CEO says the restructuring is not because of AI or cost-cutting
Online marketplace Etsy has announced that it is laying off approximately 12% of its workforce in a move its chief executive officer said was not because of cost cutting and AI adoption.
Etsy, in its second quarter financial report, announced a restructuring plan that will cut its workforce roughly by 220 employees, reducing its headcount to approximately 1,600 people.
CEO Kruti Patel Goyal, in a memo to employees, said most of the changes will be concentrated in its Product and Engineering team.
"Our departing colleagues have all played an important part in getting Etsy to where it is today, and have had a meaningful impact on all of us who have had the privilege of working with them," Goyal said in the memo, which was published on the company's website.
"I am personally deeply grateful for everything they have helped build."
According to the CEO, affected employees will receive at least 16 weeks of severance pay, with additional pay based on tenure, and continued healthcare support for up to 12 months or a cash stipend in non-US markets.
Departing staff will also receive a cash payment in recognition of their 2026 incentive compensation and near-term equity vesting, payment for accrued and unused PTO, as well as immigration support.
Not because of AI, cost-cutting
Etsy's layoffs come in the wake of recent retrenchments news also happening in other workplaces as of late, with some of the frequently cited reasons being cost cutting and AI adoption.
But this is not the case at Etsy, according to Goyal.
"Our goal wasn't to cut costs. 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," the CEO said.
She assured that the company will continue investing in the business and the team and will hire in areas that are important in its long-term strategy.
The CEO also denied that the headcount changes are because of AI adoption.
"These decisions weren't driven by AI. Ultimately, our future depends on the creativity, judgment, and expertise of our people. The opportunity is to combine talented people with powerful new technology and not replace one with the other," she said.
Goyal recognised that AI is changing how the company is working, including the skills that they require.
"As the tools available to us evolve, the skills we need, the ways we work together, and the capabilities we build across Etsy must evolve as well," she said.
"Our goal is to bring together the right team and the right technology to deliver for our community for the long term."
The real reason behind the layoffs
The retrenchment announcement comes despite the progress it reported in its financial results. Its latest shareholder letter indicated that all key performance indicators show "improving momentum."
"Second quarter GMS (Gross Merchandise Sales) and revenue growth accelerated on a sequential basis, and we delivered healthy flow-through of revenue growth to adjusted EBITDA, again demonstrating the strength of our business model," its report read.
"Etsy marketplace GMS grew year-over-year for the third consecutive quarter, reflecting sequential growth in trailing twelve month active buyers, and a 2.8% year-over-year increase in trailing twelve month GMS per buyer."
Goyal said the restructuring at Etsy is not a reflection of this quarter, but of where it needs to go next.
"Today's announcement is about building the organisation we believe Etsy needs for the future," she said.
"The progress we've made gives us the chance to act from a position of strength. This means we can shape our future proactively rather than react to it."
Goyal acknowledged that the decisions they've made have a "real human impact."
"We made them only after thoughtful consideration because we believe they are necessary to build the organisation Etsy needs for its next chapter," the CEO said.
The restructuring at Etsy comes within a year of Goyal stepping into the role as CEO, succeeding long-time CEO Josh Silverman, who transitioned to the role of Executive Chair.
