According to a recent Research and Markets report, the global gaming market is estimated to grow at a CAGR of over 9% to reach $287.1 billion by 2026 from $167.9 billion in 2020. San Francisco-based Unity Software (NYSE: U) is a leading game development platform that continues to show stellar performance.

Unity’s Financials

For the fourth quarter of the year, its revenues grew 39% to $220.3 million, significantly ahead of the market’s forecast of $204.23 million. Adjusted loss was $0.10 per share, surpassing market estimates of a loss of $0.14 per share.

Customers that generated more than $100,000 of revenue in the trailing twelve months as of December 31, 2020, grew to 793 compared to 600 a year ago. The dollar-based net expansion rate improved to 138% compared to 133% a year ago.

For the year, Unity’s revenues grew 43% to $772.4 million, and net loss was $1.66 per share.

Unity expects to end the current year with revenues of $950-$970 million. It forecast revenues of $210-$220 million for the current quarter. The market was looking for revenues of $214.7 million for the quarter and $956.1 million for the year.

The current lockdown conditions are expected to continue to drive gaming revenues, but it expects a short-term impact in advertising revenues on account of Apple’s privacy policy change. Currently, app developers and other players leverage Apple’s identifier for advertisers (IDFA), a unique string of letters and numbers on every Apple device, to target mobile ads and track ad performance metrics. Apple’s new privacy update will force these app makers to ask permission from the user before they can access a user’s IDFA. The industry believes that a significant portion of users will deny the request, making targeted advertising less effective.

Unity believes that the changes to IDFA will impact the way mobile game developers attract new customers and maximize monetization from these users. Other players like Facebook and Snap have also expressed their concerns. But as consumers become more aware of privacy concerns, Apple and other device providers will need to continue to address the issue – albeit at the risk of advertising revenues of other companies.

Unity’s Recent RestAR Acquisition and Digital Marketing Focus

Meanwhile, Unity continued to expand its digital marketing capabilities. During the quarter, it announced its acquisition of San Francisco-based RestAR. Founded in 2017 by Bar Saraf, Danny Slavin, and Shimon Vainer, RestAR provides product visualization and 3D capturing for e-commerce using AI and mobile devices. Building realistic 3D models is a time-consuming, manual, and expensive process. RestAR’s technology helps reduce this significantly. Its scans take a minute to complete and do not require technical knowledge or special hardware. Its AI capabilities are able to process and deliver results in a highly compressed format in the cloud.

RestAR’s customers include names like UGG, Off-White, Wix, and Dafiti. Unity plans to leverage the acquisition to add to its portfolio the ability to empower brands, retailers, and consumers by democratizing digital marketing. Prior to the acquisition, RestAR had raised $1.4 million in two rounds of funding from 500 Startups. Its financial performance or acquisition details are not disclosed.

Unity also announced the launch of a new service, Unity Forma, a solution that will allow marketing professionals to create and publish content as well as interactive experiences. Unity Forma will allow marketing teams to showcase products with realistic visual quality in any configuration and in a variety of formats, including interactive 3D product configurators, images, and videos. Content will be optimized for the marketer’s intended platform depending on whether they are using cloud technology or publishing directly to mobile devices, the web, or augmented and virtual reality devices. The solution will help them reduce production timelines and costs, and thus focus on their creative process.

Unity’s stock is trading at $104.90 with a market capitalization of $29.2 billion. It had touched a 52-week high of $174.94 in December and had fallen to a 52-week low of $65.11 in September.