Key Points
- Q2 revenue of $2.6 billion, rose 1% year over year and topped analyst estimates.
- Adjusted EPS of $1.18 also topped consensus estimates.
- Operating margins improved year over year, with GAAP at 21.3% and non-GAAP at 27.9%.
Popular e-commerce platform eBay (EBAY 2.23%)released second-quarter earnings on Wednesday that topped analyst estimates for both top and bottom lines.
Revenue of $2.6 billion rose just 1% year over year while adjusted EPS of $1.18 was up 15%. Overall, the quarter showed improvement in operating margins but highlighted stagnant growth in active buyers.
| Metric | Q2 2024 | Analysts Expectations | Q2 2023 | Change (YOY) |
|---|---|---|---|---|
| Revenue | $2.6 billion | $2.53 billion | $2.54 billion | 1% |
| Gross Merchandise Volume (GMV) | $18.4 billion | n/a | $18.2 billion | 1% |
| Adjusted EPS | $1.18 | $1.13 | $1.03 | 15% |
| GAAP operating margin | 21.3% | n/a | 20.4% | 0.9% |
| Adjusted operating margin | 27.9% | n/a | 26.9% | 1.0% |
Source: eBay. Note: Analyst consensus estimates provided by FactSet. YOY = Year over year. GAAP = Generally accepted accounting principles.
Company Overview
eBay operates one of the world's largest online marketplaces, providing a platform for users to buy and sell a wide variety of goods. The company focuses on leveraging technology to improve user experience and operational efficiency. Key strategic initiatives include managed payments, first-party advertising, and sustainability programs.
Recently, eBay's focus has been on enhancing its platform through artificial intelligence (AI), expanding partnerships, and implementing sustainability measures. Success for eBay hinges on GMV growth, effective revenue capture through its take rate, and diversification through managed payments and advertising.
Notable Events in Q2
The quarter saw eBay making strides in several areas:
Operating margins: The company's GAAP operating margin improved to 21.3% from 20.4% the previous year, and adjusted operating margin rose to 27.9% from 26.9%.
Gross merchandise volume (GMV): GMV grew modestly to $18.4 billion, a 1% increase year over year. This was a positive signal given GMV's crucial role in overall business volume.
Cash flow and capital returns: eBay generated $367 million in operating cash flow and $278 million in free cash flow. During the quarter, it returned $1 billion to shareholders through share repurchases and paid $135 million in cash dividends.
Strategic Initiatives: eBay completed acquisitions, including the purchase of Goldin, and established strategic partnerships, including an expanded refurbished program and enabling PayPal's (PYPL -0.57%) Venmo as a payment method. AI capabilities were ramped up with new features such as "Shop the Look."
Sustainability Focus: Significant initiatives included a collaboration with Seagate (STX 3.56%) on sustainability and the launch of a charity-driven "Rocket Man Resale" project with Elton John.
Challenges Faced
Lack of growth in active buyers: The number of active buyers remained flat at 132 million, the same as the past three quarters, indicating stagnant growth.
Competitive and regulatory pressures: eBay faces competition from various online and offline platforms, along with regulatory challenges due to evolving tax regimes and newly introduced tax liabilities.
Macroeconomic headwinds: The company has encountered global economic pressures, including market volatility and regulatory challenges in key markets.
Looking Ahead
eBay's management provided revenue guidance for the third quarter to come in between $2.50 billion to $2.56 billion with foreign currency-neutral growth of 1% to 3%. That guidance came in below analyst expectations. GAAP EPS is anticipated to range between $0.82 and $0.87 and adjusted EPS between $1.15 and $1.20. This guidance reflects cautious optimism as the company aims to navigate through competitive and regulatory hurdles.
Investors should monitor eBay's strategic focus on technology, advertising revenue growth, and expansion of its sustainability initiatives. Investors should also watch for potential changes in active buyer numbers, GMV trends, and how effectively the company can leverage its strategic initiatives to overcome competitive and regulatory challenges.
