Adds analyst comments in paragraphs 3-4, CFO comment in paragraph 10, updates shares

By Koyena Das and Neil J Kanatt

Feb 19 (Reuters) - Etsy ETSY.N shares jumped about 10% on Thursday, after the online marketplace sold off its Gen Z-focused fashion resale platform Depop to EBay EBAY.O, with investors looking past dour quarterly results and forecasts.

The nearly $1.2 billion deal, announced after markets closed on Wednesday, is expected to help Etsy double down on its core handmade and vintage goods marketplace as it pursues a turnaround under its new CEO. The company has been grappling with soft demand from inflation-weary shoppers and fierce competition from e-commerce giants, including Amazon.com AMZN.O.

"Depop had largely been overlooked by investors, so the valuation Etsy secured appears to have come as a positive surprise," CFRA analyst Arun Sundaram said.

Although the platform has been expanding rapidly, it has been "meaningfully less profitable than the core Etsy marketplace," and the divestiture should lift Etsy's margins and overall financial profile, he said.

The sale of Depop, which Etsy acquired for $1.63 billion in 2021, is expected to close in the second quarter of 2026. The company had also sold its online music-gear marketplace, Reverb, to private investors in 2025 to focus on its core operations.

Etsy posted fourth-quarter revenue of $881.6 million, below analysts' average estimate of $884.9 million, according to data compiled by LSEG.

Gross merchandise sales $(GMS)$ — a key sales metric — at Etsy marketplace fell 1% on a currency-neutral basis to $3.29 billion during the quarter.

Adjusted earnings before interest, taxes, depreciation and amortization came in at $222.5 million, while analysts estimated $213.5 million.

The company forecast first-quarter GMS at $2.38 billion to $2.43 billion, down from $2.8 billion reported a year earlier. For full-year 2026, Etsy expects GMS to grow modestly, supported by marketing initiatives.

"We've assumed that macroeconomic conditions, particularly those impacting consumer discretionary spending remains stable relative to where they are at present," Chief Financial Officer Lanny Baker said on a post-earnings call.

(Reporting by Koyena Das and Neil J Kanatt in Bengaluru; Editing by Shilpi Majumdar)

((koyena.das@thomsonreuters.com))