Unity Stock Pops shortly after the result

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    Mobile gaming engine Unity software (NYSE: U) reported first quarter results Tuesday evening, and stocks temporarily fell 9% on Wednesday morning. But then the ongoing sell-off in tech stocks continued as investors continued to steer clear of growth-oriented companies.

    By 12:45 p.m., the stock had returned all of those gains and was down roughly 1%.

    How did Unity perform in the first quarter?

    Revenue increased 41% to $ 234.8 million for the first quarter, above the consensus estimate of $ 217.1 million. This resulted in an adjusted net loss of $ 0.10 per share, which was also better than the adjusted loss of $ 0.12 per share that Wall Street analysts modeled.

    This is how each business area has developed:

    segmentQ1’21 salesYOY growth
    Create solutions$ 70.4 million51%
    Operate solutions$ 146.6 million40%
    Strategic partnership$ 17.8 million12%
    total$ 234.8 million41%
    Data source: SEC filings

    “Our first quarter results reflect the sharp transition from linear 2D to real-time 3D that is one of the major changes in the way people interact with technology,” said CEO John Riccitiello in a statement. “We believe that real-time 3D will continue to grow faster and reach massive scale.”

    Unity reported a US dollar-based net expansion rate of 140% compared to 133% in the year-ago quarter. This metric measures existing customer spend and shows that Unity is successfully selling and expanding those relationships. To date, 837 customers have achieved sales of over US $ 100,000 after twelve months (TTM).

    The company continues to make strides in expanding beyond its core mobile gaming market. During the first quarter, Unity gained new customers in a variety of emerging industries, including automotive, healthcare, government, and retail.

    Unity remains confident that the latest changes will emerge Apple (NASDAQ: AAPL), which was launched in April in relation to Identifier for Advertisers (IDFA), will have minimal impact on the company’s advertising business. The Mac maker is now asking users to allow apps to track them for ad targeting purposes. This is a privacy change that has important implications for the broader advertising industry.

    looking ahead

    The projections for the second quarter are for a turnover between 240 and 245 million US dollar, which corresponds to a growth of 30 to 33 percent. This revenue forecast is higher than what revenue analysts expect of $ 232 million. All of this should result in an adjusted operating loss of $ 30 million to $ 40 million.

    For the full year of 2021, Unity expects revenues of $ 1 billion to $ 1.02 billion, exceeding market expectations of $ 967.2 million in revenue. The company says its adjusted operating loss for the year should be in the range of $ 90 million to $ 100 million.

    Unity reiterated its long-term goal of 30% annual revenue growth and acknowledged that results can be bumpy in a few quarters or years.

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    Evan Niu, CFA, owns shares in Unity Software Inc. The Motley Fool owns shares of Unity Software Inc. and recommends Unity Software Inc. Millennial Money is part of the Motley Fool Network. Millennial Money has a disclosure policy.

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