Unity reports 25% annual revenue drop in Q4, citing portfolio reset

Unity Technologies has reported a significant revenue drop in the fourth quarter of 2024, attributing the decline to its ongoing portfolio restructuring. The company recorded a 25% year-over-year decrease in revenue, amounting to $457 million for the quarter. While efforts to streamline operations are underway, the financial setback reflects challenges in both its game engine and advertising divisions.

Unity’s Create Solutions division, which encompasses its widely used game engine, experienced the sharpest decline. Revenue plummeted by 47% year-over-year to $152 million. The company clarified that excluding a one-time gain of $99 million from terminating its Weta FX agreement, the actual year-over-year decline would have been around 20%. Meanwhile, Unity’s strategic portfolio generated $442 million in revenue, marking a modest 4% annual increase.

The Grow Solutions segment, which includes Unity’s ad business, also faced a downturn, with revenue dipping 5% year-over-year. Unity cited lingering issues from incentives granted by IronSource before their merger in November 2022 as a contributing factor. Without these incentives, the company estimated that ad revenue would have seen a 2% rise.

Amid the financial strain, Unity made progress in reducing its losses through layoffs and restructuring. Net losses for the quarter stood at $123 million, a marked improvement from the $254 million loss reported in Q4 2023. Adjusted EBITDA also declined from $186 million to $106 million year-over-year, reflecting the impact of ongoing changes within the company.

For the full year 2024, Unity’s total revenue fell by 17% to $1.8 billion. The company attributed this downturn to restructuring efforts, the termination of its Weta FX deal, and a drop in Grow Solutions revenue. Within its portfolio, Create Solutions revenue dropped 29% year-over-year to $614 million, while Grow Solutions declined 10% to $1.2 billion.

Looking ahead, Unity has projected Q1 2025 revenue to range between $405 million and $415 million, with adjusted EBITDA expected to fall between $60 million and $65 million. Despite the challenging financials, CEO Matt Bromberg expressed optimism, citing the launch of Unity 6, an updated pricing model, and advancements in AI-driven advertising as key factors fueling future growth.

“The company’s fourth-quarter results meaningfully exceeded expectations on both revenue and profit, underscoring our progress in building a new Unity,” said Bromberg. “The successful launch of Unity 6, the appeal of our new pricing model, and the progress we’re making in AI for our advertising customers are providing a lot of optimism for the future.”