees. "Cost savings are a consequence of these changes, but they are not the objective." 

She also said the decision was not driven by artificial intelligence replacing workers, though she acknowledged AI is reshaping how the remaining team will work.

Baker echoed that framing on the earnings call, telling analysts the reorganization is not meant to permanently lift profit margins. Instead, he said, it is meant to align the team with Etsy's strategy going forward, with extra investment planned in engineering talent, product talent, and customer operations.

Etsy closed the sale of Depop to eBay (EBAY) on July 30, bringing in about $1.4 billion in cash. Combined with existing cash, Etsy held $1.3 billion on its balance sheet as of June 30. Etsy's board approved a new $2 billion share repurchase program, on top of the $578 million still available under its prior plan. 

The company already stepped up buybacks in the second quarter, spending $250 million to repurchase shares, about 70% more than the prior quarter.

Is ETSY Stock Undervalued?

For the third quarter, Etsy expects marketplace sales between $2.53 billion and $2.58 billion, representing growth of about 4% to 6% compared to last year. The company raised its full-year adjusted EBITDA margin outlook to a range of 29% to 30%. 

The bigger question is whether a leaner, more focused product and engineering team can keep the growth streak alive into 2027. Goyal has staked her strategy on the bet that it can. Investors will find out whether that bet pays off over the next few quarters.

Analysts tracking ETSY stock project revenue to increase from $2.88 billion in 2025 to $3.47 billion in 2030. In this period, free cash flow is projected to expand from $639 million to $1 billion. If ETSY stock is priced at 15x forward FCF, which is similar to its five-year average, it could return close to 95% within the next four years. 

Out of the 30 analysts covering ETSY stock, seven recommend “Strong Buy,” two recommend “Moderate Buy,” 20 recommend “Hold,” and one recommends “Strong Sell.” The average ETSY price target is $80, which is similar to the current trading price.