Executive Summary / Key Takeaways

• eBay's strategic pivot towards "non-new in season" and "enthusiast" categories, significantly amplified by advanced AI, is driving a sustained return to Gross Merchandise Volume (GMV) and revenue growth.
• The company delivered robust Q3 2025 financial results, with FX-neutral GMV and revenue both increasing by 8%, and non-GAAP diluted earnings per share growing over 14% year-over-year, underscoring the effectiveness of its focused strategy.
• Technological differentiation through generative AI, including "Magical Listing" and a "unified agentic commerce platform," is enhancing both seller efficiency and buyer discovery, establishing a critical competitive advantage.
• Strategic initiatives such as eBay Live, the U.K. consumer-to-consumer (C2C) overhaul, and the Caramel acquisition are expanding market opportunities and diversifying revenue streams, even amidst macroeconomic headwinds and evolving trade policies.
• The outlook for Q4 2025 and preliminary 2026 guidance projects continued positive FX-neutral GMV and revenue growth, supported by disciplined capital allocation and shareholder returns, while acknowledging potential impacts from lapping strong prior-year performance and tariff changes.

A Marketplace Reimagined: eBay's Strategic Evolution

eBay Inc., founded in 1995, has long been a global commerce leader, connecting millions of buyers and sellers across more than 190 markets through its diverse marketplace platforms. After significant structural changes, including the 2015 spin-off of PayPal (PYPL) and the 2020 sale of StubHub, eBay has strategically sharpened its focus, pivoting towards "non-new in season" and "enthusiast" categories. This deliberate shift aims to reinvent the future of e-commerce by catering to specialized interests and unlocking value in unique inventory.

Within the dynamic e-commerce landscape, eBay occupies a distinct niche, differentiating itself from broader retailers like Amazon and Walmart . While Amazon excels with its integrated retail ecosystem, extensive logistics, and rapid fulfillment, and Walmart (WMT) leverages its omnichannel presence for affordability and convenience, eBay thrives on its peer-to-peer model and global reach for unique items. The company's brand recognition and network effects foster a community-driven marketplace, particularly appealing for rare or personalized goods, which contrasts with Amazon's less personalized approach. In categories like vintage or custom items, eBay's offerings are less specialized than Etsy's (ETSY) curated platform, but its wider array of categories and global accessibility provide a scale advantage. Compared to Alibaba (BABA), eBay's U.S.-centric marketplace and focus on individual sellers offer a different value proposition than Alibaba's ecosystem-driven international B2B approach. eBay's strategic emphasis on user-generated content and global reach allows it to counter the logistics strengths of larger rivals, potentially improving gross margins through efficient user acquisition.

Technological Edge: AI as the Growth Catalyst

At the heart of eBay's strategic resurgence is its profound investment in artificial intelligence, transforming both the seller and buyer experience. The company has developed a "unified agentic commerce platform," integrating its hybrid cloud infrastructure, proprietary Large Language Models (LLMs) like LiLiuM, and agentic protocols with three decades of commercially relevant data. This advanced platform enables fully connected experiences between eBay's own agents and third-party agents, delivering personalized and relevant products to shoppers.

The tangible benefits of this technological differentiation are evident across the platform. The "Magical Listing" technology, powered by generative AI, has been a game-changer for sellers. Over 10 million unique sellers have utilized these AI features to create more than 200 million listings, generating several billion dollars in GMV, with customer satisfaction rates exceeding 90%. This tool significantly reduces listing time, making it easier for C2C sellers to bring unique inventory online. For buyers, AI-powered discovery experiences like "Explore" and "Shop the Look," along with an "AI shopping agent pilot," provide personalized product recommendations and expert guidance, enhancing the shopping journey.

eBay is also leveraging AI to optimize its advertising performance. A new multimodal embedding model on view item pages delivers more relevant recommendations by analyzing listing imagery, titles, and other details, leading to a measurable uplift in Promoted Listings revenue. Furthermore, an AI assistant for member-to-member messaging, rolled out across the U.S., U.K., and Australia in Q3 2025, provides immediate, high-quality suggested answers to buyer inquiries, boosting seller efficiency. The company's integration with Apple (AAPL)'s visual intelligence feature in iOS 26 allows users to shop on eBay directly from their iPhone camera, while live activities functionality for auctions provides real-time updates, showing click-through rates more than four times higher than standard push notifications. These technological advancements not only build a strong competitive moat but also directly contribute to eBay's financial performance through increased transaction velocity, higher average selling prices, and improved operational efficiencies.

Strategic Pillars Driving Performance

eBay's strategic initiatives are yielding significant results, particularly within its "Focus Categories." In Q3 2025, GMV in these categories grew over 15%, outpacing the rest of the marketplace by approximately 11 percentage points. This growth was broad-based, with all focus categories contributing positively year-over-year.

Collectibles, especially trading cards, has been a standout performer, with accelerating year-over-year GMV growth for the ninth consecutive quarter and triple-digit Pokémon GMV growth in Q3 2025. This success is attributed to continuous innovation for hobbyists, including "My Collection," AI-powered listing tools, authentication and grading partnerships with PSA, and consignment services. While growth in this category may normalize, management is confident in its long-term durability, driven by sold item growth rather than just ASP surges.

Motors Parts & Accessories (P&A) was the second-largest contributor to GMV growth in Q3 2025. With over 750 million live listings, eBay offers one of the world's largest selections of auto parts. The acquisition of Caramel in 2025 further enhances this segment by providing a secure, end-to-end online vehicle purchase experience across all 50 U.S. states, tapping into an estimated $75 billion addressable market for collectible cars. This initiative also creates synergies with the P&A business, as collectible car enthusiasts often engage with parts and accessories. Fashion, including luxury, streetwear, and preloved apparel, is another notable driver, reinforced by collaborations like Marks & Spencer (MKS.L) in the U.K. to promote the circular economy and expanded Authenticity Guarantee to 70 luxury brands.

"eBay Live" is gaining significant traction, with its annual GMV run rate increasing approximately 5x year-over-year in Q3 2025. This live commerce platform is expanding into the U.K. and Germany, fostering community engagement and driving velocity in categories like trading cards, luxury watches, and pre-loved apparel.

Geographic-specific initiatives, particularly the U.K. C2C overhaul, have shown compelling results. Launched in Q4 2024, this initiative has led to notably stronger GMV growth trends, improved customer satisfaction, and accelerating year-over-year GMV growth in Q3 2025. The managed shipping program, which streamlines shipping, reduces costs, and improves trust, is now mandated for all eligible U.K. C2C items. The recent acquisition of Tise, a social marketplace for pre-loved fashion in the Nordics, further strengthens eBay's C2C offerings and its connection with younger demographics.

In financial services, eBay continues to enhance buyer choice and expand solutions for sellers. The partnership with Klarna for Buy Now Pay Later solutions, expanded to the U.S. in April 2025, has surpassed initial expectations, with average order values on transactions approximately three times the U.S. marketplace average. The "Seller Capital" program has dispersed over $1 billion in growth capital to eBay sellers since 2021, providing crucial funding for small businesses.

Cross-border trade solutions are also being accelerated in response to evolving global trade policies. Following the elimination of the U.S. de minimis exemption, eBay launched "eBay International Shipping" in Canada and expanded "SpeedPAK" access to German business sellers, simplifying compliance and improving delivery predictability.

Financial Health and Recent Performance

eBay's strategic execution translated into strong financial performance in Q3 2025. Net revenues increased by 9% year-over-year to $2.82 billion, or 8% on an FX-neutral basis. This growth was primarily fueled by higher GMV, increased penetration of first-party advertising, and the ramping of the U.K. managed shipping program. GMV itself grew 10% year-over-year to $20.1 billion, or 8% FX-neutral, accelerating by roughly 4 points sequentially. Non-GAAP diluted earnings per share rose over 14% year-over-year to $1.36, while non-GAAP operating income grew 9% to $764 million.

Despite top-line strength, the GAAP operating margin decreased to 20.4% in Q3 2025 from 23.1% in the prior year, mainly due to higher non-recurring general and administrative expenses related to legal matters and restructuring. Cost of net revenues increased due to higher shipping costs ($36 million), payment processing costs ($21 million), and depreciation expense ($13 million), partially offset by a decrease in indirect tax expense. Sales and marketing expenses also rose due to unfavorable foreign currency movements. Product development expenses increased, reflecting continued investment in strategic initiatives and employee-related costs. The provision for transaction losses increased, largely due to the ramping of the U.K. managed shipping program and fluctuations in buyer and seller fraud. Interest expense decreased due to a lower average notional amount of outstanding debt, while the effective tax rate declined due to audit settlements and benefits from the One Big Beautiful Bill Act.

From a liquidity perspective, eBay maintains a healthy position, with $5.3 billion in cash, cash equivalents, and short-term and long-term non-equity investments as of September 30, 2025.

Cash provided by continuing operating activities for the nine months ended September 30, 2025, was $1.414 billion, a decrease primarily due to a $604 million increase in cash paid for income taxes. The company actively manages its capital, repurchasing $1.90 billion of common stock during the first nine months of 2025, with $1.40 billion remaining under its authorization. A quarterly cash dividend of $0.29 per share was declared in October 2025. Management's capital allocation strategy prioritizes organic investment, evaluation of inorganic opportunities, and returning excess capital to shareholders, targeting 90% to 100% of normalized free cash flow in a normal year.

Outlook and Investment Implications

eBay's management anticipates continued positive momentum, projecting Q4 2025 GMV between $20.5 billion and $20.9 billion, representing FX-neutral growth of 4% to 6% year-over-year. Revenue is forecast to be between $2.83 billion and $2.89 billion, implying FX-neutral growth of 8% to 10%. This outlook reflects durable growth trends from focus categories and strategic initiatives, though it is tempered by lapping strong Q4 2024 performance in trading cards and U.K. C2C volume, and the full quarter impact of the U.S. de minimis exemption removal. Non-GAAP operating margin is expected to be between 25.8% and 26.3% in Q4, reflecting continued investment in strategic initiatives to drive long-term growth. Non-GAAP EPS is projected between $1.31 and $1.36.

For the full year 2025, reported free cash flow is expected to be approximately $1.5 billion, including a $935 million headwind from unique tax items, with normalized free cash flow comfortably at $2.5 billion. Looking ahead to 2026, eBay plans for a third consecutive year of positive FX-neutral GMV and revenue growth. However, management acknowledges potential headwinds, including a roughly 2-point impact on GMV growth from lapping exceptionally high growth in trading cards and bullion/coins, and an additional 1-point headwind from annualizing de minimis changes. The gap between GMV and revenue growth is expected to narrow in 2026 due to continued first-party advertising growth, partially offset by pressure on cross-border sellers and a higher mix of lower take-rate emerging businesses like Vehicles and eBay Live.

Key risks to the investment thesis include ongoing macroeconomic uncertainties, particularly in international markets, and the unpredictable impact of trade policy changes and tariffs. The company's reliance on third-party sellers and potential technological gaps compared to rivals like Amazon (AMZN) also present vulnerabilities. However, eBay's diversified supply of domestic and cross-border inventory, coupled with its focus on non-new and refurbished goods, provides resilience in a challenging consumer environment.

Conclusion

eBay's journey of strategic transformation, marked by a clear pivot to enthusiast-driven categories and a deep commitment to AI innovation, is demonstrably yielding positive results. The company's Q3 2025 performance, characterized by accelerating GMV and revenue growth, underscores the effectiveness of its focused playbook. By leveraging its unique inventory, advanced AI capabilities, and strategic investments in areas like eBay Live and end-to-end vehicle transactions, eBay is not merely adapting to the evolving e-commerce landscape but actively shaping new avenues for growth. The disciplined approach to capital allocation, balancing strategic reinvestment with robust shareholder returns, further strengthens the long-term investment thesis. While macroeconomic headwinds and trade policy shifts present ongoing challenges, eBay's foundational strengths and technological leadership position it for sustainable growth and continued value creation in a dynamic global marketplace.