Shares of video game developer Unity Software Inc. (NYSE: U) are trading for the same price this time last year. After reaching all-time highs in November of 2021, the San Francisco headquartered stock was abruptly decimated, like many of its tech brethren. This time last year, investors were reeling from an 85% drop, and while the stock has traded lower again in the year since, things are starting to look up for Unity. 

In the past two weeks alone, shares are up 15%, having popped as much as 30%, and MarketBeat's Forecast tool is pointing towards a further healthy 42% upside from here. Let's jump in and look at some of the Unity Software earnings and tailwinds that could make this one of the most compelling recovery stories in 2023. 

Strong Numbers

The company released first quarter earnings last week that smashed analyst expectations. Its EPS of negative 67 cents beat estimates for a deeper three-cent loss, while revenue for the quarter crossed $500 million for the first time. Hitting this milestone meant Unity delivered year-over-year growth of 56% and topped the consensus by a cool $20 million. Its adjusted EBITDA came in at $32 million, easily surpassing its guidance of $7 to $12 million and showing a significant improvement of $55 million compared to the same quarter in 2022. 

The good news didn't just stop there. In addition to having a stellar quarter to reflect on, management issued forward guidance that will go a long way to fueling a rally from here. Looking ahead to the remainder of 2023, Unity expects to continue outpacing the markets it competes in, with revenue growth expected to be faster than the industry average. 

The company's leadership emphasized its commitment to providing creators with comprehensive solutions integrated into its end-to-end platform while highlighting innovation, productivity, and execution as the key pillars that will strengthen the company in the future.

Impressive Guidance

For the second quarter specifically, Unity is expecting revenue in the range of $510-$520 million, representing a year-over-year increase of 72% to 75%. Adjusted EBITDA should be between $50 to $60 million, reflecting another significant increase compared to the negative $38 million reported in the second quarter of 2022, even considering the recent restructuring announcement.

Full-year guidance was also boosted, with management considering the better-than-expected first quarter. To that end, the lower threshold of the revenue guide has increased by $30 million, resulting in a revised range of $2.08 to $2.2 billion, while adjusted EBITDA should land around $250 to $300 million. Management reiterated its commitment to reaching $1 billion in adjusted EBITDA by the end of 2024. 

Getting Involved

All in all, this was nothing short of amazing for a company many thought was at death's door not too long ago. While it may be some time before shares are trading at their heady heights of 2021, this report has kickstarted a fresh rally already. This pop is already justifying the move by Goldman last month to name Unity as one of their top high-margin growth stocks, as well as that by Cathie Woods of Ark Invest, who loaded up the truck with 200,000 shares last month. 

The stock's MACD just had a bullish crossover and is about to turn positive, while the pre-earnings low of $25 provides investors with a solid level to work entry and exit stops around.