NEW YORK (CNN/Money) - eBay Inc. agreed to pay $10 million to settle allegations that its PayPal unit provided services to online gambling merchants as the online auctioneer announced yet another quarter of surging sales and profits.

The company said Thursday, along with an announcement about its 2-for-1 stock split, that such gaming activities were discontinued following its purchase of PayPal in October 2002.

eBay said PayPal posted strong growth in the latest quarter and its settlement with the U.S. attorney for the Eastern District of Missouri would be included as an adjustment to its purchase price of PayPal and not as a charge against earnings.

The company posted a second-quarter net profit that surged 102 percent to $109.7 million, or 33 cents per diluted share. Revenue jumped 91 percent to $509.3 million.

Many on Wall Street said the earnings did not outpace expectations as much as in some earlier quarters amid concern that the stock has become overvalued during its recent rally. Shares of eBay (EBAY: down $4.77 to $110.97, Research, Estimates) fell sharply following the reports.

"Expectations, unofficial ones, tend to get much higher," Deutsche Bank analyst Jeetil Patel told Reuters.

"I don't think this was disappointing at all. It gives the stock some room to breathe and come back," Safa Rashtchy, an analyst at U.S. Bancorp Piper Jaffray, said.

Shares of eBay have rallied steadily since October 2002, gaining about 130 percent over that period.

The company's market value is around $37 billion, about one-seventh the value of the world's biggest retailer, Wal-Mart Stores Inc. (WMT: Research, Estimates). Meanwhile, eBay's estimated revenue for next year is about one-percent that of Wal-Mart.  

-- Reuters contributed to the story