There was a lot of uncertainty concerning eBay (NASDAQ:EBAY) going into its third quarter earnings report. The online auctioneer and e-commerce platform had disappointed investors in the previous quarter, as revenue grew just 6% year over year on a currency-neutral basis. Slowing revenue growth, when combined with deceleration in both active buyers and items sold, was enough to send investors running for the exits.

Another factor weighing on the minds of shareholders was the potential that conditions could worsen. When payment-processor PayPal (NASDAQ:PYPL) reported its third quarter results last week, it indicated that eBay's payment volume grew just 3% year over year, fanning the flames of fear that growth might decelerate even more.

Things weren't as bad as feared, and investors bid up eBay's shares nearly 6% in the wake of its report.

The eBay logo at the entrance to the company's campus in San Jose.

Image source: eBay.

Not horrible results

Metric

Q3 2018

Q3 2017

Year-Over-Year Change

Net revenue

$2.65 billion

$2.50 billion

6%

Net income

$720 million

$520 million

38%

Diluted earnings per share

$0.73

$0.48

52%

Data source: eBay Third Quarter Financial Release.

eBay reported revenue of $2.65 billion, an increase of 6% year over year. That was at the low end of the company's forecast range and just missed the analyst consensus of $2.66 billion. Adjusted earnings per share of $0.56 increased 19% year over year, reaching the high end of management's guidance and edging out expectations of $0.55 per share. 

Global active buyers rose to 177 million, an increase of 4% compared to the prior-year quarter. eBay's marketplace generated $2.1 billion in revenue, up 6% year over year and 5% on a currency-neutral basis, and produced $21.5 billion in gross merchandise volume (GMV). StubHub added revenue of $291 million, up 7% compared to the year-ago quarter, on GMV of $1.2 billion. Classified ads contributed revenue of $254 million, up 8% year over year and 11% on a currency-neutral basis.

Total GMV topped $22.7 billion, up 5% compared to the prior-year quarter, while sold items were flat year over year. Transaction revenue of $2.09 billion increased 5% year over year, while marketing services and other revenue of $560 million grew 7% compared to the prior-year period, both on a currency-neutral basis.

The transaction take rate -- the percentage of each transaction that eBay kept for its services -- grew to 9.2%, up from 9.1% in the prior-year quarter.

Other news

There were a number of other business-related announcements in eBay's earnings release. The company said that it had completed the sale of its stake in Flipkart, India's largest e-commerce platform, which was recently purchased by Walmart. The deal netted the auctioneer $1 billion.

eBay also debuted or expanded a number of customer-centric programs during the quarter. The company announced a partnership with Square (NYSE:SQ) that allows eBay sellers to access up to $100,000 in small-business loans via Square Capital. The company also launched new tools that allow merchants to incorporate eBay's image search, machine translation, and marketplace feeds into their own platforms.

A continued focus on advertising is bearing fruit, as more than 400,000 sellers have promoted more than 160 million listings.

The biggest news was likely related to the payments processing that eBay is gradually taking over from PayPal. eBay has directly handled payment processing for about $38 million of GMV so far, and that number should rise going forward.

What the future holds

For the upcoming fourth quarter, eBay expects net revenue in a range of $2.85 billion to $2.89 billion, which would represent growth of between 4% and 5%, excluding the impact of currency changes. The company also anticipates diluted earnings per share in a range of $0.87 and $0.92 and adjusted earnings per share of between $0.67 and $0.69.

To put this into context, analysts had been expecting revenue of $2.9 billion, just above management's guidance, and adjusted EPS of $0.69, at the high end of eBay's forecast range. 

eBay managed another quarter of tepid results but is working hard to transition away from its legacy used-goods business in an attempt to rebrand itself as an e-commerce powerhouse. The company continues to focus on advertising and its nascent payments business while trying to woo a new generation of customers. Now, eBay just needs to pull it off.

Danny Vena owns shares of PayPal Holdings and Square and is long January 2019 $18 calls on eBay. The Motley Fool owns shares of and recommends PayPal Holdings and Square. The Motley Fool is short January 2019 $82 calls on PayPal Holdings and short January 2019 $80 calls on Square. The Motley Fool recommends eBay. The Motley Fool has a disclosure policy.