Latest news with #Unity6
Yahoo
11-06-2025
- Business
- Yahoo
U Q1 Earnings Call: Unity Highlights AI Ad Platform Progress Amid Lower Revenue Outlook
Game engine maker Unity (NYSE:U) beat Wall Street's revenue expectations in Q1 CY2025, but sales fell by 5.5% year on year to $435 million. On the other hand, next quarter's revenue guidance of $420 million was less impressive, coming in 1.9% below analysts' estimates. Its non-GAAP profit of $0.24 per share was significantly above analysts' consensus estimates. Is now the time to buy U? Find out in our full research report (it's free). Revenue: $435 million vs analyst estimates of $416.8 million (5.5% year-on-year decline, 4.4% beat) Adjusted EPS: $0.24 vs analyst estimates of $0.11 (significant beat) Revenue Guidance for Q2 CY2025 is $420 million at the midpoint, below analyst estimates of $428 million EBITDA guidance for Q2 CY2025 is $72.5 million at the midpoint, below analyst estimates of $79.05 million Market Capitalization: $10.33 billion Unity's first quarter performance reflected the early impact of its AI-driven advertising platform, Unity Vector, and strong adoption of Unity 6 in its Create segment. CEO Matthew Bromberg credited the company's 'accelerated rollout of Vector ahead of schedule,' which delivered a 15% to 20% increase in installs and in-app purchase value on iOS compared to previous models. Management pointed to double-digit subscription growth in Create, particularly from non-gaming industries, as another positive factor, and emphasized that transitioning away from low-margin professional services has improved the revenue mix. CFO Jarrod Yahes highlighted disciplined cost management—especially in general and administrative and sales and marketing expenses—as a key contributor to margin improvement. For the coming quarter, Unity's guidance reflects a cautious stance, shaped by a mix of internal transitions and ongoing industry challenges. Management noted that although Unity Vector has begun to yield higher advertiser returns, the financial benefits will take time to be fully visible as legacy ad products are phased out. Bromberg stated, 'Our confidence in the future of our Grow business has never been stronger,' but also cautioned that the company is 'being prudent about how we're guiding this business' given its early stage. Yahes explained that increased cloud costs from operating both legacy and new ad models will normalize in the second half, supporting better profitability. Management also acknowledged the broader macroeconomic environment but said gaming's resilience and the focus on performance-based advertising should buffer major impacts. Unity's leadership attributed Q1 results to rapid AI ad platform deployment, strong subscription momentum, and deliberate resource reallocation. Management also identified a multi-quarter transition period as a significant factor affecting near-term results. AI-powered ad platform rollout: The full migration of Unity's ad network to the new AI-driven Vector platform was completed ahead of schedule. Management reported that Vector delivered a 15% to 20% lift in installs and in-app purchase value for iOS advertisers compared to the legacy system. Initial Android results are tracking similarly. Shift toward high-margin subscriptions: The Create segment saw double-digit year-over-year subscription growth, offsetting declines in low-margin professional services. Subscription revenue now comprises nearly 80% of Create, with industry verticals outside gaming contributing meaningfully to growth. Resource reallocation to Vector: Unity aggressively shifted investment toward machine learning and cloud infrastructure to support Vector, while reducing costs in general and administrative and sales and marketing. R&D spending increased, but management expects these costs to normalize as legacy ad models are retired. Non-strategic revenue runoff: CFO Jarrod Yahes clarified that sequential declines in Create are primarily due to planned reductions in non-core revenue streams, which now account for under 2% of total revenue, providing a clearer focus on core growth areas. Platform expansion beyond gaming: Management highlighted new customers in healthcare, industrial training, and digital twins, citing consistent revenue growth from non-gaming verticals for nine consecutive quarters. These emerging use cases are now the fastest-growing part of Unity's subscription business. Unity's near-term outlook is shaped by ongoing migration to its AI ad platform, normalization of costs, and continued uptake of core subscription products. AI-driven ad business ramp: Management expects Unity Vector to drive long-term revenue growth as advertisers see higher returns and shift budgets to the platform. However, in the immediate term, overall Grow segment revenue is tempered by declines in legacy ad products as customer spending transitions to Vector. Normalization of cloud and R&D costs: With the completion of the Vector migration, Unity anticipates cloud and R&D expenses will decrease in the second half of the year, supporting margin improvement. CFO Jarrod Yahes noted that operating leverage from high gross margins should enable profitability as ad business scales. Industry diversification and new pricing: The company is seeing early success from expanding Create into new industry verticals and implementing price improvements. Management expects these trends, along with continued seat growth, to support double-digit subscription revenue growth through 2025. Looking ahead, the StockStory team will monitor (1) the pace at which advertisers increase spend on Unity Vector and whether it sustains its reported performance gains, (2) the impact of normalizing cloud and R&D costs on margins as legacy ad models are fully retired, and (3) the continued expansion and retention of non-gaming industry customers in the Create segment. Developments in product pricing and successful delivery of new platform features will also be critical for validating Unity's growth strategy. Unity currently trades at a forward price-to-sales ratio of 5.7×. Should you double down or take your chips? Find out in our full research report (it's free). Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs. While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today. 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Business Wire
07-05-2025
- Business
- Business Wire
Unity Reports First Quarter 2025 Financial Results
SAN FRANCISCO--(BUSINESS WIRE)--Unity (NYSE: U), the leading platform to create and grow games and interactive experiences, today announced financial results for the first quarter ended March 31, 2025. "The Company's first quarter results once again meaningfully exceeded expectations on both revenue and Adjusted EBITDA, highlighting our progress as we continue to build a culture of execution and discipline,' said Matt Bromberg, President and CEO of Unity. 'The early success of Unity Vector and continued strong demand for Unity 6 underscore our positioning as the leading integrated platform supporting developers across the full lifecycle of game development,' Bromberg continued. First Quarter 2025 Results: Revenue was $435 million, compared to $460 million in the first quarter 2024. Create Solutions revenue was $150 million, compared to $164 million in the first quarter 2024. Grow Solutions revenue was $285 million, compared to $297 million in the first quarter 2024. GAAP net loss was $78 million, with a margin of (18)%. GAAP basic and diluted net loss per share was $0.19. Adjusted EBITDA was $84 million, with a margin of 19%. Adjusted EPS was $0.24. Net cash provided by operating activities was $13 million. Free cash flow was $7 million. Revenue Revenue was $435 million, down 6% year-over-year driven by our portfolio reset. Create Solutions revenue was $150 million, down 8% year-over-year, primarily due to a decrease in professional services revenue and consumption services revenue, both caused by the portfolio reset. The year-over-year decrease was partially offset by strong growth in subscription revenue. Grow Solutions revenue was $285 million, down 4% year-over-year. The change was driven by declines in select Grow products, partially offset by the earlier than expected rollout of Unity Vector. Basic and Diluted Net Loss per share Basic and diluted net loss per share was $0.19, as compared to $0.75 for the same period in 2024. Net Loss and Net Cash Provided by or Used in Operating Activities Net loss for the quarter was $78 million, compared to $291 million in the first quarter of 2024. Net loss margin was (18)%, compared to (63)% in the first quarter of 2024. Net cash provided by operating activities for the quarter was $13 million, compared to net cash used in operating activities of $7 million in the first quarter of 2024. Adjusted EBITDA, Free Cash Flow, and Adjusted EPS Adjusted EBITDA for the quarter was $84 million, with a margin of 19%, compared to $79 million in the first quarter of 2024, with a margin of 17%. The better than expected adjusted EBITDA margin in the first quarter of 2025 was due to better cost control and higher than expected revenue. Free cash flow for the quarter was $7 million, compared to negative $15 million in the first quarter of 2024. Adjusted EPS for the quarter was $0.24, compared to $0.28 in the first quarter of 2024. Liquidity As of March 31, 2025, our cash and cash equivalents, and restricted cash was $1,552 million, and increased by $24 million, as compared with $1,528 million as of December 31, 2024. This increase was primarily driven by proceeds from issuance of common stock from employee equity plans, and from our operations, offset by the net cash outflows from our debt refinancing. Q2 2025 Guidance 1 Revenue of $415 to $425 million. Adjusted EBITDA of $70 to $75 million. About Unity Unity [NYSE: U] offers a suite of tools to create, market and grow games and interactive experiences across all major platforms from mobile, PC, and console, to extended reality (XR). For more information, visit UNITY SOFTWARE INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par share data) (Unaudited) As of March 31, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 1,541,170 $ 1,517,672 Accounts receivable, net 552,958 573,884 Prepaid expenses and other 144,514 133,795 Total current assets 2,238,642 2,225,351 Property and equipment, net 89,972 98,819 Goodwill 3,166,304 3,166,304 Intangible assets, net 980,584 1,066,235 Other assets 170,453 180,698 Total assets $ 6,645,955 $ 6,737,407 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 16,538 $ 13,948 Accrued expenses and other 273,444 294,951 Publisher payables 339,129 394,284 Deferred revenue 188,490 186,304 Total current liabilities 817,601 889,487 Convertible notes 2,232,143 2,238,922 Long-term deferred revenue 14,710 16,846 Other long-term liabilities 154,863 165,004 Total liabilities 3,219,317 3,310,259 Commitments and contingencies Redeemable noncontrolling interests 234,740 230,627 Stockholders' equity: Common stock, $0.000005 par value: Authorized shares - 1,000,000 and 1,000,000 Issued and outstanding shares - 415,406 and 409,393 2 2 Additional paid-in capital 7,008,134 6,936,038 Accumulated other comprehensive loss (8,501 ) (9,425 ) Accumulated deficit (3,813,586 ) (3,735,944 ) Total Unity Software Inc. stockholders' equity 3,186,049 3,190,671 Noncontrolling interest 5,849 5,850 Total stockholders' equity 3,191,898 3,196,521 Total liabilities and stockholders' equity $ 6,645,955 $ 6,737,407 Expand UNITY SOFTWARE INC. (In thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2025 2024 Revenue $ 435,000 $ 460,380 Cost of revenue 113,957 144,387 Gross profit 321,043 315,993 Operating expenses Research and development 220,625 282,728 Sales and marketing 162,013 230,625 General and administrative 66,340 177,569 Total operating expenses 448,978 690,922 Loss from operations (127,935 ) (374,929 ) Interest expense (5,891 ) (6,035 ) Interest income and other income (expense), net 58,111 76,643 Loss before income taxes (75,715 ) (304,321 ) Provision for (benefit from) Income taxes 2,192 (12,843 ) Net loss (77,907 ) (291,478 ) Net loss attributable to noncontrolling interest and redeemable noncontrolling interests (265 ) (404 ) Net loss attributable to Unity Software Inc. (77,642 ) (291,074 ) Basic and diluted net loss per share attributable to Unity Software Inc. $ (0.19 ) $ (0.75 ) Weighted-average shares used in computation of basic and diluted net loss per share 411,852 387,151 Net loss (77,907 ) (291,478 ) Change in foreign currency translation adjustment 1,178 (3,461 ) Comprehensive loss $ (76,729 ) $ (294,939 ) Net loss attributable to noncontrolling interest and redeemable noncontrolling interests (265 ) (404 ) Foreign currency translation attributable to noncontrolling interest and redeemable noncontrolling interests 254 (710 ) Comprehensive loss attributable to noncontrolling interest and redeemable noncontrolling interests (11 ) (1,114 ) Comprehensive loss attributable to Unity Software Inc. $ (76,718 ) $ (293,825 ) Expand UNITY SOFTWARE INC. (In thousands) (Unaudited) Three Months Ended March 31, 2025 2024 Operating activities Net loss $ (77,907 ) $ (291,478 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 96,217 101,810 Stock-based compensation expense 98,790 265,877 Gain on repayment of convertible note (42,744 ) (61,371 ) Impairment of property and equipment 3,470 13,598 Other (218 ) 2,918 Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable, net 21,022 (9,740 ) Prepaid expenses and other (10,602 ) (16,779 ) Other assets 10,023 (2,399 ) Accounts payable 2,198 5,273 Accrued expenses and other (21,029 ) (4,269 ) Publisher payables (55,155 ) 25,558 Other long-term liabilities (10,919 ) (23,584 ) Deferred revenue (120 ) (12,787 ) Net cash provided by (used in) operating activities 13,026 (7,373 ) Investing activities Purchases of property and equipment (5,718 ) (7,190 ) Net cash used in investing activities (5,718 ) (7,190 ) Financing activities Proceeds from issuance of convertible notes 690,000 — Purchase of capped calls (44,436 ) — Payment of debt issuance costs (13,236 ) — Repayments of convertible note (641,691 ) (414,999 ) Proceeds from issuance of common stock from employee equity plans 21,611 25,998 Net cash provided by (used in) financing activities 12,248 (389,001 ) Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash 4,197 (6,202 ) Increase (decrease) in cash, cash equivalents, and restricted cash 23,753 (409,766 ) Cash, cash equivalents, and restricted cash, beginning of period 1,527,881 1,604,267 Cash, cash equivalents, and restricted cash, end of period $ 1,551,634 $ Expand About Non-GAAP Financial Measures To supplement our consolidated financial statements prepared and presented in accordance with generally accepted accounting principles in the United States (GAAP) we use certain non-GAAP financial measures, as described below, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe the following non-GAAP measures are useful in evaluating our operating performance. We are presenting these non-GAAP financial measures because we believe, when taken collectively, they may be helpful to investors because they provide consistency and comparability with past financial performance. However, non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As a result, our non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered in isolation or as a substitute for our consolidated financial statements presented in accordance with GAAP. We define adjusted EBITDA as GAAP net income or loss excluding benefits or expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, restructurings and reorganizations, interest, income tax, and other non-operating activities, which primarily consist of foreign exchange rate gains or losses. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue. We define adjusted gross profit as GAAP gross profit excluding expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, and restructurings and reorganizations. We define adjusted gross margin as adjusted gross profit as a percentage of revenue. We define adjusted cost of revenue as GAAP cost of revenue, excluding expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, and restructurings and reorganizations. We define adjusted research and development expense as research and development expense, excluding expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, and restructurings and reorganizations. We define adjusted sales and marketing expense as GAAP sales and marketing expense, excluding expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, and restructurings and reorganizations. We define adjusted general and administrative expense as general and administrative expense excluding expenses associated with stock-based compensation, depreciation, and restructurings and reorganizations. We define free cash flow as net cash provided by (used in) operating activities less cash used for purchases of property and equipment. We define adjusted EPS as net income or loss excluding benefits or expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, restructurings and reorganizations, and the income tax impact of the preceding adjustments (cumulatively "adjusted net income"), increased by the tax effected impacts from any relevant dilutive securities, divided by the diluted weighted-average outstanding shares. The effective tax rate used in calculating adjusted EPS is estimated for each period, based on the net income or loss adjusted for the items noted above, and may differ from the effective rate used in our financial statements. Shares of common stock that are excluded in our calculation of GAAP diluted net loss per share due to their antidilutive impact on such calculations, are included in the diluted weighted average outstanding shares used in our calculation of adjusted EPS, to the extent they have a dilutive impact on adjusted EPS given the adjusted net income in each period. Cautionary Statement Regarding Forward-Looking Statements This press release and the earnings call referencing this press release contain 'forward-looking statements,' as that term is defined under federal securities laws, including, but not limited to, statements regarding Unity's outlook and future financial performance, including: (i) Unity's ability to further enhance its platform, accelerate product innovation and enhance financial performance; (ii) expectations regarding Vector, including the impact on financial results, as well as expectations regarding Vector's improvements over time and Unity's ability to mature the product and operate it at scale; (iii) Unity's opportunities in the AR and VR gaming and entertainment market; (iv) expectations regarding revenue from non-strategic portfolio; and (v) Unity's financial guidance for the second quarter 2025. The words 'aim,' 'believe,' 'may,' 'will,' 'estimate,' 'continue,' 'intend,' 'expect,' 'plan,' 'project,' and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and assumptions. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. Risks include, but are not limited to, those related to: (i) the impact of macroeconomic conditions, such as inflation, high interest rates, tariffs, sanctions and trade barriers, and limited credit availability which could further cause economic uncertainty and volatility; (ii) competition in the advertising market and Unity's ability to compete effectively; (iii) ongoing restrictions related to the gaming industry in China; (iv) ongoing geopolitical instability, particularly in Israel, where a significant portion of the Grow operations is located; (v) Unity's ability to recover or reengage its customers, or attract new customers; (vi) the impact of any decisions to change how Unity prices its products and services; (vii) Unity's ability to achieve and sustain profitability; (viii) Unity's ability to retain existing customers and expand the use of its platform; (ix) Unity's ability to further expand into new industries and attract new customers; (x) the impact of any changes of terms of service, policies or technical requirements from operating system platform providers or application stores which may result in changes to Unity or its customers' business practices; (xi) Unity's ability to maintain favorable relationships with hardware, operating system, device, game console and other technology providers; (xii) breaches in its security measures, unauthorized access to its platform, data, or its customers' or other users' personal data; (xiii) Unity's ability to manage growth effectively and manage costs effectively; (xiv) the rapidly changing and increasingly stringent laws, regulations, contractual obligations and industry standards that relate to privacy, data security and the protection of children; (xv) the effectiveness of the company reset; (xvi) Unity's ability to successfully transition executive leadership; (xvii) Unity's ability to adapt effectively to rapidly changing technology, evolving industry standards, changing regulations, or changing customer needs, requirements, or preferences; and (xviii) the effectiveness of Vector. Further information on these and additional risks that could affect our results is included in our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K, filed with the SEC on February 20, 2025 and our Quarterly Report on Form 10-Q, filed with the SEC on May 7, 2025, and our future reports that we may file with the SEC from time to time, which could cause actual results to vary from expectations. Copies of reports filed with the SEC are available on the Unity Investor Relations website. Statements herein speak only as of the date of this release, and Unity assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release except as required by law.
Yahoo
02-04-2025
- Yahoo
Unity to Support Developers Targeting Nintendo Switch 2 for Launch
SAN FRANCISCO, April 02, 2025--(BUSINESS WIRE)--Unity (NYSE: U), the leading platform to create and grow games and interactive experiences, today announced that it will provide game developers with official support for Nintendo Switch™ 2. Support for this platform will be made available soon in Unity 6, as an add-on, for approved Nintendo developers - further expanding Unity's commitment to enabling creators to bring their visions to life on the widest range of platforms. "We're excited to offer official support for Nintendo Switch 2," said Matthew Bromberg, CEO and President of Unity. "Unity has battle-tested our support for Nintendo Switch 2 through hands-on development of a day-one launch title. The valuable feedback obtained during the development process provided learnings that will drive further enhancements to the Unity engine for those developers building new games for this gaming system." With a robust ecosystem that spans 20+ platforms, Unity continues to deliver on its promise of multiplatform accessibility and day-one support for the newest platforms. Developers using Unity will be able to seamlessly build, port, optimize, and deploy their projects for Nintendo Switch 2 leveraging Unity's powerful suite of tools and technologies to create immersive and engaging experiences. What developers can expect from Unity and Nintendo Switch 2 includes: Rendering and Performance Optimization – Scale your games' graphical fidelity with the Universal Render Pipeline (URP), Spatial-Temporal Post-Processing (STP), and GPU Resident Drawer enabling developers to push the power of Nintendo Switch 2 while maximizing performance. End-to-end Multiplayer solutions – Improvements to our multiplayer capabilities extending our existing Nintendo Switch support, launching on Nintendo Switch 2 soon. Enhanced Developer Documentation – Unity's developer documentation for Nintendo Switch 2 will make it easier for developers to build and optimize their games on the platform. Unity is also making it easier for developers to port their existing Nintendo Switch games to Nintendo Switch 2 by ensuring full compatibility with key features in Unity 6, including the new input system, Build Profiles, and Incremental Build Pipeline, while also integrating built-in support for Nintendo Switch 2's new capabilities—helping developers seamlessly reach players on this new platform. Unity developers interested in getting started on Nintendo Switch 2 must be an approved developer for Nintendo Switch 2. For further details on Nintendo Switch 2 software development and the new platform, please wait for more information from Nintendo by visiting the Nintendo Developer Portal. About Unity Unity [NYSE: U] offers a suite of tools to create, market, and grow games and interactive experiences across all major platforms from mobile, PC, and console, to extended reality. For more information, visit Forward-Looking Statements This publication contains "forward-looking statements," as that term is defined under federal securities laws, including, in particular, statements about Unity's plans, strategies and objectives. The words "believe," "may," "will," "estimate," "continue," "intend," "expect," "plan," "project," and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and assumptions. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. Further information on these and additional risks that could affect Unity's results is included in our filings with the Securities and Exchange Commission (SEC) which are available on the Unity Investor Relations website. Statements herein speak only as of the date of this release, and Unity assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this publication except as required by law. Nintendo Switch is a trademark of Nintendo. View source version on Contacts Unity PR Contact: Kelly EkinsUnityComms@ Sign in to access your portfolio
Yahoo
02-03-2025
- Business
- Yahoo
Unity Software Inc. (NYSE:U): Taking a U Turn
We came across a bullish thesis on Unity Software Inc. (NYSE:U) on ValueInvestorsClub by wfc. In this article, we will summarize the bulls' thesis on U. The company's shares were trading at $23.75 when this thesis was published, vs. the closing price of $25.64 on Feb 28. A close up of a person's hands using a home console gaming device. U is an international company that operates a platform to create and grow games and interactive experiences for mobile phones, PCs, consoles, and extended reality devices. While it is often classified as a gaming engine, U also has an ad tech business with a wide array of products. A series of poor strategic decisions is the reason why U has been losing market share since 2021-2022. To begin with, a number of expensive M&A deals like IronSource at $4.4 billion bore no result. U also applied retrospective pricing on existing games based on royalty was not well received by the developers. The mobile ad market revenue was also impacted by changes made by Apple that allowed companies to track users and gain insights into their activities. This prompted many iPhone users to drop out. With the appointment of Matt Bromberg as CEO, the pricing was made favorable for studios enabling U to monetize from large developers that generated large revenue. The platform was made free to new and small users. This will enable U to maintain its dominance in the mobile gaming market in which 70% of the top 1,000 games are developed on its engine. Unity 6, a superior technology, offering a better and faster interface is also gaining popularity and along with the new pricing strategy, could drive double-digit growth. U is in a turnaround phase with its Grow Solutions segment reporting a 5% decline in Y-o-Y Q3-24 revenue even though it grew 1% on a sequential basis. The business is expected to benefit from an improved AI model. On the other hand, revenue for Create Solutions was up 5% Y-o-Y due to a 12% increase in subscription base. The valuation based on current EBITDA can be misleading as there is enough scope for cost cuts. U enjoys a gross margin of 75% and can achieve a 25% EBITDA margin in a few years if costs are checked. U appears to have a reasonable valuation based on 6x EV/Sales and 20x EV/EBITDA if it manages to sustain a 25% normalized EBITDA margin. While we acknowledge the potential of U as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than U but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey. Sign in to access your portfolio
Yahoo
20-02-2025
- Business
- Yahoo
Unity Stock Skyrockets 25%--Is This the Ultimate Turnaround or Just a Dead Cat Bounce?
Unity (NYSE:U) just dropped a Q4 earnings bombsmashing expectations and sending shares soaring 25% at 11.16am. The game engine powerhouse is clawing back from a rough year, fueled by the launch of Unity 6, a revamped pricing model, and AI-driven ad tech gains. Revenue for the quarter came in at $457 million, down 25% year-over-year due to a portfolio reset, but the company's cost-cutting moves paid off. Adjusted EBITDA hit $106 million, with a solid 23% margin, while free cash flow surged to $106 millionproof that Unity is tightening up its operations and getting leaner. Warning! GuruFocus has detected 6 Warning Signs with U. The long-term picture is still a mixed bag. Full-year revenue dropped 17% to $1.81 billion, weighed down by a slowdown in Create Solutions, but key segments like subscription revenue and industry strategic revenue saw double-digit growth. Meanwhile, Unity's cash flow from operations hit $316 million for the yearcritical breathing room as the company navigates its turnaround. Management's Q1 2025 guidance points to revenue of $405$415 million, with adjusted EBITDA expected between $60$65 million, signaling a cautious but steady recovery. Investors are clearly buying into the rebound story. While challenges remainespecially in stabilizing core revenue streamsUnity's focus on profitability, AI innovation, and operational efficiency is starting to pay off. If the momentum holds, this could be the first real sign that Unity is turning the page on its post-merger struggles and building a more sustainable growth trajectory. This article first appeared on GuruFocus. Sign in to access your portfolio
