eBay reports growth in Q3 on revenue of $4.35B, leans on PayPal

eBay today reported its third-quarter earnings for 2014, with revenue of $4.35 billion and GAAP earnings of $0.54 per diluted share (EPS) and non-GAAP earnings of $0.68 per share. Analysts had expected earnings of $0.67 per share on revenue of $4.37 billion.

In its 2013 third quarter, the company reported revenue of $3.9 billion.

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PayPal’s revenue grew to $1.9 million, up 20 percent year over year. The payments side gained 4.4 million new active registered accounts to bring the new total to 157 million. PayPal also acquired 2.9 million new mobile users. Total payment volume for mobile payments went up 72 percent to $12 billion, an important area of growth for the company. PayPal largely carried eBay’s revenue growth last quarter.

In marketplaces eBay also saw growth, though not as much as in payments. Revenue is up 6 percent year over year for a total of $2.15 million.

Also worth noting is the company’s fourth-quarter outlook. eBay expects less than $5 million in net revenue next quarter and is reducing full-year revenue guidance to a range of $17.85 billion to $17.95 billion.

eBay’s third-quarter results arrive just after the announcement that the company will spin off PayPal, its digital payments company, which is facing increasing competition from a variety of competitors, including Apple. The iPhone purveyor is expected to roll out its new digital payment method tomorrow at an event in the Bay Area. The market responded positively to news of the spinoff, with stock prices rising 7.5 percent to $56.63 a share by market close.

It’s not certain whether Apple Pay will allow PayPal as a payment. Currently iTunes allows consumers to pay with PayPal. But to better compete with new technologies it looks like PayPal will be adopting NFC technology.

In response to an investor query about whether PayPal’s mobile app will become compatible with NFC technology, CEO John Donahoe said yes. “We thought NFC wasn’t going to get fast adoption, now with the industry changes I think that will be accelerated,” Donahoe said in today’s earnings call.

However, it’s not all good news for eBay. A massive security breach in its second quarter may have damaged the marketplace’s credibility with consumers. A second breach at StubHub didn’t restore confidence.

In a call with investors eBay’s CFO Bob Swan acknowledged that eBay had to “dig” its way out of the security attacks, which lead to an increased marketing budget. eBay also upped its marketing budget to help promote PayPal.

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In battling problems around public perception, the secondhand marketplace is also fighting an increasing number of new online marketplaces, not to mention giant competitors like Amazon.

While investors may be excited about PayPal’s opportunity to better compete as its own company, there are still many questions about what eBay will do to better grow revenue without PayPal.

In normal trading, eBay was down by .69 percent. In after-hours trading, the stock was down more than 3 percent.