Investors were excited about the news. They have been waiting for good news from the game developer for a long time. Although like other tech companies, Unity is struggling this year, having lost 57% of its value year-to-date, the contract shows the market is confident about the video-game software company.
Unity announced Tuesday that it had signed a contract with the U.S government. The agreement stipulates that Unity provides digital simulation technology for the military in its aerospace activities. The multi-million dollar contract has a 3-years term. Unity will deliver the contract in partnership with CACI International Inc. (NYSE: CACI). CACI is renowned for providing software to the U.S government that includes aerial surveillance and military intelligence.
The U.S government chose Unity Software engines because it requires a company that can deliver applications with a robust user experience. In addition, the Unity game engine is used worldwide for simulation and real-time gameplay.
Unity’s recent market initiative to make its software go beyond video games is paying off. Unity software’s game engine is usually found in video games and has made a name in that sector. But it is now concentrating its 3D gaming platform beyond the gaming industry. Automotive companies, real estate developers, and factory designers have shown interest in the strategy. Now, the U.S military believes it would help them train pilots and other personnel for the aerospace sector.
The company’s game engine has recently been used at the Hong Kong International airport to study people's movements with real-time visualizations. In the past, Unity software’s game engine has served the military to simulate attacks on plane runways and train drones.
This contract will cement Unity software’s position as one of the dominant game engine developers globally.
Also, this week, and also exciting news, Unity software stated that it is expanding its operations in China. The company is reacting to the insistence of the Chinese government that companies that control data on Chinese citizens and tech companies have more local control. As a result, unity software said it is seeking a domestic partner, and it would be a deal worth $1 billion.
China is Unity’s biggest games market, and an expansion would increase its revenue. But many investors are worried about Unity’s complying with the demand of the Chinese government and allowing Chinese locals to have a greater say in its technology implementation in the country. They cite the growing strained relationship between China and the United States, especially regarding the issue of Taiwan. Also, the Chinese are increasingly becoming sensitive to data handling and technology transfer within their country.
But Unity downplays those fears. The company says that China will be the bastion of the metaverse when it is rolled out globally and wants to have a part of the action when that happens. The metaverse market is valued at more than $300 billion globally, and the value is still increasing as adoption increases.
What This Means For Unity Stock
Unity's stock rose Tuesday on the news and has continued to be on a steep climb since then. The market is excited about it. Unity Software's stock has risen 78% in the past month. So, the market would welcome any good news from the company as investors will be smiling at the bank.
At its last earnings call on August 9, Unity had revenue of $297 million which beat market estimates. It also beat its guidance of $290 million. The revenue posted represented a 9% growth over the comparable quarter last year. However, the full-year revenue guidance has been lowered to $3.1 billion from $3.5 billion due to a slowdown in revenue uptick.
What is most exciting is that the non-game business has posted a 33% growth for the company. With this new contract, there will be more growth in that sector. So we foresee Unity’s stock making new highs this year and in the coming one. That is why it is a tempting buy right now.
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