Unity's revenue growth was below expectations, due to the effects of the fresh regulations regarding video games in China. As the company is transitioning, its directors could not guarantee what the timeline will be, which is why there were no predictions of future earnings.
Unity Software shares dropped by up to 15% in after-hours trading on Thursday after the video-game engine provider reported its third-quarter sales figures to be lower than expected and did not provide guidance. The results of the quarter were mixed, according to a letter sent to shareholders. The noted revenue growth of 69% year-over-year was, for the most part, driven by Unity's $2.9 billion acquisition of ironSource. However, the company's Create Solutions segment, which includes game-development tools, had a slightly lower than anticipated return of $189 million vs. the estimated $204.7 million. Low revenue from China and new fees that caused an outcry from customers were identified as possible contributing factors. The Grow Solutions division, encompassing game publishing and advertising, produced revenue of $355.3 million, surpassing the StreetAccount consensus of $345.3 million yet still negatively affected by the new fees. In response to this, Unity has been exploring ways to charge its clients, with a plan due to be put into effect during the current quarter. This may involve redundancies, job cuts, and a reduction in office space. Concerning the question of guidance, Unity's CEO Jim Whitehurst (formerly of Red Hat) clarified on a call with shareholders that the timing was uncertain and hence not given. He also pointed to similarities between Red Hat and Unity, such as market leadership and revenue growth, when asked if he would stay on as permanent CEO. Unity's finance chief Luis Felipe Visoso stated that alterations to the business should be finished by the end of the first quarter of 2024. In comparison to the S&P 500 which has risen 13% this year, Unity's shares have dropped by 12%.
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