eBay Inc. Q3 FY2025 earnings call

• Strong Q3 results: Gross merchandise volume grew 8% to $20.1 billion, revenue increased over 8% to $2.82 billion, and non-GAAP earnings per share grew over 14% to $1.36.
• Focus category growth: Focus categories grew over 15% in Q3, with collectibles, P&A, and fashion driving growth. Collectibles saw triple-digit GMV growth in Pokémon for the third straight quarter. P&A benefited from easy and free returns in the U.S. Fashion had a collaboration with Marks & Spencer in the U.K. for the circular economy.
• eBay Live momentum: Continues to grow with consistent quarter-over-quarter growth in viewers, watch time, sold items, and GMV. Annual GMV run rate up approximately 5x year-over-year.
• C2C value proposition: Improvements in the U.K. C2C initiative, including faster payouts, greater transparency, and mandatory managed shipping, led to improved customer satisfaction and GMV growth. Acquisition of Tise strengthens presence in Nordic markets and circular economy efforts.
• AI integration: Leveraging AI for selling (magical listing, member-to-member messaging), shopping (AI shopping agent, visual camera intelligence with Apple), and advertising (multimodal embedding model for better recommendations). Unified agentic commerce platform integrates various technologies for personalized experiences.
• Advertising revenue: First-party advertising revenue grew nearly 23% in Q3, driven by broad-based growth in ads portfolio.
• Seller Capital program: Over $1 billion in growth capital dispersed to sellers since 2021.
• Shipping initiatives: Accelerated cross-border shipping solutions, including eBay International Shipping in Canada and enabling German business sellers to access SpeedPAK.
• Company culture: Recognized as one of Forbes America's Best Employers for Company Culture, etc.

In Q3, focus category GMV grew over 15%, outpacing the remainder of the marketplace. Collectibles was the largest contributor, with GMV accelerating in collectible card games and sports trading cards. Motor parts and accessories (P&A) was the second largest contributor, generating over 1 point for the overall marketplace. Fashion was another driver, led by luxury, streetwear, and preloved apparel. Off-platform marketplaces TCGplayer and Goldin also saw GMV acceleration. Focus categories' revenue contribution was significant, with collectibles, P&A, and fashion each playing key roles in the overall growth.

• Q4 GMV: Expected between $20.5 billion and $20.9 billion, FX-neutral growth 4%-6% year-over-year. Tailwinds from acquisition of Tise and commodity price appreciation, offset by lapping dynamics from prior year's strong trading card growth and de minimis exemption removal.
• Revenue: Forecasted between $2.83 billion and $2.89 billion, FX-neutral growth 8%-10% year-over-year. Expect take rate expansion partially due to remonetization of U.K. C2C volume and advertising growth, offset by mix shift and trade policy headwinds.
• Non-GAAP operating margin: Expected 25.8%-26.3% in Q4.
• 2026 planning: Anticipates third consecutive year of positive FX-neutral GMV and revenue growth, but notes lapping dynamics from high trading card growth, bullion/coins, and marketing efficiency, along with headwinds from de minimis annualization. Focus on balancing GMV growth and operating margin for long-term value.

• Macroeconomic challenges: International markets face challenges, and cross-border trade into the U.S. is impacted by de minimis exemption removal, creating cost and friction for sellers and buyers.
• Lapping dynamics: High growth in certain categories in prior years may impact 2026 growth, and annualization of de minimis effects could pressure GMV growth.

Q: How is AI anticipated to change eBay's connection with buyers and sellers and advertising?

A: AI will unlock supply by making listing easy, transform shopping discovery with personalized recommendations, and embed throughout the experience. It improves listing, messaging, search, and advertising performance with multimodal approaches for better recommendations.

Q: Elaborate on incremental investments and margins?

A: Product development expenses are ramping for strategic initiatives like eBay Live, shipping solutions, and vehicles. Sales and marketing expense is flat, G&A expenses have lower employee-related spend, but transaction losses are up due to managed shipping and fraud. Focus on balancing top line growth and margin flow-through.

Q: Sustainability of trading cards growth?

A: Long runway of growth due to trust and innovation, but growth won't be linear. Driven by new releases, collaborations, and enthusiast engagement. Metrics like new buyers, sold items, and ASP contribute to durability.

Q: Vehicles business and take rate impact?

A: Vehicles business has significant growth potential with end-to-end services, but effective take rate is low to mid-single-digit. Revenue contribution is immaterial currently.

Q: 2026 guidance and de minimis impacts?

A: Early in planning, strategic initiatives are core drivers. De minimis exemption removal led to breakage in Q3, with efforts to support sellers via accelerated shipping solutions. Anticipate headwinds from annualizing de minimis effects.