ETSY INCETSY
ETSY INC Fair Value Disclosure
Note 8—Fair Value Measurements
As of December 31, 2025 and December 31, 2024 the Company’s cash equivalents, short-term investments, and long-term investments primarily consisted of available-for-sale debt securities. These debt securities are measured at fair value and classified within Level 1 or Level 2 in the fair value hierarchy as the Company uses unadjusted quoted prices for identical assets in an active market that the Company has the ability to access (Level 1) or quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets (Level 2).
As of December 31, 2025 and December 31, 2024 the Company’s short-term and long-term investments also consisted of investments in loan receivables and in third-party managed funds. The investments in loan receivables are measured on an amortized cost basis and classified in Level 3 of the fair value hierarchy as the fair value is derived from techniques in which one or more significant inputs are unobservable. The investments in third-party managed funds are measured on the net assets value (“NAV”) basis as a practical expedient. NAV is primarily determined based on the information provided by external fund administrators for which the most recent financial information is typically received on a lag within the quarter following the Company’s balance sheet date. These investments are intended to further the Company’s impact strategy as part of its Impact Investment Fund.
The following table sets forth the cost, gross unrealized losses, gross unrealized gains, and fair values of the Company’s investments as of the dates indicated (in thousands):
| Cost | Gross Unrealized Holding Loss | Gross Unrealized Holding Gain | Fair Value | Cash and Cash Equivalents | Short-term Investments | Long-term Investments | |||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Level 1 | |||||||||||||||||||||||
| Money market funds | $ | 946,932 | $ | — | $ | — | $ | 946,932 | $ | 946,932 | $ | — | $ | — | |||||||||
| U.S. Government securities | 76,816 | — | 204 | 77,020 | — | 52,002 | 25,018 | ||||||||||||||||
| 1,023,748 | — | 204 | 1,023,952 | 946,932 | 52,002 | 25,018 | |||||||||||||||||
| Level 2 | |||||||||||||||||||||||
| Certificate of deposit | 20,913 | — | 30 | 20,943 | — | 19,240 | 1,703 | ||||||||||||||||
| Commercial paper | 32,409 | — | 26 | 32,435 | — | 32,435 | — | ||||||||||||||||
| Corporate bonds | 199,920 | (12) | 549 | 200,457 | — | 118,411 | 82,046 | ||||||||||||||||
| 253,242 | (12) | 605 | 253,835 | — | 170,086 | 83,749 | |||||||||||||||||
| Level 3 | |||||||||||||||||||||||
| Loans receivable - held for investment | 13,000 | — | — | 13,000 | — | — | 13,000 | ||||||||||||||||
| 13,000 | — | — | 13,000 | — | — | 13,000 | |||||||||||||||||
| $ | 1,289,990 | $ | (12) | $ | 809 | $ | 1,290,787 | $ | 946,932 | $ | 222,088 | $ | 121,767 | ||||||||||
| Measured at NAV (1) | |||||||||||||||||||||||
| Third-party managed funds | 2,000 | 12,609 | |||||||||||||||||||||
| $ | 224,088 | $ | 134,376 | ||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Level 1 | |||||||||||||||||||||||
| Money market funds | $ | 402,731 | $ | — | $ | — | $ | 402,731 | $ | 402,731 | $ | — | $ | — | |||||||||
| U.S. Government securities | 71,188 | (109) | 71 | 71,150 | — | 41,477 | 29,673 | ||||||||||||||||
| 473,919 | (109) | 71 | 473,881 | 402,731 | 41,477 | 29,673 | |||||||||||||||||
| Level 2 | |||||||||||||||||||||||
| Certificate of deposit | 35,301 | (2) | 31 | 35,330 | 3,638 | 31,692 | — | ||||||||||||||||
| Commercial paper | 57,035 | (1) | 39 | 57,073 | 7,488 | 49,585 | — | ||||||||||||||||
| Corporate bonds | 165,092 | (98) | 310 | 165,304 | — | 101,863 | 63,441 | ||||||||||||||||
| 257,428 | (101) | 380 | 257,707 | 11,126 | 183,140 | 63,441 | |||||||||||||||||
| Level 3 | |||||||||||||||||||||||
| Loans receivable - held for investment | 7,500 | — | — | 7,500 | — | 500 | 7,000 | ||||||||||||||||
| 7,500 | — | — | 7,500 | — | 500 | 7,000 | |||||||||||||||||
| $ | 738,847 | $ | (210) | $ | 451 | $ | 739,088 | $ | 413,857 | $ | 225,117 | $ | 100,114 | ||||||||||
| Measured at NAV (1) | |||||||||||||||||||||||
| Third-party managed funds | 3,205 | 11,611 | |||||||||||||||||||||
| $ | 228,322 | $ | 111,725 | ||||||||||||||||||||
(1)Third-party managed funds measured on the NAV basis have not been categorized in the fair value hierarchy. The amount presented in the table is intended to permit reconciliation of the long-term investments in the fair value hierarchy to the amount presented in the Consolidated Balance Sheets.
The tables below show the fair value and gross unrealized loss related to available-for-sale debt securities, aggregated by investment category and the length of time that the securities have been in a continuous unrealized loss position as of the dates indicated (in thousands):
| As of December 31, 2025 | ||||||||||||||
Less than 12 Months | 12 Months or Greater | |||||||||||||
Fair Value | Gross Unrealized Holding Loss | Fair Value | Gross Unrealized Holding Loss | |||||||||||
| Corporate bonds | $ | 17,577 | $ | (12) | $ | — | $ | — | ||||||
Total | $ | 17,577 | $ | (12) | $ | — | $ | — | ||||||
| As of December 31, 2024 | ||||||||||||||
Less than 12 Months | 12 Months or Greater | |||||||||||||
| Fair Value | Gross Unrealized Holding Loss | Fair Value | Gross Unrealized Holding Loss | |||||||||||
| U.S. Government securities | $ | 32,501 | $ | (105) | $ | 12,600 | $ | (4) | ||||||
| Certificate of deposit | 2,397 | (2) | — | — | ||||||||||
| Commercial paper | 8,233 | (1) | — | — | ||||||||||
| Corporate bonds | 38,641 | (98) | 932 | — | ||||||||||
| Total | $ | 81,772 | $ | (206) | $ | 13,532 | $ | (4) | ||||||
The Company evaluates fair value for each individual security in the investment portfolio. When assessing the risk of credit loss, the Company considers factors such as the extent to which the fair value is less than the amortized cost basis, the credit rating, including whether there has been any changes to the rating of the security by a rating agency, available information relevant to the collectibility of the security, and management’s intended holding period and time horizon for selling the security. The Company did not recognize a credit loss in 2025, 2024, or 2023.
Outside of the Company’s Impact Investment Fund, the Company typically invests in short- and long-term instruments, including fixed-income funds and U.S. Government securities aligned with the Company’s investment strategy. In accordance with the Company’s investment policy, all investments, other than investments made through its Impact Investment Fund, have maturities no longer than 37 months, with the average maturity of these investments maintained at 12 months or less.
Disclosure of Fair Values
The Company’s financial instruments that are not remeasured at fair value in the Consolidated Balance Sheets include the 1.00% Convertible Senior Notes due 2030 (the “2025 Notes”), the 0.25% Convertible Senior Notes due 2028 (the “2021 Notes”), the 0.125% Convertible Senior Notes due 2027 (the “2020 Notes”), and the 0.125% Convertible Senior Notes due 2026 (the “2019 Notes” and together with the 2025 Notes, the 2021 Notes, and the 2020 Notes, the “Notes”). See “Note 12—Debt” for additional information. The Company estimates the fair value of the Notes through inputs that are observable in the market, classified as Level 2 as described above. The following table presents the carrying value and estimated fair value of the Notes as of the dates indicated (in thousands):
| As of December 31, 2025 | As of December 31, 2024 | |||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||
| 2025 Notes | $ | 689,890 | $ | 709,800 | $ | — | $ | — | ||||||
| 2021 Notes | 995,329 | 891,300 | 993,429 | 822,600 | ||||||||||
| 2020 Notes | 648,011 | 608,595 | 646,818 | 562,380 | ||||||||||
| 2019 Notes | 649,008 | 655,736 | 647,836 | 628,766 | ||||||||||
| $ | 2,982,238 | $ | 2,865,431 | $ | 2,288,083 | $ | 2,013,746 | |||||||
The carrying value of other financial instruments, including accounts receivable, funds receivable and seller accounts, accounts payable, and funds payable and amounts due to sellers approximate fair value due to the immediate or short-term maturity associated with these instruments.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.