Despite its earnings beat, eBay Inc (NASDAQ: EBAY) shares tanked 10.5% upon the release of second quarter results last week while its main competitor and e-commerce giant, Amazon.com Inc (NASDAQ: AMZN) is scheduled to report its earnings on Thursday after the close. As eBay continues its tech-led business reimagination journey, the latest report failed to ease concerns that it is losing its share to Amazon and Walmart Inc (NYSE: WMT) who are fiercely battling for the U.S. e-commerce throne.
Second Quarter Highlights
For the fiscal second quarter that ended on June 30th, eBay's revenue expanded 5% YoY to $2.54 billion, but gross merchandise value (GMV) contracted 2% to $18.2 billion. While international ebay GMV grew 1%, US eBay GMV contracted 4%. CEO Jamie Iannone revealed the e-commerce platformed an important milestone as advertising revenue reached 2% penetration of GMV. Iannone also added that as of this quarter, a new way of ranking ads on search has been introduced, with this AI-gained capability optimizing cost per acquisition placements for both conversion and ad rate. CFO Stephen Priest noted this is an improvement from first quarter's 3% drop but eBay lost 1 million active buyers quarter over quarter, as they now total 132 million. Total ads grew 35%, while first-party ad revenue grew roughly 50 points faster than GMV. Non-GAAP earnings amounted to $1.03 per share.
Third Quarter Guidance Below Expectations
Non-GAAP earnings per share have been guided to be between 96 cents and $1.01, while Wall Street analysts expected $1.02. Revenue is expected in the range between $2.46 and $2.52 billion.
AI-Powered Magical Listing
With the help of generated AI, sellers will be able to list their inventory in a far more easier way as eBay integrated Microsoft Corporation's (NASDAQ: MSFT) creation, Azure's open AI API, into its core listing flow. Early feedback has been positive with 80% customer satisfaction, among the highest CSAT for any new feature that eBay launched. Iannone pointed out that eBay just got started with this feature as the next step will involve leveraging improved image recognition capabilities to provide flows with the option of a more seamless camera-based listing.
The Bottom Line Is That eBay Is Struggling
Despite its strategic initiatives, such as launching the authenticity guarantee for streetwear in June, the market's reaction shows concern and weakening momentum among active buyers that eBay is struggling. Unlike Amazon, it only relies on e-commerce and the competition is intense.
eBay will need to do more than simplify listings for sellers, sell more luxury items that boost revenue and refurbished items that attract price-conscious consumers to be able to stay in the e-commerce game. Here's to hoping that AI support is all that it takes for eBay to stay relevant in the competitive universe, one in which Amazon and Walmart are locked in the battle for the U.S. territory for more than a decade.
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