Etsy is shrinking its workforce even as its business starts gaining momentum again.
The online marketplace said Wednesday it will eliminate about 220 jobs, roughly 12% of its workforce, as part of a restructuring aimed at simplifying the organization and speeding up decision-making. Most of the layoffs will affect employees in product and engineering, according to Etsy.
The announcement came alongside Etsy’s second-quarter earnings report, which showed stronger-than-expected revenue and an improved outlook for the rest of the year. CEO Kruti Patel Goyal, who took over earlier this year, said the changes are meant to prepare Etsy for its next stage of growth rather than respond to current financial weakness.
“The progress we’ve made gives us the chance to act from a position of strength,” Goyal wrote in a letter to employees. “This means we can shape our future proactively rather than react to it.”
Etsy says layoffs are not about cost cutting or AI
Goyal said the restructuring is intended to build a faster, more focused organization. She also pushed back on the idea that the cuts were driven by artificial intelligence.
“Cost savings are a consequence of these changes, but they are not the objective. We didn’t start this work with a cost reduction target or a goal of making Etsy smaller,” she wrote.
She added that “these decisions weren’t driven by AI,” while acknowledging that the technology is changing how the company develops products and solves problems. Employees affected by the layoffs will receive at least 16 weeks of severance pay, continued healthcare support for up to 12 months, and other benefits, the company said.
Strong quarter despite buyer pressure
Etsy reported second-quarter revenue of $668.3 million, up 6.2% from a year earlier and above Wall Street expectations. Gross merchandise sales on the core Etsy marketplace rose 9.3%, and the company raised its full-year outlook for gross merchandise sales growth, according to The Wall Street Journal.
The company has struggled to maintain the rapid expansion it experienced during the pandemic and has faced increasing competition from Amazon, Walmart, TikTok Shop, and Temu. Etsy has also been narrowing its focus around its main marketplace. Etsy recently completed sale of secondhand marketplace Depop to eBay for $1.4 billion.
The restructuring is expected to be completed by the end of the third quarter and will leave Etsy with about 1,600 employees.
The layoffs stand out because they come during a period of improving financial performance. Rather than signaling an immediate crisis, the restructuring reflects Etsy’s stated effort to become leaner and quicker as online shopping behavior evolves and AI tools become more integrated into product development.
Read more: Oracle Faces Layoffs Amid Costly AI Push for a contrasting look at workforce cuts tied to rising AI infrastructure costs.