Unity Software Inc. (U) Earnings & Analysis

Latest quarter

Unity reported Q3 FY2026 revenue of $622.1 million, up 32.2% from $470.6 million a year earlier and above the consensus. Adjusted earnings per share of $0.44 also exceeded the $0.34 consensus estimate.

In its filing, Unity attributed revenue growth primarily to its Grow Solutions business, where Unity Vector drove growth in the Unity Ads Network, partly offset by declines in the ironSource Ads Network. The company said higher subscriptions also lifted Create Solutions revenue, offset in part by lower cloud and hosting revenue following its portfolio reset.

Unity reported its first quarterly GAAP profit since going public, with $122 million in net income and diluted earnings per share of $0.25, compared with a loss per share of −$0.30 a year earlier. Gross margin rose to 81.9% from 74.4%, while operating margin moved to 16.2% from −26.7%. Unity’s filing said lower amortization following an earlier impairment reduced cost of revenue. Free cash flow increased to $219.7 million from $151.3 million.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Matt Bromberg said Vector revenue grew 126% year over year and 40% from the preceding quarter, exceeding Unity’s prior expectation for 20% sequential growth. He attributed the increase primarily to more installs and higher player values, rather than changes in the share Unity retains from transactions. CFO Jarrod Yahes said Vector’s advertiser account count rose 27% quarter over quarter, while existing advertisers generated 90% of quarterly growth.

Asked about the durability of Vector’s growth, Bromberg described it as an AI prediction engine that matches potential players with games. He said Unity continually improves its models, data and products, but cautioned that not every quarter would see 40% growth. Yahes said Unity bases guidance on run rates, seasonality and planned product changes, while some shifts in growth are unforeseen.

On pricing, Bromberg said Unity does not manage take rate as a lever; its focus is on increasing player value and delivering more installs. He also said runtime data gives publishers feedback on player behavior. Among Vector’s top 1,000 spenders, 30% were sharing that data, he said.

Yahes attributed the quarter’s adjusted EBITDA margin to operating leverage and expense controls. He said adjusted sales and marketing expenses fell $22 million sequentially, primarily because of the Supersonic sale. Unity’s filing also said research and development expense rose year over year, principally because of hosting investment in Vector.

Bromberg said Unity had opened its authoring platform to coding agents and introduced Spark, a browser-based creation platform developed through a partnership with Google. Asked how Spark would compete and make money, he said it was designed to help creators build games for distribution across platforms. Yahes said the planned business model combines subscriptions, consumption-based revenue and advertising; Bromberg said the details would be refined during beta.

Guidance

Bromberg said Unity had raised its Vector growth guide after the business delivered 40% sequential growth in the third quarter against its prior 20% expectation. For Q4 FY2026, Yahes said Unity’s outlook assumes Vector revenue growth of 21% to 23% from the preceding quarter.