Unity Software Inc. (U) saw its stock surge over 5% in pre-market trading on Friday, following the company's better-than-expected fourth quarter 2024 results and positive outlook for future growth.

The game engine and software development platform reported revenue from its strategic portfolio of $442 million, up 4% year-over-year and exceeding guidance by $15 million. Adjusted EBITDA of $106 million also surpassed expectations, representing 23% margins.

A key highlight was the 9% year-over-year growth in Create Solutions revenue to $139 million, driven by a 15% increase in subscription revenue and a 50% surge in industry revenue, which is Unity's fastest-growing subscription business. The company's new Unity 6 game engine release has seen strong adoption, with 38% of active users upgrading and 2.8 million downloads since its launch.

Unity also announced the upcoming migration of its Unity Ad Network to a new AI platform called Unity Vector, expected to complete in the second quarter of 2025. The company believes this transition will enhance targeting precision, increase audience scale, and improve real-time adaptability, establishing Unity as a stronger competitor in the advertising space.

Another positive development was the announcement of a significant co-development partnership with Google, providing day-one support for the new Android XR platform and reinforcing Unity's leadership in the growing XR market.

While Unity cautioned that the transition to Unity Vector may cause some near-term disruption in its existing ad business, impacting first-quarter 2025 revenue, the company expressed confidence in its long-term growth prospects. Analysts were optimistic as well, with several raising their price targets on Unity stock following the earnings release.