eBay (EBAY)

Online marketplace eBay (NASDAQ:EBAY) announced better-than-expected revenue in Q4 CY2025, with sales up 15% year on year to $2.97 billion. On top of that, next quarter’s revenue guidance ($3.03 billion at the midpoint) was surprisingly good and 8.5% above what analysts were expecting. Its non-GAAP profit of $1.41 per share was 4.4% 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 is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, eBay’s 4.3% annualized revenue growth over the last three years was sluggish. This fell short of our benchmark for the consumer internet sector and is a poor baseline for our analysis.

This quarter, eBay reported year-on-year revenue growth of 15%, and its $2.97 billion of revenue exceeded Wall Street’s estimates by 3%. Company management is currently guiding for a 17% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.8% over the next 12 months, similar to its three-year rate. This projection doesn't excite us and indicates its newer products and services will not catalyze better top-line performance yet.

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.

Over the last two years, eBay’s active buyers, a key performance metric for the company, increased by 1.2% annually to 135 million in the latest quarter. This growth rate is one of the lowest in the consumer internet sector, largely a function of its already massive scale and saturated market. If eBay wants to reaccelerate growth, it likely needs to innovate with new products.

Unfortunately, eBay’s active buyers were flat year on year in Q4. 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 decent over the last two years, averaging 5.2%. Its ability to increase monetization while growing its active buyers demonstrates the value of its platform.

This quarter, eBay’s ARPB clocked in at $21.96. It grew by 14.1% 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 71.7% gross margin over the last two years. That means eBay only paid its providers $28.29 for every $100 in revenue.

eBay produced a 71.4% gross profit margin in Q4, 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 30.1% 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.

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 31.3%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, eBay’s EBITDA margin decreased by 3.2 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.

This quarter, eBay generated an EBITDA margin profit margin of 29.5%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term 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.

eBay’s EPS grew at a decent 10.3% compounded annual growth rate over the last three years, higher than its 4.3% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its EBITDA margin didn’t improve.

Diving into the nuances of eBay’s earnings can give us a better understanding of its performance. A three-year view shows that eBay has repurchased its stock, shrinking its share count by 15.4%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q4, eBay reported adjusted EPS of $1.41, up from $1.25 in the same quarter last year. This print beat analysts’ estimates by 4.4%. Over the next 12 months, Wall Street expects eBay’s full-year EPS of $5.52 to grow 6.3%.

Although EBITDA is undoubtedly valuable for assessing company performance, we believe cash is king because 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 15.9% over the last two years, quite impressive for a consumer internet business.

Taking a step back, we can see that eBay’s margin dropped by 5.4 percentage points over the last few years. If its declines continue, it could signal increasing investment needs and capital intensity.

eBay’s free cash flow clocked in at $478 million in Q4, equivalent to a 16.1% margin. The company’s cash profitability regressed as it was 5.6 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

eBay reported $2.92 billion of cash and $7.06 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 $3.48 billion of EBITDA over the last 12 months, we view eBay’s 1.2× net-debt-to-EBITDA ratio as safe. We also see its $82 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.

We were impressed by eBay’s optimistic revenue guidance for next quarter, which blew past analysts’ expectations. We were also glad its EPS guidance for next quarter exceeded Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 6.4% to $87.31 immediately after reporting.

Updated: February 18, 2026 at 4:48 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in eBay.

eBay isn’t a terrible business, but it isn’t one of our picks. To kick things off, its revenue growth was weak over the last three years, and analysts don’t see anything changing over the next 12 months. While its impressive EBITDA margins show it has a highly efficient business model, the downside is its growth in active buyers has been lackluster. 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 11.6x. This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $94.67 on the company (compared to the current share price of $87.31).