Unity Software shares drop 35% in after-hours trading.

Unity Software Shares Drop 35% in After-Hours Trading

Unity Software, a leading provider of real-time 3D development platforms, saw its shares drop by 35% in after-hours trading on Wednesday, following the release of its Q3 2021 financial results.

The company reported revenue of $214.7 million, up 43% year-over-year, but fell short of analysts’ expectations of $225.2 million. Unity also reported a net loss of $144.6 million, or $0.97 per share, compared to a net loss of $39.2 million, or $0.28 per share, in the same period last year.

The disappointing results were attributed to a slowdown in growth in Unity’s gaming business, which accounts for the majority of its revenue. The company’s non-gaming revenue, which includes industries such as automotive, architecture, and film, grew by 53% year-over-year, but still only accounted for 17% of total revenue.

Unity CEO John Riccitiello acknowledged the challenges the company faced in the quarter, but remained optimistic about the company’s long-term prospects.

“We are confident in our ability to continue to drive growth and innovation in the 3D content creation market,” Riccitiello said in a statement. “We remain focused on executing our strategy and investing in our platform to drive long-term value for our customers and shareholders.”

Despite the disappointing results, some analysts remain bullish on Unity’s future prospects. Wedbush Securities analyst Michael Pachter maintained his “outperform” rating on the stock, citing the company’s strong position in the growing 3D content creation market.

“Unity is the clear leader in the 3D content creation market, and we believe the company is well-positioned to benefit from the continued growth in this space,” Pachter said in a note to clients.

However, other analysts were more cautious, with Jefferies analyst Brent Thill downgrading the stock from “buy” to “hold” and lowering his price target from $150 to $100.

“We believe Unity’s growth prospects are still strong, but the company’s valuation is now more in line with its peers,” Thill said in a note to clients.

The drop in Unity’s share price is a reminder of the volatility of the stock market, and the importance of diversification in any investment portfolio. While Unity’s long-term prospects may be strong, investors should always be prepared for short-term fluctuations in the market.