EBAY Q3 Deep Dive: Margin Compression and Strategic Investments Temper Revenue Growth

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.

Is now the time to buy EBAY? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

eBay’s third quarter was marked by solid revenue growth but a negative market reaction, as investors focused on margin compression and rising costs. Management attributed revenue gains to strength in focus categories such as trading cards, motor parts, and luxury fashion, as well as the continued rollout of AI-driven seller tools. CEO Jamie Iannone highlighted that “focus category GMV growth accelerated to over 15%,” with collectibles and trading cards delivering standout performance. However, operating margins declined due to increased investment in strategic initiatives and higher transaction losses, particularly from the ramp-up of managed shipping and consumer protection programs.

Looking ahead, eBay’s guidance reflects optimism around continued momentum in its focus categories and new strategic investments, including AI-powered search and agentic commerce platforms. Management expects the durability of growth to be tested by lapping strong trading card releases and the full impact of new international trade regulations. CFO Peggy Alford cautioned that, while the company remains confident in its strategy, “we expect a modest deceleration in GMV growth during Q4” as headwinds from regulatory changes and increased investment continue. The company is prioritizing advancements in shipping solutions, live commerce, and AI-driven personalization to support future growth.

Key Insights from Management’s Remarks

Management emphasized that growth in trading cards, strategic AI investments, and enhancements to shipping and live commerce were key to third quarter performance, while margin pressures reflected deliberate reinvestment in these areas.

• Trading cards drive momentum: The collectibles focus category, especially trading cards, was the largest contributor to growth. Management cited partnerships with PSA for authentication and grading, along with new features like My Collection and AI-powered listing tools, as catalysts for increased buyer and seller engagement.
• AI embedded across platform: eBay advanced its proprietary AI technologies in both buyer and seller experiences. The company rolled out an AI assistant in messaging, expanded its AI-driven “magical listing” tools, and piloted a shopping agent to enhance personalized recommendations and streamline the listing process.
• Live commerce and C2C expansion: eBay Live, the company’s live shopping platform, saw a 5x increase in its annual GMV run rate year-over-year, and management highlighted recent launches in the U.K. and Germany. Consumer-to-consumer (C2C) initiatives, especially in the U.K., delivered notable GMV growth, supported by managed shipping and new fee structures.
• Shipping solutions address regulatory friction: In response to the removal of the de minimis import exemption, eBay accelerated the rollout of enhanced cross-border shipping solutions, such as SpeedPAK and eBay International Shipping, to help sellers manage new customs requirements and maintain reliable delivery timelines.
• Margin pressures from reinvestment: Operating margins declined year-on-year as eBay reinvested in product development, shipping, and live commerce. CFO Peggy Alford explained that product development expenses were intentionally increased to accelerate the roadmap for growth initiatives, with a focus on long-term market share gains.

Drivers of Future Performance

eBay’s outlook for the next quarter and into next year is shaped by ongoing strategic investments, regulatory headwinds, and the durability of category-specific growth.

• Focus category expansion: Management is betting on further growth in focus categories like trading cards, motor parts, and luxury fashion, while adding fashion as a new area of emphasis. These categories are expected to maintain momentum, though some deceleration is anticipated as the company laps exceptionally strong prior-year releases.
• AI and live commerce investments: Continued investment in AI-powered tools and the expansion of eBay Live into new geographies are projected to drive engagement and seller efficiency. Management sees these as crucial to sustaining buyer interest and supporting both core and emerging business lines.
• Regulatory and cost headwinds: The removal of the de minimis exemption and evolving international trade policies are expected to pressure cross-border sales and advertising monetization. These challenges, along with higher product development spending, may weigh on margins and take rate in upcoming quarters.

Catalysts in Upcoming Quarters

Going forward, the StockStory team will be monitoring (1) the pace of adoption and monetization for eBay Live and agentic commerce features, (2) the effectiveness of cross-border shipping initiatives in mitigating regulatory headwinds, and (3) the sustainability of growth in focus categories, particularly as trading card releases and collectibles face tougher comparisons. Continued investment in AI and product development will also be key markers of execution.

eBay currently trades at $88.80, down from $99.56 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

High Quality Stocks for All Market Conditions

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.