Unity (U, Financial) reported first quarter revenue of $435 million, significantly outperforming the anticipated $416.63 million. This robust performance highlights the company's ongoing success in executing its strategic initiatives effectively. Key contributors to this outcome include the early achievements of Unity Vector and the sustained high demand for Unity 6. These developments cement Unity's position as a leading platform, offering comprehensive support for developers throughout the entire game development lifecycle.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 23 analysts, the average target price for Unity Software Inc (U, Financial) is $26.99 with a high estimate of $35.00 and a low estimate of $17.00. The average target implies an upside of 26.60% from the current price of $21.32. More detailed estimate data can be found on the Unity Software Inc (U) Forecast page.
Based on the consensus recommendation from 29 brokerage firms, Unity Software Inc's (U, Financial) average brokerage recommendation is currently 2.3, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Unity Software Inc (U, Financial) in one year is $29.35, suggesting a upside of 37.66% from the current price of $21.32. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Unity Software Inc (U) Summary page.
U Key Business Developments
Release Date: February 20, 2025
- Revenue: $442 million, up 4% year-over-year, $15 million above guidance.
- Create Solutions Revenue: $139 million, up 9% year-over-year, 6% sequentially.
- Growth Solutions Revenue: $303 million, up 2% year-over-year, 2% sequentially.
- Non-Strategic Portfolio Revenue: $15 million, down 92% year-over-year.
- Adjusted EBITDA: $106 million, 23% margins, exceeded guidance by 26%.
- Adjusted Gross Margins: Improved from 82% in 2023 to 83% in 2024.
- Free Cash Flow: $106 million in Q4, up 74% year-over-year; $286 million for the full year, up 60% year-over-year.
- Cash and Debt: $1.5 billion in cash, $2.2 billion in debt.
- Share Count Dilution: Reduced from just under 3% in 2023 to just under 2% in 2024.
- Q1 2025 Revenue Guidance: $405 million to $415 million.
- Q1 2025 Adjusted EBITDA Guidance: $60 million to $65 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Unity Software Inc (U, Financial) exceeded its guidance for both revenue and adjusted EBITDA in Q4 2024, with revenue from its strategic portfolio reaching $442 million, up 4% year-over-year.
- The company's Create Solutions revenue grew by 9% year-over-year, driven by a 15% increase in subscription revenues and a 50% growth in industry revenue.
- Unity 6 has been well-received, with 38% of active users upgrading and 2.8 million downloads since launch, contributing to the company's strong performance.
- Unity's advertising business exceeded expectations in Q4, driven by strong holiday demand and improved ROI for customers.
- The company announced a significant co-development partnership with Google for the new Android XR platform, reinforcing its position in the XR market.
Negative Points
- Unity Software Inc (U) anticipates some disruption in its existing ad business due to the transition to the new AI platform, Unity Vector, which may impact Q1 2025 revenue.
- The company is cautious about the time needed to mature the Unity Vector product as it begins to operate at scale, reflecting prudence in its Q1 guidance.
- Revenue from Unity's non-strategic portfolio was down 92% year-over-year, indicating a significant decline in this segment.
- The transition to Unity Vector is a significant undertaking, and the benefits are not expected to be immediate, requiring patience from stakeholders.
- Unity's guidance for Q1 2025 reflects a step down in revenue compared to Q4 2024, partly due to seasonal demand and the transition to the new ad model.
