Artificial intelligence is the latest tool Etsy is utilizing to enhance its platform, aiming to improve how its 86 million active buyers discover and purchase products. New technological integrations offer a more targeted approach, which has led to a sequential increase in Etsy’s buyer count for the first time in eight quarters. This strategic shift focuses on delivering personalized shopping experiences by aligning AI capabilities with consumer behaviours, an approach Etsy hopes will set it apart from competitors in the digital marketplace.
Etsy’s previous adoption of machine learning to maximize conversion laid the groundwork for its current AI initiatives. Historically, Etsy had brand recognition yet struggled with matching products effectively to consumers. The new AI-driven method aims to address these shortcomings. Mobile app sales seeing an 11.2% yearly growth rate, a jump from 6.6% in the prior quarter, showcases the effectiveness of these changes. Additionally, both desktop and mobile web platforms have also shown positive growth.
How Is AI Influencing Transactions?
A transformative layer of machine learning models now serves as a key element in mapping buyer profiles to Etsy’s catalog, dynamically matching them to products in real time. Initial tests of these models have indicated a higher rate of products being added to carts and an increase in conversions. The models also enable exploration beyond explicit search intents by offering products from categories that users haven’t previously visited.
“We’re shifting toward a more personalized, relevance-driven approach with ML models that learn from both past behavior and real-time intent,” CEO Kruti Patel Goyal announced during an earnings call. The models’ success extends to marketing strategies, fueling growth without higher expenditure through efficient push notifications and email campaigns.
What Are the Changes in Buyer Behavior?
The average order value has surged, with its growth attributed to heightened listing prices, favorable foreign exchange conditions, and shifts in how search exposes higher-priced inventories. Yet, the advantages from currency fluctuations and tariff lifts may not sustain throughout the year. However, non-U.S. buyer growth in constant currency has revitalized since 2023, marking an important development in international trade lanes that had previously faltered.
Despite these improvements, purchase frequency remains below past levels. Etsy attributes this to the personalization efforts currently driving engagement metrics, though no definitive timeline for improvement has been provided. The increase in personalization signifies steps toward enhanced consumer engagement, but it has not yet impacted purchase frequency to previous standards.
Etsy reported a growth in its active buyer base to 86.6 million, marking a sequential rise, and a 4.8% year-over-year increase in new buyers. Nevertheless, the year-over-year decline cannot be overlooked. Further fueled by improvements in machine learning for ad relevance and seller engagement, these changes are part of why Etsy Ads have become instrumental, contributing to the growth in their take rate.
Looking forward, Etsy achieved a revenue of $631 million for Q1 2026, of which marketplace revenue was $432.8 million. Services revenue also showed a significant increase of 10.5%. With expectations to achieve GMS between $2.48 billion and $2.53 billion for Q2, the company maintains an optimistic outlook. According to Etsy, advancements in AI integration are primed to hold substantial influence on the future trajectory of its platform.
