I expect Unity's stock price will continue to drop for a while. It's my opinion that the adjustments that Unity made (layoffs and the engine license changed) were not just about "pumping the share price". Unity's financials were simply mid to long-term unsustainable - they were spending much more than they were making.
Unity is probably overvalued, and if its plans to reshape itself into a viable long-term business, it'll probably have to eat a bunch of share price drops.
Taking a quick peek at the Q4 shareholder letter, it doesn't really look like any of their belt tightening has really taken hold yet. 2023 Q4 has broadly similar operating expenses (R&D, S&M and G&A) as 2022 Q4. 2023 Q4 revenue barely up when you exclude the one time WETA release. Overall, Unity is still very much in the red.
Cutting expenditures means falling ever further behind Unreal Engine in the long term. Fundamentally I don't think it's a viable business as such, there are too many competitors who don't need to turn a profit solely on their game engine product.
I really hope they get acquired sooner rather than later, before they pivot to a stripped-down mobile-only engine or something.
From the outside it looks like Unity lacks focus and stamina more than anything else, lots of (what could be groundbreaking) projects started, but then semi-abandondend half way through with the key people behind those projects leaving the company.
And TBH, the 'chasing AAA' strategy was one of those things. IMHO Unity would actually be better off if it did focus on mobile. That's where the money is, where they are established, and where they don't have much competition.
That's based on the assumption that every employee contributed to improving the game engine. They went from 2700 to 7700 employees during the pandemic. They could fire the bottom half of those people and still be way ahead where they were a few years ago.
As a hobby game dev using Unity, there are plenty of issues with it. But I doubt hiring more people and throwing more money on it will solve them at this stage.
To be fair Unity had/has a bunch of other businesses unrelated or marginally related to the engine itself. They went on a spending spree during 2020 and 21 buying random companies left and right.
Seems like they are mainly focusing on cutting that.
Unity is probably overvalued, and if its plans to reshape itself into a viable long-term business, it'll probably have to eat a bunch of share price drops.
Taking a quick peek at the Q4 shareholder letter, it doesn't really look like any of their belt tightening has really taken hold yet. 2023 Q4 has broadly similar operating expenses (R&D, S&M and G&A) as 2022 Q4. 2023 Q4 revenue barely up when you exclude the one time WETA release. Overall, Unity is still very much in the red.
2024 will be interesting to see.