What made Unity Software shares plunge 35% in extended trading?


What made Unity Software shares plunge 35% in extended trading?

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Wajeeh Khan

May 10, 2022

Unity Software Inc Q1 results come in line with Wall Street expectations.

The video game software development company gave dovish future guidance.

Unity Software shares plummeted over 35% in extended trading on Tuesday.

Unity Software Inc shares (NYSE: U) plummeted over 35% in after-hours trading on disappointing guidance for the fiscal second quarter. Its Q1 results, though, matched Street expectations.

Notable figures in Unity Software Q1 results

Lost $177.6 million in the first quarter that translates to 60 cents a share.In Q1 last year, Unity had lost $107.5 million or 39 cents per share.On an adjusted basis, per-share loss stood at 8 cents a share in fiscal Q1.Revenue jumped 36% to $320.1 million, as per the earnings press release.Consensus was for 8 cents of adjusted per-share loss on $321 million in revenue.Revenues from Create and Operate were up 65% and 26%, respectively.

The stock is now down more than 75% for the year. According to Unity Software, its revenue in Q1 hit an all-time high. In the earnings press release, CEO John Riccitiello said:

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We remain focused on the massive opportunity we see in front of us long-term. Short-term, we are laser-focused on accelerating growth in Operate.

Q2 guidance and CFO’s remarks

For Q2, Unity Software forecasts its revenue to fall between $290 million and $295 million. In comparison, analysts had called for a much higher $360 million. The top end of its full-year guidance for revenue also missed FactSet consensus by $70 million.

The video game software development company expects up to $64 million in loss this quarter. In the earnings press release, CFO Luis Visoso said:

In Q1, we continued to add new customers and made strategic investments to support long-term value creation while improving margins. We believe we’re in the early stages of one of the largest transformations in tech.

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