Unity and Palantir shares jump after their first earnings reports since going public

The New York Stock Exchange welcomes Unity Software Inc. (NYSE: U) Friday, September 18, 2020, as they officially begin trading today.
NYSE

Unity and Palantir both reported revenue growth above 50% on Thursday in their first earnings announcements since going public in September. Investors rewarded them, sending their stocks up on Friday.

Unity, whose software is used by video game developers, surged 12% to $114.31 following its third-quarter earnings report. The stock has more than doubled from its IPO price.

Palantir, a developer of software and analytics tools for government agencies and large corporations, climbed 7% to $15.61. The shares are up almost 60% since the company’s direct listing.

Both companies topped analysts’ estimates, aided by increased usage tied to the coronavirus. Hardcore gamers have been stuck at home during the pandemic, leading to higher engagement for Unity’s customers and demand for new titles. Palantir has won business from companies that need its software to monitor employee health, manage supply chains and track clinical work.

Unity and Palantir shares
CNBC

Unity reported revenue growth for the third quarter of 53% to $200.8 million, topping the $186.9 million average analyst estimate, according to Refinitiv. Palantir’s revenue for the quarter jumped 52% to $289.4 million, beating the $279.4 million average estimate.

The companies are also saving money from a steep drop in travel and by eliminating live events. Unity’s operating loss shrank in the period, reducing its negative margin to 4% from 21% a year earlier.

“We’re experiencing a very material savings in travel, marketing and events,” Unity CFO Kim Jabal told CNBC in an interview. “That’s helping our operating margins.”

However, Jabal said that from a revenue perspective, some of the growth the company often gets in the fourth quarter may have come in the latest period because people who would normally be heading home for the holidays are already there. Unity forecast sales for the fourth quarter of 27% to 29%, a significant slowdown from the third period.

“That seasonal engagement uptick has already happened,” Jabal said. “They’re already engaged at a level that’s pretty high.”

Palantir raised its full-year revenue guidance from about $1.06 billion to between $1.07 billion and $1.072 billion, which would represent 44% growth from a year earlier. Palantir’s sales continues to come from a small set of customers, who spend on average millions of dollars a year for the technology.

The company noted that its “customer concentration is decreasing.” Palantir said that 61% of its revenue for the first nine months of the year came from its top 20 customers, down from 68% over the same stretch in 2019.

WATCH: Palantir reports Q3 results with revenue of $289.37 million

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