Investors weren't thrilled with the latest earnings update from eBay (NASDAQ:EBAY). Sure, the online marketplace is benefiting from soaring e-commerce demand for everything ranging from collectible sneakers to automobiles. But its growth comparisons only get more difficult from here as it passes a full year since pandemic-related volume spikes started.

With that bigger picture in mind, let's look at some takeaways from this past week's first-quarter 2021 earnings report, and what they could mean for shareholders of this highly profitable business.

1. A widening portfolio

There was plenty for investors to celebrate in eBay's growth performance. Sales volumes jumped 24% year over year after accounting for exchange rate swings, marking an acceleration over the previous quarter's 18% increase.

A young woman shopping online.

Image source: Getty Images.

eBay's pool of active buyers continued to grow at a near-record pace, up 7% in each of the past two quarters compared to a roughly 2% uptick before the pandemic struck. Management said market share expanded in several major niches, including collectible sneakers, luxury watches, and trading cards, which just became an over $1 billion quarterly business. "We delivered another strong quarter," CEO Jamie Iannone said in a press release, "and an excellent start to the year for our buyers and sellers."

2. Rising margins

Profitability is expanding thanks to the combination of robust sales growth, rising prices, and restrained expenses. eBay's transaction fee, which it charges buyers for the use of its platform, rose to 10% compared to 9.8% last quarter and 8.9% a year ago. The company's efficient operating model got even more powerful thanks to reduced marketing and selling expenses, too.

Overall, non-GAAP earnings shot higher by 45% to easily outpace the 42% boost in net sales. Cash flow was similarly strong, with a full 28% of sales converted into free cash this quarter. "We generated tremendous volume and earnings," Iannone noted.

3. About that outlook

Despite all that good news, Wall Street pros focused on eBay's outlook as a reason to send the stock price lower immediately following the report. The company is predicting that volume gains will slow to between 8% and 10% in Q2, or roughly half this past quarter's pace.

That deceleration should be a big surprise, especially considering that volume jumped 29% in Q2 a year ago as pandemic lockdowns spurred a record demand spike for online retailing. It's great news for the business that eBay is targeting almost double-digit percentage gains compared to that epic surge.

Meanwhile, investor returns should be amplified by the company's gushing cash flow and expanding profitability. eBay sent over $400 million to shareholders in Q1, mainly through stock buybacks.

The next quarter should bring a temporary earnings dip as eBay laps the biggest volume spike from the pandemic while keeping up investments in growth initiatives like its advertising and payments processing projects.

But investors have every reason to expect bigger profits from eBay in 2021 and beyond. The platform is gaining market share in attractive niches, improving the transaction experience for buyers and sellers, and finding ways to charge more for added value. Those factors should support a rising stock price over time, despite Wall Street's knee-jerk reaction to this quarterly report.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.