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Why Unity Software Stock Fell Sharply on Friday

By Daniel Sparks - Feb 5, 2021 at 5:38PM

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Shares are down even though the tech company's fourth-quarter results beat analyst estimates.

What happened

Shares of Unity Software (U -0.79%), a tech company that provides a platform for creating, running, and monetizing creative games, saw its stock fall 14% on Friday.

The growth stock's slide follows Unity's Q4 earnings report, which beat analyst expectations but apparently didn't quite live up to the market's expectations.

A red chart showing a stock price falling.

Image source: Getty Images.

So what

Unity reported Q4 revenue of $220 million, up 39% year over year. Analysts, on average, were expecting revenue of $204 million. Perhaps explaining why the market may be disappointed, this growth was a significant slowdown from Unity's 53.3% revenue growth in the third quarter. 

The company's non-GAAP loss per share was $0.10, an improvement from a loss per share of $0.79 in the year-ago period. Analysts, on average, were expecting Unity's adjusted loss to come in at $0.14 per share.

"Unity achieved record fourth quarter and full year 2020 revenues in an unprecedented and fast changing technological and economic environment," said Unity CEO John Riccitiello in the company's Q4 earnings release.

So what

Looking ahead, management is optimistic.

"As the leader in creating and operating tools for the world of real-time 3D content," explained Riccitiello, "we continue to invest with the intent to capture what we believe is a substantial opportunity ahead in 2021 and years beyond."

Management guided for first-quarter revenue to be between $210 million and $220 million, translating to 26% to 32% year-over-year growth.

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Unity Software Inc. Stock Quote
Unity Software Inc.
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