eBay Released 2023 Second Quarter Earnings, Stock Drops Despite Positive Metrics

eBay released its financial results for the second quarter ending on June 30, 2023, with the company claiming it’s another result beyond expectations.

“In Q2, we exceeded expectations on all key metrics while investing in sustainable growth,” said Jamie Iannone, Chief Executive Officer at eBay.

“Three years ago, I set our ambition of becoming the best global marketplace to buy and sell through a tech-led reimagination. Now, we’re raising the bar for innovation and have evolved our vision – to reinvent the future of ecommerce for enthusiasts, only at eBay.

“This work is already producing compelling results, and we are confident the sharper focus will deliver long-term returns to our shareholders.”

Steve Priest, the Chief Financial Officer at eBay, also expressed his satisfaction with the company’s performance in Q2, highlighting that their Gross Merchandise Volume (GMV), revenue, and earnings per share (EPS) surpassed expectations, even amid ongoing macroeconomic uncertainties.

He commended the team’s unwavering commitment and execution toward achieving their long-term objectives and strategic goals.

Key financial highlights for the second quarter include:

• Revenue amounted to $2.5 billion, representing a 5% increase on an as-reported basis and a 6% increase on a foreign exchange (FX) neutral basis.
• GMV totaled $18.2 billion, indicating a decline of 2% on an as-reported basis and 1% on an FX-Neutral basis.
• GAAP net income from continuing operations reached $172 million, or $0.32 per diluted share.
• Non-GAAP net income from continuing operations stood at $555 million, or $1.03 per diluted share.
• GAAP and Non-GAAP operating margins were 20.4% and 26.9%, respectively.
• Active buyer numbers stayed steady at 131 million (excluding GittiGidiyor and TCGplayer), marking the first time in many quarters that the core businesses didn’t shrink.

Furthermore, eBay demonstrated its strong financial position by generating $605 million of operating cash flow and $492 million of free cash flow from continuing operations during the second quarter.

The company also displayed its commitment to shareholder value by returning $383 million, including $250 million through share repurchases and $133 million paid in cash dividends.

Overall, eBay’s said its second-quarter performance reflects the company’s resilience and successful execution of its growth strategies in the dynamic global marketplace.

As it continues to innovate and expand its services, the company remains optimistic about its future prospects and the value it brings to shareholders.

Concerns About Turnaround Speed?

However, eBay stock is under pressure in after-hours trading as projecting earnings in the current quarter (Q3) narrowly missed analysts’ estimates, suggesting the company’s turnaround strategy may be slower than expected, despite its glowing claims.

While active buyers on the company’s core marketplace stayed the same versus the previous quarter and GMV dropped less than in previous quarters, this adds to the concern that the company’s ‘turnaround’ strategy is only showing moderate progress.

Given that third-quarter earnings projections missed Wall Street analysts’ estimates for the current quarter, is by itself an acknowledgment that the strategy may be working, but not at the speed envisioned.

We’ll take a look at tonight’s earnings call transcript for additional information that could provide additional insight. Meanwhile, let’s look at select Business Highlights from the company’s second quarter.

eBay Business Highlights

Revenue Initiatives

eBay achieved substantial growth in its first-party advertising products, primarily driven by Promoted Listings, generating $341 million in revenue during the second quarter. This represents a remarkable increase of 47% on an as-reported basis and 49% on an FX-Neutral basis.

The company’s overall advertising offerings yielded revenue of over $367 million in the second quarter, accounting for approximately 2% of GMV.

Strategic Initiatives

eBay introduced its Authenticity Guarantee for streetwear in the U.S. and subsequently expanded it to encompass kids’ sneakers in both the U.S. and UK, as well as trading cards in Canada. This move reinforces eBay’s commitment to ensuring a trusted marketplace for buyers and sellers of sought-after items.

The Certified by Brand program was launched, enabling shoppers to access an expanded selection of luxury goods by partnering directly with brands, thus enhancing their presence in the secondary market.

eBay’s acquisition of Certilogo, an AI-powered authentication provider for fashion, further solidified its reputation as a trusted platform for consumers seeking pre-loved apparel with confidence.

In collaboration with top sneaker sellers, eBay hosted The ’85 Shop in Chicago, coinciding with the premiere of the movie ‘Air,’ which explores the origin story of the Air Jordan 1. This retail pop-up store featured an impressive collection of original Air Jordan 1s in various colorways, along with a never-before-released Air Jordan 1 sample and other iconic 1980s sneakers.

eBay U.K. relaunched the Certified Recycled program, instilling an added layer of trust for shoppers seeking used parts and accessories that have been thoroughly tested and graded.

eBay Motors organized a successful ‘Renew Your Ride‘ event in Atlanta, offering in-person consultations with expert builders to guide drivers on how to extend the lifespan of their vehicles using eBay Guaranteed Fit purchase protections.

To enhance sellers’ experience, eBay beta-tested a generative AI tool on its mobile app, aiding sellers in creating detailed item descriptions based on entered titles or keywords.

eBay introduced a Live Commerce Streaming experience on iOS, enabling sellers to conduct live commerce events directly through the eBay app. Additionally, eBay Live now offers Extended Auctions, a highly requested feature, which extends an auction’s time by five seconds if a new bid is received within the final five seconds of the auction.

eBay Ventures demonstrated its commitment to recommerce by investing in sports resale marketplace, Sideline Swap, and luxury fashion rental marketplace, The Volte.

Impact

eBay released its seventh annual Diversity, Equity, and Inclusion Report, highlighting the progress made in four strategic objectives: increasing representation, fostering a sense of belonging, engaging communities, and building inclusive technology.

The company also published its 2022 Impact Report, acknowledging the strides made towards its environmental and social goals, celebrating the positive impact of eBay’s marketplace, and outlining ambitious 2025 and 2030 impact goals.

In the U.K., the eBay Foundation collaborated with grantees to launch an inclusive entrepreneurship program dedicated to supporting refugee entrepreneurs.

eBay for Charity made significant contributions, totaling more than $38 million globally during the quarter.

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