EBAY Q2 Earnings Recap

Raising PT on EBAY but trimming our holdings; summarizing an excellent quarter

This post was published prior to this platform’s re-branding as Sophon Microcap Atlas (with an exclusive focus on sub-$500M market cap companies). Coverage of EBAY is moving to our sister publication - AlphaArk

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EBAY reported an excellent Q2 2025 print, with top- and bottom-line beats driven by robust GMV growth in focus categories, accelerating U.S. momentum, and continued traction in advertising and AI initiatives. This pushed the name to an ATH of $92. EBAY’s NTM EBITDA multiple currently sits at ~13x, the highest its been in four years (July ‘21). Mark Mahaney at Evercore wrote in a note yesterday that EBAY stands at an “inflection point.” We at Sophon agree with this take and anticipated this moment, which is why we got into the name a few months ago. We’ve made the decision to trim our holdings (more on that below), but first we want to cover the main takeaways of Q2 earnings.

Earnings Summary

For FY25, EBAY’s GMV is tracking towards the high end or slightly above its prior expected range of low single-digit FX-neutral growth. EBAY is guiding for flat FX-neutral operating income margins in FY25, which aligns with our bull case of constant margins. EBAY has increased its target buybacks, to ~$2.5 billion for FY25. This is higher than our bull case assumption of ~$2 billion. Mgmt expects FY25 FCF of ~$1.5Bn but above $2bn at normalized levels (excluding a $925Mn tax headwind).

Revenue of $2.73B (+6.1% y/y, +4% FXN) beat consensus at the high end of guidance, while non-GAAP EPS of $1.37 beat by 5.4% and rose 16.1% y/y. GAAP net income surged 63% y/y to $369M, demonstrating strong operating leverage.

GMV increased 6% y/y (+4% FXN) to $19.5B, with strength in Focus Categories such as Collectibles and Motors/Parts leading the way — both up >10% y/y. This contrasts starkly with non-Focus Categories which only grew ~1%. Some Focus Categories showed immense growth: Pokémon trading cards (one of the verticals EBAY is prioritizing) grew triple digits in revenue.

U.S. GMV accelerated to +7% y/y, while international GMV rose a more modest 2% FXN.

Advertising revenue reached $482M (2.5% of GMV), up 19% y/y, with first-party ad products generating $455M (+17% FXN).

Mgmt guided Q3 revenue to $2.69–$2.74B and adjusted EPS to $1.29–$1.34, above prior Street expectations.

EBAY returned $759M to shareholders during the quarter through $625M in share buybacks and $134M in dividends. With ~$2B remaining on the buyback authorization, we see continued shareholder-friendly capital allocation as a key pillar of the long-term bull case - our main reason for investing is the company’s status as a “share cannibal.”

Setting a new PT; why we’re trimming our holdings

We think EBAY will meet its FY25 revenue guidance of ~$10.7Bn. Over the next two years, we think mgmt can grow top-line at a ~6% CAGR, achieve ~22% FCF margins, and conservatively lower share count to ~390mn. We tack on a 20x multiple to FCF per share. This results in a price target of $135, slightly higher than our prior bull case PT of $125.

With our bull case PT and current share price, we see 50%+ upside on EBAY over the next ~2 years. Our prior bear case PT was $51, we now underwrite the downside at ~$68 (assumes ~3% topline CAGR; ~15% FCF margins; 16x P/FCF multiple). The R/R on EBAY at current levels with our new underwriting is about 2:1; when we made the investment it was 4:1. Due to the decreased risk reward profile, we’ve made the decision to trim our holdings in the name. EBAY currently holds a ~10% position in our portfolio and we’ve roughly halved it to ~4.8%.

This sale funds a new investment into Thunderbird Entertainment, a Canadian small-cap media stock we’ve decided to build a position in (more on this new investment coming soon). Overall, we’re incredibly proud at achieving a ~220% IRR through our partial exit of EBAY (41.5% return in just over 4 months).