Unity Software (Nasdaq: U) shares were more than 10% higher following the company's strong Q3 earnings report and the announcement that it would be purchasing the tech arm of Peter Jackson's Weta Digital to bolster its offering of tools to creators for its metaverse.
Initially, shares opened lower as many investors felt that the company had overbid. However, buyers stepped in and aggressively bid shares higher due to the strong results and belief that Unity could be one of the leading metaverse companies. Overall, shares have nearly tripled from their debut late last year and are up 155% from recent lows in mid-May.
Inside the Numbers
In Q3, Unity reported a loss of $0.06 per share which was slightly better than expectations of a $0.07 per share loss. Revenue beat expectations at $286.3 million vs $266.5 million. Both figures were an improvement from last year's Q3 loss of $0.09 per share and revenue of $200.9 million. Revenue also increased by 4% on a quarterly basis.
In Q4, Unity is forecasting revenue of $287.5 million, a 30.5% increase from last year's Q4. This forecast is in-line with analysts' estimates.
The company's Create solutions segment 34% YOY to $83.7 million, while Operate solutions grew 54% YOY to $185.0 million. Strategic partnerships and other segment revenue came in at $17.6 million, a 3% drop.
The number of customers generating more than $100,000 of revenue over the last 12 months reached 973 from 739. Unity's net expansion rate came in at 142%, showing that developers continue to spend more on the platform.
Unity's video game engine is the leading choice for developers with a majority of games on the Apple app store or Google Play store developed on the platform. It's increasingly being used for other purposes such as architecture, engineering, and education.
Looking ahead, there is increasing investor and corporate attention to the metaverse which is essentially a place where people could meet digitally. Unity's platform is a place where people could create content for the metaverse.
In Unity's conference call, management seemed excited at growth in this area as people want to create 3D, immersive worlds for games or other purposes. These are also being used for training and education purposes.