Shares of Etsy (ETSY) plummeted 5.08% in Thursday's intraday trading session following the release of the company's second-quarter 2025 earnings report, which revealed mixed results and ongoing challenges in user engagement.

While Etsy's Q2 revenue of $672.7 million surpassed analyst expectations of $647.2 million, the company's GAAP earnings per share (EPS) fell significantly short at $0.25, compared to the anticipated $0.48. This earnings miss was primarily attributed to a substantial non-cash foreign exchange loss of $25.4 million.

Investors' concerns were further fueled by continued declines in key marketplace metrics. Gross Merchandise Sales (GMS) dropped 4.8% year-over-year to $2.8 billion, reflecting weaker buyer traffic and lower spending per buyer. The company also reported a contraction in its user base, with active buyers falling 4.6% year-over-year to 87.3 million on the marketplace, while the number of active sellers decreased by 7.8% following the introduction of a new shop setup fee.

Despite some positive developments, such as strong growth in app-based GMS and impressive performance from its Depop segment, the overall outlook remains cautious. Etsy's management projected Q3 2025 Gross Merchandise Sales between $2.6 billion and $2.7 billion, suggesting little to no sequential growth and a continued year-over-year decline. This guidance, coupled with the disappointing Q2 results, appears to have dampened investor sentiment, leading to the sharp decline in Etsy's stock price.