eBay Inc. (NASDAQ:EBAY) has exceeded third-quarter 2023 earnings expectations, reporting non-GAAP earnings of $1.03 per share, a 3% beat over the Consensus Estimate. This represents a 3% increase in earnings compared to the same period last year.

The company’s net revenues for the quarter were $2.5 billion, in line with the Consensus Estimate, reflecting a 5% growth from the previous year on a reported basis and 5% on an FX-neutral basis. The positive performance was attributed to the growing momentum in eBay’s advertising offerings.

EBAY’s Promoted Listings contributed significantly, generating $345 million in revenues, marking a 39% increase on a reported basis and 36% on an FX-neutral basis compared to the previous year. This growth extended to the first-party advertising products, resulting in total advertising offerings generating $366 million in revenues, representing a 26.2% increase year-over-year.

However, there were concerns regarding softness in eBay’s Marketplace platform and a decline in active buyers by 3% year-over-year, amounting to 132 million at the end of the third quarter. The active buyer count, excluding contributions from GittiGidiyor and TCGplayer acquisitions, stood at 131 million. Nonetheless, eBay’s focus on integrating AI technology to enhance the customer experience is expected to drive customer engagement in the near future.

EBAY’s stock performance in the year-to-date period has been challenging, with an 8.5% decline, lagging behind the industry’s growth of 44.2%.

GMV Details

eBay reported a total GMV of $17.99 billion in the third quarter, showing a 2% year-over-year growth on a reported basis and remaining relatively stable on an FX-neutral basis. This GMV figure surpassed the Zacks Consensus Estimate of $17.84 billion.

The total GMV is divided into two categories:

U.S. GMV amounted to $8.64 billion, accounting for 48% of the total GMV, representing a 1% decline compared to the previous year.

International GMV reached $9.35 billion, accounting for 52% of the total GMV, showing a 4% increase year-over-year.

Operating Details

eBay’s gross margin for the third quarter was 71.8%, contracting by 100 basis points (bps) compared to the previous year. Operating expenses reached $1.34 billion, marking a 15% increase year-over-year and expanding to 53.6% of net revenues, a 470 bps increase compared to the same quarter in the prior year. The non-GAAP operating margin was 26.4% in the third quarter, contracting by 250 bps year-over-year.

Balance Sheet & Cash Flow

As of September 30, 2023, eBay held cash equivalents and short-term investments amounting to $4.7 billion, up from $4.5 billion as of June 30, 2023. The company’s long-term debt decreased to $6.97 billion at the end of the third quarter, down from $7.72 billion in the previous quarter.

eBay generated $862 million in cash from operating activities during the third quarter, compared to $605 million in the second quarter. The company’s free cash flow for the reported quarter was $777 million. Additionally, eBay repurchased $651 million worth of shares and paid out dividends of $132 million.

Guidance

For the fourth quarter of 2023, eBay anticipates revenues in the range of $2.47-$2.53 billion, with an expected year-over-year change in revenues of (1)%-2% on an FX-neutral basis. Non-GAAP operating margin is expected to be between 26.1% and 26.7%. GMV for the fourth quarter is projected to be in the range of $17.9-$18.3 billion, and non-GAAP earnings per share are anticipated to be between $1.00 and $1.05.

For the full year 2023, eBay expects revenues in the range of $10.02-$10.08 billion, with an anticipated year-over-year growth of 3%-4% on an FX-neutral basis. Non-GAAP operating margin is projected to be between 27.3% and 27.4%. GMV for the year is likely to be within the range of $72.5-$72.9 billion, and non-GAAP earnings per share are anticipated to be between $4.17 and $4.22. This represents a 1-3% growth compared to the Consensus Estimate of $4.17 per share.

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