Game engine maker Unity reported earnings and revenues that beat Wall Street’s expectations for the fourth quarter ended December 31.
The company’s stock rose 16% in after-hours trading to $106.30 a share, up 14%. The company’s closing market valuation was $27 billion.
The San Francisco-based company also forecast better-than-expected earnings for the year ahead.
In Q4, Unity lost an adjusted 5 cents a share on sales of $315.9 million. Analysts had expected Unity to lose 7 cents a share on sales of $295.5 million. In the year-earlier period, it lost 10 cents a share on sales of $220.3 million.
For the current quarter, Unity forecast sales of $317.5 million, up 35% from the same period last year and matching Wall Street’s target. That’s based on the midpoint of its outlook.
“We closed out the quarter with great momentum,” said John Riccitiello, CEO of Unity, in a call with analysts.
For the full-year 2022, Unity expects revenue of $1.5 billion, up 35% from a year ago. Analysts expected $1.43 billion.
Unity makes game engine tools for developing and monetizing games and apps for mobile devices, PCs, and consoles. It has also expanded into sports broadcasts, movie and TV show production, and commercials.
Unity said it sees an expanded total available market of $45 billion, up from $29 billion in 2020, as demand for immersive, real-time 3D experiences grows. Unity has hit 40%-plus growth in six of the last eight quarters.
“Big market, rapidly growing, good tailwinds,” Riccitiello said.
He said non-gaming business is growing even faster than games, and he said Unity extended its market share lead over rivals (like Epic Games) in virtual reality and mobile games.
Unity Create Solutions Q4 revenue increased 49% from 2020; full-year revenue increased 41% from a year ago. And Unity Operate Solutions Q4 revenue increased 45% from 2020; full-year revenue increased 51% from a year ago. Unity is now on two dozen platforms, Riccitiello said.
Unity said 1,052 customers each generated more than $100,000 of revenue in the trailing 12 months as of December 31, 2021, compared to 793 as of December 31, 2020.
Facebook said that Apple’s focus on privacy over targeted ads would cost the company $10 billion in revenues this year. But Riccitiello said the company still executed despite the challenging environment Identifier for Advertisers (IDFA) changes at Apple.
Asked about the metaverse’s impact on Unity, Riccitiello said the company was like Levi’s, the blue jean company that made a lot of money during the California Gold Rush. Instead of using picks and shovels to look for gold, Unity makes the underlying technology for things like the metaverse.
“Industry after industry will launch real-time interactive experiences,” Riccitiello said. “Our role in all of this is a good analogy to Levi’s.”
Regarding nonfungible tokens (NFTs), he said that Unity is often the main game engine used to make NFT games. But he noted that the game industry has a “love-hate relationship” with crypto games.
“We see energy consumption, schemers, scammers — a lot of things we don’t like,” he said. But he said Unity’s role will be to draw attention to the good things being done to incorporate new tech like NFTs into games.
Riccitiello said he isn’t fond of the idea of one avatar. I really don’t want to show up in a swimsuit for an RPG with a sword in my hand. He said most NFTs today are JPEGs printed on a blockchain. The right assets should have utility, setting up those assets in a smart way so the underlying registries of value can be built upon and traded. But he also said he sees a lot of ponzi schemes perpetrated by charlatans.
“Our eyes are wide open, huge opportunity, full of land mines,” he said. “Unity’s place in the world is to help our creators recognize the good part of something without stepping on a land mine.”