Unity Software is best known for its game and virtual reality development platforms, but the company also has a fast-growing business focused on digital twin creation.
Digital twins, data-driven virtual representation of physical items, are seeing strong gains for Unity, which delivered second quarter revenue of $533.5 million, well ahead of Wall Street expectations for $518 million. The company reported a net loss of $192 million, or 51 cents a share. The company reported adjusted EBITDA of $99 million.
While Unity has been getting a lot of press as a platform aligned with Apple's Vision Pro launch, the digital twin business is maturing rapidly. The digital twin business sits inside Unity Industries, a part of the company's Create Solutions unit, which had second quarter revenue of $193 million, up 17% from a year ago.
Unity sells Unity Industry for $4,950 per year per license. Unity Industry, which provides metaverse, digital twin and augmented and virtual reality creation tools, is the fastest growing Unity SKU ever launched, the company said.
Speaking on a conference call with analysts, Unity CEO John Riccitiello touched on digital twin momentum multiple times. "We're getting great traction in the market, and we're now focused on delivering repeatable solutions, high-margin solutions that deliver ratable revenue streams and consumption revenue streams," said Riccitiello, who added Unity has cut back on professional services to rely on partners like Capgemini and Booz.
Riccitiello said that Unity is looking to embed generative AI into its digital twin platform that includes data ingestion, creation, visualization, simulation and collaboration tools. "An agent inside of a digital twin can predict what's going to happen next or run scenarios or run simulation. We feel great about that. That's ratable and consumption revenue," he said.
Unity is making money three ways in digital twins. First, there's the services part where a manufacturer, automaker or city is looking to get running on Unity via services or partners. The second revenue driver is the seats sold. Unity has combined all the tools into one suite. And finally, there is ratable revenue when the customer has the digital twin running and using Unity Cloud for simulation, rendering or computer vision. That's a cloud model.
Riccitiello said:
"We've been supply constrained, not pushing a lot for demand, and it's the sectors that you know. We're very keen on government. Another area where there's large interest is manufacturing, particularly the automotive industry, but also specialty manufacturers. There's a fair amount of interest on the retail side. And there's a lot of architecture engineering and construction. What we're working to do between now and the end of the year is to bring it down to a handful of turnkey solutions that we can scale rapidly. We think that's the best way to scale this business."
Indeed, Unity Industries generated roughly $58 million in revenue. Not bad for a company known for gaming and metaverse applications.