Etsy Posts 8.8% GMS Jump as CEO Bets AI Boosts Human Craft

Etsy's third-quarter gross merchandise sales rose 8.8% year over year to $2.6 billion, and revenue climbed nearly 11% to $692.5 million, results the company reported Wednesday alongside a detailed account of how it plans to deploy AI without diluting the human creativity at the core of its marketplace.

CEO Kruti Patel Goyal told analysts the technology is a discovery engine, not a replacement for makers. "We believe AI will fundamentally change how people discover and shop, and we are leaning into that change," Patel Goyal said on Wednesday's 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."

She framed the strategy around a tension the platform cannot ignore. "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," the CEO said.

How is Etsy applying AI in practice?

AI and machine learning currently help the marketplace better understand shopper interests and improve product discovery, Patel Goyal added. Two concrete tools carry the strategy:

• A beta-launched seller assistant tool.
• An expanded gifting experience built on learnings from the company's Gifting Assistant test.

Both moves appear in the shareholder letter Etsy issued Wednesday.

What do the new seller rules prohibit?

Last week Etsy rolled out rules governing how sellers can use AI in product listings, an effort to stop AI-generated creations from overwhelming the marketplace. The changes include:

• A ban on AI-generated functional guides, such as patterns, recipes and instructions.
• A requirement that every listing include at least one real product image.

The rules put a hard boundary around automation while leaving room for AI-assisted selling. In plain terms: Etsy wants machine help behind the listings, not inside them.

Did buyer growth return?

Yes, and for the first time in two years. Active buyers increased 1% year over year to roughly 88 million on a trailing 12-month basis, according to the company. The gain breaks a two-year decline streak and signals that discovery investments may be converting into returning shoppers.

What happens next for guidance?

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

The raised guidance gives Patel Goyal's AI-plus-craft thesis a measurable test: if buyers keep returning and sellers keep listing real, human-made work, the paradox she described becomes a growth engine rather than a risk.