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EBay 2nd-quarter profit slides as costs rise, but PayPal, e-commerce growth boost revenue

A challenging overseas market is weighing on eBay's outlook for the second half of the year, sending shares lower in after-hours trading Wednesday even though the e-commerce bellwether's second-quarter results were roughly in line with Wall Street's expectations.

EBay shares fell $3.55, or 6.2 percent, to $53.83 in extended trading.

Revenue rose by 14 percent in the April-June period, as its PayPal business and namesake online marketplace continued to grow. But net income declined amid higher expenses.

The company's shares fell by about 6 percent to $53.95 in extended trading after the results came out on Wednesday. Though he called the quarter's results strong, CEO John Donahoe said economic weakness in Europe and Korea will "continue to be a challenge" in the second half of the year. The company kept its full-year guidance unchanged, but indicated that results may come in at the lower end of the expected revenue and profit range.

EBay Inc. earned $640 million, or 49 cents per share, in the April-June period. That's down 8 percent from $692 million, or 53 cents per share, in the same months a year earlier.

Adjusted to exclude one-time items, per-share earnings rose to 63 cents from 56 cents and matched Wall Street's expectations.

Revenue grew by 14 percent, to $3.88 billion from $3.4 billion. Analysts polled by FactSet expected $3.89 billion.

Donahoe said that eBay's core businesses — PayPal and its e-commerce sites — are going strong. PayPal, which has been the company's fastest-growing segment, added 4.7 million active registered accounts, ending the quarter with 132 million users.

Revenue at PayPal grew 20 percent to $1.6 billion as eBay continued to expand its once online-only payments service to brick-and-mortar stores.

Marketplaces revenue increased 10 percent to $2 billion. Gross merchandise volume, an important metric that measures all items sold on eBay excluding vehicles, grew 13 percent to $18 billion.

EBay's operating expenses were $1.92 billion, up 12 percent from a year earlier.

For the current quarter, eBay forecast earnings of 49 to 51 cents per share and adjusted earnings of 61 to 63 cents per share. Analysts estimated higher adjusted earnings of 65 cents per share. EBay expects revenue of $3.85 billion to $3.95 billion, below analysts' expectations of $3.97 billion.

EBay still expects adjusted earnings of $2.70 to $2.75 per share and revenue of $16 billion to $16.5 billion for the full year. Analysts forecast adjusted earnings of $2.75 per share on revenue of $16.31 billion.

The midpoint of San Jose, Calif.-based eBay's earnings outlook for the year is below analysts' average estimate.

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