More and more people are making video games and that's excellent news for Unity Software, which allows developers to create games and simulations.
"We are seeing the compounding impact of our flywheel strategy: more creators make more games on our platform, and more games fuel the need for more discovery through advertising," CEO Matt Bromberg said in the company's third-quarter earnings release on Thursday.
That development was the reason behind Unity Software forecasting robust revenue momentum in the fourth quarter following better-than-expected third-quarter earnings and revenue growth of 32%.
Unity, which counts Among Us and Pokémon Go among some of the more popular games created using the company's game engine, said it expects fourth-quarter "strategic" revenue -- its ongoing business segment -- to grow between 65% and 67%.
The company sees its "strategic grow," or its core advertising and monetization, revenue jumping between 105% and 107% in the fourth quarter. It's underpinned by the Unity's expectation for revenue from its game development engine to grow 4% to 6% in the current quarter.
It's a simple formula: Growth in video game development leads to more advertisement revenue. That formula is looking awfully healthy for Unity.
Unity Software stock rose 18% to $50.25 in premarket trading on Thursday after ending Wednesday up 4.9%. Shares, as of Wednesday, had fallen 3.9% this year but the stock was on pace to go for 2026.
The stock also was on pace to make a significant move from its 50-day moving average around the $42.30 price level. Shares of Unity closed above that key technical level on Wednesday for the first time since Oct. 13.
Unity also has been looking to expand its business opportunities.
Unity and Alphabet-owned Google last month launched Playground, an artificial-intelligence-powered game platform that allows users to create games without prior coding experience.
Google and Unity said they would expand on Playground later this year by launching Unity Spark, a new product that adds professional-level mechanics, 3-D capabilities, and flexibility within the gaming template.
With Take-Two Interactive poised to release Grand Theft Auto VI, video games are having a moment. If Unity Software's earnings were any indication, growth is here to stay.
