eBay (EBAY)

Online marketplace eBay (NASDAQ:EBAY) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 9.5% year on year to $2.82 billion. Guidance for next quarter’s revenue was optimistic at $2.86 billion at the midpoint, 2% above analysts’ estimates. Its non-GAAP profit of $1.36 per share was 1.9% above analysts’ consensus estimates.

Company Overview

Originally known as the first online auction site, eBay (NASDAQ:EBAY) is one of the world’s largest online marketplaces.

Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, eBay grew its sales at a sluggish 2.7% compounded annual growth rate. This fell short of our benchmarks and is a poor baseline for our analysis.

This quarter, eBay reported year-on-year revenue growth of 9.5%, and its $2.82 billion of revenue exceeded Wall Street’s estimates by 3.1%. Company management is currently guiding for a 10.9% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 5.4% over the next 12 months. Although this projection indicates its newer products and services will spur better top-line performance, it is still below the sector average.

Buyer Growth

As an online marketplace, eBay generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.

eBay struggled with new customer acquisition over the last two years as its active buyers were flat at 134 million. This performance isn't ideal because internet usage is secular, meaning there are typically unaddressed market opportunities. If eBay wants to accelerate growth, it likely needs to enhance the appeal of its current offerings or innovate with new products.

Unfortunately, eBay’s active buyers were once again flat year on year in Q3. The quarterly print isn’t too different from its two-year result, suggesting its new initiatives aren’t accelerating buyer growth just yet.

Revenue Per Buyer

Average revenue per buyer (ARPB) is a critical metric to track because it measures how much the company earns in transaction fees from each buyer. ARPB also gives us unique insights into a user’s average order size and eBay’s take rate, or "cut", on each order.

eBay’s ARPB growth has been subpar over the last two years, averaging 2.7%. This raises questions about its platform’s health when paired with its flat active buyers. If eBay wants to grow its buyers, it must either develop new features or lower its monetization of existing ones.

This quarter, eBay’s ARPB clocked in at $21.04. It grew by 8.7% year on year, faster than its active buyers.

For online marketplaces like eBay, gross profit tells us how much money the company gets to keep after covering the base cost of its products and services, which typically include payment processing, hosting, and bandwidth fees in addition to the costs necessary to onboard buyers and sellers, such as identity verification.

eBay has robust unit economics, an output of its asset-lite business model and pricing power. Its margin is better than the broader consumer internet industry and enables the company to fund large investments in new products and marketing during periods of rapid growth to achieve higher profits in the future. As you can see below, it averaged an excellent 71.8% gross margin over the last two years. Said differently, roughly $71.83 was left to spend on selling, marketing, and R&D for every $100 in revenue.

This quarter, eBay’s gross profit margin was 70.9%, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs have been stable and it isn’t under pressure to lower prices.

Consumer internet businesses like eBay grow from a combination of product virality, paid advertisement, and incentives (unlike enterprise software products, which are often sold by dedicated sales teams).

eBay is quite efficient at acquiring new users, spending only 30.5% of its gross profit on sales and marketing expenses over the last year. This efficiency indicates that eBay has a highly differentiated product offering, giving it the freedom to invest its resources into new growth initiatives.

EBITDA is a good way of judging operating profitability for consumer internet companies because it excludes various one-time or non-cash expenses (depreciation), providing a more standardized view of the business’s profit potential.

eBay has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer internet business, boasting an average EBITDA margin of 30.5%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, eBay’s EBITDA margin decreased by 3.9 percentage points over the last few years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, eBay generated an EBITDA margin profit margin of 29.4%, down 1.3 percentage points year on year. Since eBay’s EBITDA margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

We can take a deeper look into eBay’s earnings to better understand the drivers of its performance. A three-year view shows that eBay has repurchased its stock, shrinking its share count by 14.8%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q3, eBay reported adjusted EPS of $1.36, up from $1.19 in the same quarter last year. This print beat analysts’ estimates by 1.9%. Over the next 12 months, Wall Street expects eBay’s full-year EPS of $5.36 to grow 9.9%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

eBay has shown robust cash profitability, driven by its attractive business model and cost-effective customer acquisition strategy that enable it to invest in new products and services rather than sales and marketing. The company’s free cash flow margin averaged 14.1% over the last two years, quite impressive for a consumer internet business.

eBay’s free cash flow clocked in at $803 million in Q3, equivalent to a 28.5% margin. This result was good as its margin was 3.4 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

eBay reported $3.38 billion of cash and $7.02 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $3.34 billion of EBITDA over the last 12 months, we view eBay’s 1.1× net-debt-to-EBITDA ratio as safe. We also see its $22 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see eBay’s revenue guidance for next quarter beat analysts’ expectations. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its number of active buyers slightly missed and its EPS guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 6.6% to $93.01 immediately following the results.

Updated: December 4, 2025 at 9:20 PM EST

When considering an investment in eBay, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

eBay isn’t a terrible business, but it doesn’t pass our quality test. To kick things off, its revenue growth was weak over the last three years. And while its impressive EBITDA margins show it has a highly efficient business model, the downside is its active buyers were flat. On top of that, its projected EPS for the next year is lacking.

eBay’s EV/EBITDA ratio based on the next 12 months is 10.8x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $93.97 on the company (compared to the current share price of $82.12).