Etsy depends on human connection, selling handcrafted items to its millions of shoppers, but in the past several years, the e-commerce platform lost some of its personal touch.

That is changing. Etsy is getting to know its customers better, down to whether they are buying home decor items for their own apartment or a friend's, thanks to artificial intelligence and detailed profiles it has built on most of its roughly 90 million shoppers. By closely tracking shopping history and preferences as well as clues about whether customers are buying for themselves or purchasing a gift, Etsy aims for a more custom shopping experience.

"We've been kind of, somewhat clumsy about it in the past," Chief Financial Officer Lanny Baker said. "But we're really dedicating ourselves to getting more effective on it."

The efforts are starting to show. Etsy Marketplace's gross merchandise sales rose to $2.58 billion in its latest quarter, up 7.5% compared with a year earlier. In the first three months of 2025, the Etsy Marketplace figure fell nearly 9% year-over-year. The company last month raised its full-year GMS outlook to mid-single-digit growth, up from a previous low-single-digit forecast as active buyer counts begin to recover.

Baker credits the turnaround to the more individualized shopping experience. Previously, a customer buying a belt buckle was nudged toward a matching belt or hat, items that closely related to the original purchase, he said. Customers buying a baby shower gift, meanwhile, would be targeted with future purchase suggestions that assumed they were having a baby.

Now with the help of artificial intelligence, Etsy has built more precise profiles on over 70% of its shoppers, with plans to map the rest. The profiles track whether buyers are preparing for back-to-school, moving, collecting rare books or hunting for gifts, getting sharper the more someone shops.

Knowing the customer better is only part of Etsy's plan. The company is also adapting to how and where consumers shop, working with ChatGPT and other AI platforms on everything from advertising to instant checkout options available inside the chatbots. Etsy is additionally chasing younger shoppers. For years, Etsy's core user base aged up because the brand lacked a presence on social media and streaming platforms, Baker said.

Younger buyers might spend less initially, but by reaching them earlier, Etsy knows them well by the time they hit major spending milestones, like landing a first job, buying a home and starting a family.

The company wants to give shoppers more high-quality items too, often with higher price tags to match without chasing off shoppers. Already, the platform's buyers have absorbed tariff-related seller price increases in the past year, Baker said.

For Etsy, this boosted average order values, but there was some concern that shoppers would pull back as a result. Instead, demand held up, and in fact, shoppers are increasingly paying higher price tags for the elevated items.

To focus on its core marketplace, Etsy has been slimming down. The company sold secondhand fashion platform Depop to eBay in July and announced plans to cut around 12% of its workforce last month. Baker said the head count reductions are being made with improving the customer experience in mind. This means removing barriers between teams and making room for employees who will help fine-tune search results as shoppers sort through Etsy's more than 100 million listings.

"It wasn't about driving our margins up," the CFO said, adding that the company will likely add back some of the head count with a focus on skills that will help accelerate Etsy's growth.

Etsy's year-ago figures make it easier to post recent positive results, analysts note. And a couple of quarters showing momentum doesn't necessarily mean a long-term trend, they added. But there are signs that the growth is durable.

?Etsy is reaching more shoppers and retaining them, and the company is seeing growth even as the comparison boost from tariffs begins to fade. This is despite the fact that top-selling categories, like jewelry, toys and party supplies, are discretionary items that some consumers are generally cutting back on. The one-of-a-kind nature of goods on the marketplace helps, said Shweta Khajuria, head of global internet research at Wolfe Research.

"They are not immune" to a more judicious consumer, she said. "But there are some offsets."