Posted on Tuesday, Oct 26th 2021
global gaming market is projected to grow at 11% CAGR to $398.9 billion by 2026, from $192.2 billion in 2019, driven by the increased adoption of internet services, widespread availability of online games, the adoption of gaming platforms, such as E-sports. Gaming developers are responding to this high growth by providing games that are constantly improving and leveraging advanced technological capabilities in the form of real-time rendering of images. San Francisco-based Unity Software (NYSE: U) is a leading player in the market that is hoping to address this high growth through acquisitions. Unity’s Financials
Unity’s second quarter revenues grew 48% to $273.6 million. Non GAAP loss was $0.02 per share, surpassing market estimates of a loss of $0.12.
In key metrics, customers that generated more than $100,000 of revenue in the trailing twelve months grew to 888 compared to 716 a year ago.
Unity expects to end the current year with revenues of $1.045-$1.060 billion. It forecast revenues of $260-$265 million for the third quarter.
Recently, Unity announced the acquisition of New York-based Parsec for $320 million. Founded in 2016 by Benjy Boxer and Chris Dickson, Parsec allows artists, animators, developers, and designers to use their PCs and VMs from anywhere and from any device. The work of game development and creative professionals involves significant interaction and immersion for the developers. The new games are only getting more complex. With companies and their employees transitioning to hybrid working and collaboration models, Parsec enables creators to work from anywhere by providing them the requirements to support this level of performance processing. Parsec’s technology helps deliver low latency, ultra-high-definition desktop streaming while providing enhanced details with the same sampling rate for all images. Additionally, Parsec also offers the privacy, security, and management tools needed for companies to support fleets of computing resources for all of their creators.
The continuing pandemic conditions are helping Parsec become a go-to-solution for gaming companies. Its Parsec for Teams subscription business is growing by 170% over the year with significant acceleration expected in the coming quarters. Subscription growth is also showing high growth driven by a net dollar expansion rate of nearly 200%. Parsec has also integrated well with many of the industry verticals where Unity sells solutions, such as media and entertainment, architecture, and design. Unity plans on leveraging these capabilities to drive shared momentum with its customers through targeted cross-selling and bundled solutions.
Additionally, the company is benefiting significantly from its various partnerships. Its partnership with Snap to extend the reach of its Ad supply to Snapchat advertisers is one such example. The agreement has helped bring Snap’s technology to mobile game developers through select Snap Kit tools while allowing Unity’s developers access to Snapchat’s 249 million daily active users.
It also continues to expand its product offering and recently announced the availability of Unity Computer Vision Datasets that are aimed at reducing the cost of developing computer vision applications, and accelerate the training of AI for the Manufacturing, Retail, and Security industries.
Unity’s stock is trading at $145.99 with a market capitalization of $41.2 billion. It had touched a 52-week high of $174.94 in December and had hit a 52-week low of $76.00 in May.
Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. Photo Credit: ChristianaT from Pixabay This segment is a part in the series : Cloud Stocks . Smartsheet Acquiring Bootstrapped Startups to Drive Growth . Bootstrapped Unicorn Atlassian is Acquiring Capital Efficient Startups . Netflix Price Hike Ruffles Competition . How Will Carbon Black Differentiate? . 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IBM's Transition to a Hybrid Cloud and AI Company . Analysis of Box's Acquisition of SignRequest . ON24 Should Look at Consolidating MarTech SaaS . Snowflake Exploring AI for Data Warehousing Capabilities . Unity Software Focuses on Digital Marketing with RestAR Acquisition . Tuya Counts on PaaS for Growth Within IoT . ServiceNow Continues to Acquire, Partner, and Integrate . Atlassian Expands Beyond IT Teams to Enterprise-Wide Offerings . Google's Growth Continues Despite Regulatory Concerns . Analysis of Microsoft's Acquisition of Nuance . Amazon's Ad Revenue on the Rise . Alteryx Focuses on the User and Partner Community . Qualys Expands Endpoint Security Offerings . SurveyMonkey Investing in AI and ML Tools . GoDaddy Expands Registry Catalog . Wix Goes on an Acquisition Spree . Analysis of Twilio's Zipwhip Acquisition . HubSpot's PaaS Ecosystem Revenues Expected to Grow Rapidly . Zendesk's Products Help Increase Average Deal Size . Shopify Focuses on Social Commerce . 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Analysis of Magnite's Spot X Acquisition . PagerDuty Focuses on Integrations . Analysis of Bill.com's Divvy Acquisition . C3.ai Doubles Down on Partnerships . Analysis of Coupa's Pana Acquisition . BigCommerce Eyes a Bigger Marketshare Through Walmart Tie-up . Analysis of Everbridge's xMatters Acquisition . Adobe's Digital Solutions Drive Stellar Growth . CrowdStrike Leads in Endpoint Security Through Tie-ups . Snowflake Focuses on Expanded Partner Program to Drive Growth . Analysis of Sumo Logic's Sensu Acquisition . Dynatrace Counts on AI to Continue its Market Leadership . Analysis of IBM's Waeg Acquisition . Tuya Focuses on Smart Product Distribution . Appian Strengthens AI Offerings . Analysis of Zoom's Five9 Acquisition . Google's Offerings Help Drive Partner Revenue Growth . ServiceNow's Entire Portfolio is Booming . How can Atlassian Amplify its Robust Growth? . Analysis of Microsoft's Three More Acquisitions After Nuance . Twilio Focuses on Customer Engagement . Analysis of Amazon's MGM Acquisition . Guidewire Focuses on Building its Partner Network . Momentive, Formerly SurveyMonkey, Adds Analytics to Offerings . Zendesk Should Look at Acquisitions . HubSpot Continues to Grow its App Marketplace . Is Alteryx Being Acquired? . Shopify Continues to Woo Developers . DigitalOcean Expands Partnership with MongoDB . Analysis of Qualys' TotalCloud Acquisition . Pure Storage Experimenting with Pricing Models . Palo Alto Networks Expands Security Capabilities . RingCentral Cashing in on the Hybrid Work Environment . Splunk Tackles Decelerating Growth with Product Upgrades . MongoDB's Atlas Capabilities Expand to the Government Sector . Analysis of Bill.com's Invoice2Go Acquisition . DocuSign Banks on Agreement Cloud . Smartsheet's Expanding Use Cases . Analysis of Salesforce's Servicetrace Acquisition . Zscaler Focuses on Federal Agencies . Coupa Launches PaaS Strategy . Analysis of BlackLine’s Kyriba Partnership . 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Microsoft Teams Lags Far Behind Zoom . Analysis of ServiceNow's Gekkobrain Acquisition . Google Attempts to Gain Ground in Cloud and AI . Atlassian Expands Beyond IT Offerings . Amazon Addresses Margin Pressures Through Product Upgrades . Twilio Leverages Segment Platform for Product Expansion . Shopify Expands PaaS Integrations . Analysis of Zendesk's $4.1B Momentive Acquisition . HubSpot Becomes a Stickier Platform . Analysis of Alteryx's Acquisitions . Wix Focuses on Fitness Services Providers . Pure Storage Partners with Microsoft Azure to Address Chip Shortage Concerns . Analysis of Salesforce's LevelJump Acquisition . Qualys Expands Solutions to Address Ransomware . Veeva Eyes Data Cloud . Splunk Expands Partner Capabilities . Coupa Continues to Build on its PaaS . MongoDB Focuses on Winning Government Contracts . DocuSign Targets $50B Market Opportunity in Agreement Cloud . Smartsheet Focuses on PaaS Growth . C3.ai Expands Enterprise and Public Sector Presence