Etsy Posts 8.8% GMS Jump and Draws Lines Around AI Use

Etsy's gross merchandise sales rose 8.8% year over year to $2.6 billion in the third quarter, and the marketplace used the moment to explain how it plans to deploy AI without eroding the human creativity that defines its brand.

"We believe AI will fundamentally change how people discover and shop, and we are leaning into that change," CEO Kruti Patel Goyal told analysts on a Wednesday call. "For Etsy, the opportunity is to use this technology to help buyers discover items that feel uniquely right for them, and to help our sellers reach more customers and grow their businesses."

Goyal named the tension directly. "And there's an interesting paradox here: as AI makes it easier to create and replicate products at scale, we believe the human creativity, craftsmanship, and connection that have always made Etsy special will matter even more."

For practitioners, the strategy splits into two tracks. On the buyer side, AI and machine learning help Etsy understand shopper interests and sharpen the discovery experience. The company is expanding its gifting tool experience based on learnings from its Gifting Assistant test, and it has beta-launched a seller assistant tool, according to a Wednesday shareholder letter.

What do the new seller rules change?

Last week Etsy introduced rules that govern how sellers can use AI in product listings, aiming to stop AI-generated creations from flooding the marketplace. The changes:

• Ban AI-generated functional guides, including patterns, recipes and instructions
• Require every listing to include at least one real product image

The rules matter for marketers managing multi-channel retail content. They set a precedent for marketplaces that want AI efficiencies in discovery while protecting the authenticity claims shoppers use to justify premium prices.

How strong was the quarter?

The AI announcement arrived on top of Etsy's best operating results in two years:

• Gross merchandise sales: $2.6 billion, up 8.8% year over year
• Revenue: $692.5 million, up nearly 11%
• Active buyers: about 88 million on a trailing 12-month basis, up 1% — the first growth in two years

The buyer reversal is the number to watch. Two years of shrinking or flat audiences had pressed Etsy's growth story; a 1% gain suggests the discovery investments are beginning to pull occasional shoppers back.

What does Etsy expect next?

The company raised its outlook on the strength of the quarter. Etsy now expects full-year gross merchandise sales to grow about 7%, up from prior guidance of "mid-single-digit range" growth. For the fourth quarter, it projects GMS growth between 5% and 7%.

The tighter guidance gives analysts a concrete test of whether AI-driven discovery tools, rather than one-time demand, drove the quarter. If Q4 lands inside the 5% to 7% range, Goyal's bet — that machine-matched discovery and handmade inventory reinforce rather than replace each other — gains real evidence.