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Unity shares fall 18% despite revenue growth to $2.2 billion in 2023

Cost-cutting measures bite as company closes offices and pulls back from Professional Services and hardware units
Unity shares fall 18% despite revenue growth to $2.2 billion in 2023
  • Unity reduced losses by 10% year-over-year to $826.3 million last year
  • Professional Services unity to be limited to select few deals, and Unity will exit hardware component of multiplayer business
  • Unity forecasts revenue for 2024 between $1.76bn to $1.8bn

Unity shares fell by as much as 18.5% in extended trading as it laid bare cost-cutting measures despite yearly revenue growth of 57.2% to $2.19 billion in 2023.

The company’s latest financials showed that the firm saw $826.3 million in net losses for the year, marking a 10.1% reduction Y/Y.

Unity confirmed its restructuring resulted in 25% of its employees losing their jobs. It said the reduction in workforce, combined with office closures, cutting cloud hosting costs and other measures would reduce $250m in annual non-GAAP operating expenses.

It added it was exiting businesses “where we do not believe that we can provide unique value to customers or generate a sound return to investors”. As a result, its Professional Services unit will now be limited to “a few selected strategic engagements”, and it would be exciting the hardware components of its multiplayer business.

Quarterly revenue boost

In Q4, the firm reported $609m in revenue, a rise of 35% Y/Y. Earnings were boosted by a deal with Weta FX worth $99m to use Unity’s Weta tools.

Unity had previously acquired Weta Digital’s visual effects tools and team in December 2021 in a deal worth $1.6bn. It ended that partnership in November last year, laying off 265 workers.

Net losses for Q4 fell by 11.7% to $254m. Despite revenue rising because of the Weta deal, Unity noted that expenses from ending the partnership were actually greater than the revenue it received.

Unity’s Create Solutions division saw revenue increased by 47% Y/Y to $290m in Q4. However, without the Weta FX revenue, sales would have fallen by 4% Y/Y to $190m.

Meanwhile, Unity’s Grow Solutions business saw sales up 26% Y/Y to $319m. The company noted, however, that revenue compared to Q3 was flat as it faced stiff competition in the market - likely a nod to rival AppLovin - and dealt with the fallout of the Runtime Fee. During an earnings call, the firm noted that the impact of the controversy was not significant on its quarterly earnings.

Unity forecasted revenue for 2024 between $1.76bn to $1.8bn, which would mark a decline from the $2.19bn it generated in 2023.