Etsy posts strong second quarter, then cuts 12% of workforce; CEO Kruti Patel Goyal says layoffs aren't driven by AI or cost-cutting

Etsy is laying off about 12% of its workforce, affecting around 220 employees, mainly across its Product and Engineering teams. The restructuring, announced on August 6, comes despite strong quarterly results, with CEO Kruti Patel Goyal saying the move is intended to position the company for long-term growth rather than reduce costs or replace workers with artificial intelligence.

The layoffs will bring Etsy's global workforce down to about 1,600 employees. In a memo to staff, Goyal said the affected employees had played an important role in the company's journey and would receive comprehensive severance packages.

Employees leaving the company will receive at least 16 weeks of severance pay, with additional compensation based on tenure. Etsy will also provide healthcare coverage for up to 12 months (or a cash stipend in non-U.S. markets), payment for unused paid time off, immigration support, a cash payment covering 2026 incentive compensation, and compensation for near-term equity vesting.

CEO: Layoffs were not aimed at cutting costs

Goyal stressed that the restructuring was not designed to reduce expenses, even though it would result in cost savings. "Our goal wasn't to cut costs. Cost savings are a consequence of these changes, but they are not the objective. We didn't start this work with a cost reduction target or a goal of making Etsy smaller," she said.

'These decisions weren't driven by AI'

The CEO also dismissed suggestions that the layoffs were linked to the company's adoption of artificial intelligence. "These decisions weren't driven by AI. Ultimately, our future depends on the creativity, judgment, and expertise of our people. The opportunity is to combine talented people with powerful new technology and not replace one with the other," she said.
Goyal acknowledged that AI is changing how Etsy operates, but said the company must evolve its skills and capabilities alongside new technology. "As the tools available to us evolve, the skills we need, the ways we work together, and the capabilities we build across Etsy must evolve as well. Our goal is to bring together the right team and the right technology to deliver for our community for the long term."

Restructuring comes despite strong financial performance

The announcement follows a strong second quarter for Etsy. The company reported improving momentum across key metrics, with Gross Merchandise Sales (GMS) and revenue growth accelerating sequentially while adjusted EBITDA also improved.

The core Etsy marketplace recorded its third consecutive quarter of year-over-year GMS growth, supported by sequential growth in active buyers and a 2.8% increase in GMS per buyer.

Goyal said the restructuring was made from "a position of strength" rather than as a reaction to weak performance. "Today's announcement is about building the organisation we believe Etsy needs for the future. The progress we've made gives us the chance to act from a position of strength. This means we can shape our future proactively rather than react to it."
She acknowledged the human impact of the decision, adding: "We made them only after thoughtful consideration because we believe they are necessary to build the organisation Etsy needs for its next chapter."

Q2 earnings beat expectations

The restructuring comes less than a year after Goyal took over as CEO from Josh Silverman, who became Executive Chair.

For the second quarter, Etsy reported:

• Revenue from continuing operations rose 6.2% to $668.3 million.
• Core Etsy marketplace GMS increased 7.5% year over year.
• Marketplace revenue grew 9.3%.
• Continuing operations profit climbed to $114.3 million, or 98 cents per share, beating analysts' estimates of 75 cents per share.
• The company raised its full-year GMS guidance to mid-single-digit percentage growth.

Etsy posted a net loss of $46.7 million for the quarter, largely because of a $161 million loss from discontinued operations following the sale of its Depop resale platform to eBay for $1.4 billion in July.

The board also approved a new $2 billion share repurchase programme, with part of the funding expected to come from the Depop sale.

The company ended the quarter with 87 million active buyers, down 0.4% year over year but higher than the previous quarter, and 5.7 million active sellers, up 5.9% from a year earlier.

Etsy expects the restructuring to result in about $35 million in charges, with the layoffs scheduled to be completed before the end of the third quarter.