Unity Software (U) Faces 19% Stock Plunge in After-Hours Trading

Unity Software (U) saw its stock price plummet by 19% in after-hours trading on the 26th due to disappointing fourth-quarter performance and guidance.

Unity Software’s fourth-quarter revenue was $609 million, a 35% increase from the previous year. Although it appears to have exceeded the consensus of $551 million, it was considered disappointing when considering the impact of the Weta FX contract change. Intensified market competition and the impact of the runtime pricing plan also played a significant role.

Unity Software continues its efforts to optimize costs. After reducing its workforce by 25%, cutting cloud hosting costs, integrating offices, and optimizing software licenses, the company expects the effects of the first quarter to be fully reflected in the second quarter.

Researcher Lee Yeong Jin of Samsung Securities pointed out that “although the restructuring strategy is showing positive trends, it is still too early to confirm the results.”

He also pointed out the lack of fundamentals to support narratives related to the Metaverse and AI.

Unity Software continues its efforts to restructure its portfolio and limit future investments to promising areas such as the digital twin industry. The company emphasized that it had to provide conservative guidance for the year’s first half due to corporate restructuring. It predicts accelerated revenue growth in the second half of the year and double-digit growth by the end of the year, but there are uncertainties.

Researcher Lee Yeong Jin said, “It is difficult to expect margin improvement in a situation where revenue growth is sluggish,” and judged that “the fundamentals supporting the narrative, such as positioning in the 3D content industry and creating AI momentum through the fusion of AI tools, are weak.”