eBay’s Downbeat Q4 Outlook Overshadows Positive Q3 Performance
2min read eBay is experiencing a significant market reaction today, with shares dropping around 7 percent as investors respond to the company’s cautious outlook for Q4. Despite posting stronger-than-expected earnings and revenue for Q3, a soft sales forecast for the final quarter of the year has sparked a wave of selling pressure, bringing the stock near one-month lows.
In Q3, eBay outperformed analysts’ projections, supported by a moderate uptick in gross merchandise volume (GMV), which rose 1 percent year-over-year to $18.3 billion. This marks the second consecutive quarter of GMV growth, largely driven by the company’s Focus Category initiatives.
This targeted approach encompasses categories like collectibles, refurbished electronics, motor parts, and luxury fashion, which collectively outpaced overall marketplace growth by approximately 5 percentage points, growing by nearly 5 percent year-over-year. Trading cards stood out with double-digit growth, highlighting the success of eBay’s specialization strategy in appealing to niche markets.
eBay’s top-line growth of 3 percent year-over-year in Q3 to $2.58 billion reflects steady improvement, while its bottom line saw a 16 percent increase to $1.19 per share.
These figures underscore the company’s successful cost management and its ability to leverage growth within strategically chosen segments to maintain a competitive edge against larger e-commerce players like Amazon and Walmart.
However, the positive results from Q3 were overshadowed by eBay’s guidance for Q4, which signals a year-over-year revenue contraction.
The company has forecasted Q4 revenue of $2.53-$2.59 billion, reflecting a potential 1.5 percent decline at the midpoint. Several factors contribute to this cautious outlook, including inflationary pressures and a shorter holiday shopping season. Additionally, the heightened focus on the U.S. elections may distract some consumers, dampening e-commerce activity.
Foreign exchange impacts further complicate revenue growth, as the strong U.S. dollar cuts into international sales.
Another significant factor in eBay’s outlook is a substantial operational shift in its U.K. market. The company is piloting a “free selling” model, which removes selling fees while handling shipping for sellers and collecting higher fees from buyers.
While this model is expected to drive incremental revenue and operating income in the long term, it brings a temporary monetization lag as the program ramps up through Q4 and Q1 2025. Consequently, eBay will not fully implement the buyer fees until the end of Q1, resulting in a transitional period that weighs on revenue expectations.
Looking forward, eBay projects around flat to 2 percent GMV growth in Q4 and adjusted earnings per share of $1.17-$1.22. Although the decline in projected sales is cause for concern, eBay’s continued success with Focus Categories and the early uptake of new sellers in the U.K. market signal longer-term potential. As the U.K. overhaul takes effect, and with incremental gains expected by 1H25, eBay’s strategy may begin to bear fruit.
This transition phase, while challenging, could pave the way for improved monetization and growth stability in future quarters, making eBay a stock worth monitoring as these developments unfold.
