Why is Etsy Cutting 220 Jobs Despite Rising Sales? The Layoffs, AI Questions and the Bigger Tech Reset Explained

Business is growing. Revenue is up. Marketplace sales are improving. Customers are spending more. Yet Etsy is cutting 220 jobs, or about 12% of its workforce. The online marketplace says the layoffs are about becoming faster and more efficient—not about saving money or replacing employees with artificial intelligence. But the announcement comes as the global technology sector continues one of its biggest workforce resets in years, with tens of thousands of jobs disappearing across major companies.

So why is Etsy laying off employees when its business appears to be recovering?

Why is Etsy cutting jobs now?

According to Etsy, the layoffs are part of a broader restructuring designed to simplify the organisation, improve coordination and enable faster decision-making. Around 220 employees, primarily from the product and engineering teams, will be affected. CEO Kruti Patel Goyal told employees the company wants to operate with smaller, faster-moving teams as it focuses on its core marketplace. The restructuring is expected to be substantially completed by the end of the third quarter.

Is artificial intelligence behind the layoffs?

Etsy says no. In an internal memo reported by Reuters and The Wall Street Journal, Goyal made it clear that AI was not the reason for the workforce reduction. She said the company remains committed to investing in growth and that cost savings are only a by-product of the restructuring—not its primary objective. However, she also acknowledged that AI is changing how products are built and how customers shop online, meaning employees and the organisation will have to evolve alongside those changes.

If business is improving, why cut staff?

That's what makes Etsy's decision noteworthy. The company reported second-quarter revenue of $668.3 million, up 6.2% year-on-year. Revenue from its core marketplace climbed 9.3%, while gross merchandise sales also increased, beating analysts' expectations. Despite those gains, Etsy reported a net loss of $46.7 million, largely because of accounting charges linked to the sale of Depop, the fashion resale platform it bought in 2021 and later sold to eBay. Reuters reported that Etsy is increasingly focusing its resources on strengthening its flagship marketplace rather than managing multiple businesses.

What happens to employees who lose their jobs?

Etsy says affected employees will receive at least 16 weeks of severance pay, additional compensation based on tenure, and healthcare benefits for up to 12 months. The company also said it would provide career transition support to those impacted.

Why did Etsy sell Depop?

Depop was once expected to help Etsy capture younger shoppers. Instead, the company has chosen to double down on its core marketplace. Following regulatory approvals, Etsy completed the sale of Depop to eBay, allowing management to focus resources on its primary business while simplifying its portfolio. The company has also authorised an additional $2 billion share buyback, signalling confidence in its long-term strategy despite the restructuring.

Is Etsy alone in cutting jobs?

Not even close. The layoffs are part of a much larger technology industry reset. According to Layoffs.fyi, more than 125,000 technology employees have already lost their jobs across over 260 companies in 2026, surpassing the total recorded during all of 2025. Companies including Oracle, Salesforce, Amazon, Meta, Visa and several software firms have all announced significant workforce reductions this year as businesses restructure, streamline operations and adapt to changing market conditions. While many companies cite AI as a factor, others point to slowing growth, shifting customer behaviour and a renewed focus on profitability.

What does Etsy's move tell us about Big Tech?

It highlights a new reality. Layoffs are no longer confined to struggling companies. Increasingly, profitable technology firms are trimming headcount while simultaneously reporting healthy revenues and investing in future growth. The objective is less about survival and more about building leaner organisations capable of moving faster in an AI-driven economy. For Etsy, that means betting on a simpler business, a sharper focus on its core marketplace and smaller teams. For the wider tech industry, it suggests the workforce reset that began in 2022 is evolving into something more permanent: companies aren't just cutting costs anymore—they're redesigning how they operate.

(With inputs from yMedia)