Shares of Unity Software (NYSE:U) rose over 10% in after-hours trading yesterday after the company posted a solid first-quarter Fiscal 2023 beat. The video game software developer’s revenue jumped 56% year-over-year to $500.36 million, beating analysts’ estimates of $480.95 million.
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Meanwhile, the net loss for the quarter stood at $0.67 per share, higher than the prior year’s loss of $0.60 per share. At the same time, Unity’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) came in better than expected at $32 million.
The company’s performance is being impacted by a slump in mobile gaming and advertising demand. To counter these headwinds, Unity is undertaking strategic steps to streamline operations and make the workflow more agile. Recently, Unity announced three rounds of workforce reductions. In the most recent round, the company slashed 600 jobs, or 8% of its workforce. The company also intends to reduce the number of global offices by nearly 35%.
Unity Provides Robust Outlook
In the second half of 2023, Unity expects both gaming and advertising revenue to pick up pace and to perform better than its peers. Plus, Unity’s adoption of artificial intelligence (AI) is adding solid value to its offerings. Based on the same, the company offered an upbeat forward outlook.
Unity expects Q2FY23 revenue to grow between $510 and $520 million, up nearly 75% year-over-year, and higher than the consensus of $502.8 million. Also, adjusted EBITDA is expected to grow between $50 and $60 million, thanks to the restructuring efforts taken recently.
For the full year of Fiscal 2023, Unity raised the lower end of its guidance for both revenue and adjusted EBITDA. FY23 revenue is now pegged between $2.08 to $2.2 billion and adjusted EBITDA between $250 to $300 million, on track to reach the targeted $1 billion adjusted EBITDA run rate by 2024.
Is Unity Software a Buy, Hold, or Sell?
On TipRanks, Unity Software has a Moderate Buy consensus rating based on six Buys, five Holds, and one Sell rating. The average Unity Software price forecast of $41.90 implies 45.8% upside potential from current levels. Plus, year to date, U stock is up 6.8%.
