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Despite May security breach, eBay earnings meet expectations

EBay said it had a “challenging” second quarter during which its financial results met Wall Street expectations based on strength in PayPal, its online payment service.

The company reported revenue of $4.4 billion in the quarter, up 13% year-over-year, with earnings per share of 69 cents. Analysts had expected earnings per share of 68 cents and $4.38 billion in revenue.

CEO John Donahoe blamed a privacy breach for weakness in the company’s marketplace arm that prompted the company to require users to change their passwords. Fear of fraud caused many users to balk at buying.

“PayPal generated another strong quarter while eBay’s growth was hampered by its global password reset for all users,” Donahoe said in a statement.

eBay’s (EBAY) core marketplace division had $2.2 billion in revenue in the quarter, up from $2 billion in the comparable period a year earlier. The number of active accounts grew to 149 million, a gain of 14%.

Meanwhile, PayPal’s revenue came in at $1.9 billion, up from $1.6 billion. Total online payment volume grew 29% year-over-year while the division added 4 million new active registered accounts during the quarter, for a total of 152 million.

Donahoe called the second quarter “challenging,” which follows a trend among bricks and mortar retailers of reporting weak second quarter earnings.

For the third quarter, analysts expect eBay to report 72 cents per share on revenue of $4.42 billion.