Unity Software Inc. (NYSE:U) shares are soaring Thursday after reporting third-quarter results that beat analyst estimates and issuing fourth-quarter sales guidance well above expectations.
- Unity Software stock is charging ahead with explosive momentum. Why are U shares rallying?
Unity Stock Rises After Earnings Beat
Unity shares are climbing Thursday after the game software company beat Wall Street’s third-quarter forecasts on both earnings and sales.
It earned an adjusted 44 cents a share, far above the 6 cents analysts projected and more than double the 20 cents of a year earlier. Revenue of $622.09 million cleared the $567.44 million estimate by 9.63% and grew 32.19% from last year’s roughly $470.62 million.
The outlook may carry even more weight. Analysts had estimated fourth-quarter sales of approximately $603.62 million, yet Unity is guiding to a range of $688 million to $696 million. Its $692 million midpoint sits about 15% higher than that estimate.
Unity also guided to $290 million up to $295 million on an adjusted EBITDA basis, which would be 132% to 136% above a year earlier.
Unity Adjusted EBITDA More Than Doubles
CEO Matt Bromberg stated that the “third-quarter performance was [the] strongest ever.” Adjusted EBITDA more than doubled to $257 million, lifting its margin to 41% from 23%, which Unity credits to higher revenue and cost discipline. Operating cash flow reached $224 million.
Advertising drove the growth. Grow Solutions, which includes Unity’s ad network, rose 44% to $457 million, powered by Unity Vector, which grew 126% over the year and 40% over the previous quarter. Subscription growth lifted Create Solutions, the game-creation side of the business, 8% to $165 million.
Strategic revenue, the category Unity highlights, climbed 59% to about $597 million. Non-strategic revenue fell 73% after Unity retired ironSource Ads and sold Supersonic, its publishing arm.
Free cash flow improved to $220 million from $151 million. Cash at quarter-end totaled $2.651 billion, which is $587 million more than in December.
U Shares Are Flying
U Price Action: Unity shares were up 8.13% at $45.91 at the time of publication on Thursday, according to Benzinga Pro.
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