Financial Data and Key Metrics Changes - In Q3 2025, Unity reported a sequential revenue increase of 11% in the Grow segment, reaching $318 million, and a year-over-year increase of 6% [18] - The Create segment generated $152 million in revenue, up 3% year over year, with a 13% increase when excluding non-strategic revenue [19] - Adjusted EBITDA for the quarter was $109 million, representing a 23% margin, an improvement of 200 basis points year over year [20] - Free cash flow reached a record $151 million, an increase of $36 million year over year [20] - The company has a strong balance sheet with cash of $1.9 billion and convertible debt of $2.2 billion [21] Business Line Data and Key Metrics Changes - The Grow segment's revenue growth was driven by the performance of Vector AI, which enhanced the Unity ad network [18] - The Create segment's growth was attributed to improvements in subscription revenue and ARPU, particularly in China [19] Market Data and Key Metrics Changes - China has become a significant market for Unity, with revenue from the region increasing from 15% to 20% of total revenue over the past year [99] - The gaming market in China is the largest globally, and Unity's technology is compatible with all major Chinese platforms [97] Company Strategy and Development Direction - Unity aims to democratize game development, enabling not just software developers but also regular content creators to build interactive experiences [60] - The company is focusing on advancements in AI to enhance content creation efficiency and engagement [9][60] - Unity is expanding into cross-platform commerce with Unity IAP, allowing developers to manage global commerce from a single dashboard [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainable growth trajectory of the business, particularly with the ongoing improvements in Vector AI and the overall mobile gaming advertising spend [27] - The company anticipates continued strong performance in both the Grow and Create segments, with guidance for Q4 revenues between $480 million and $490 million [21] Other Important Information - Unity has rolled out the Developer Data Framework, which has seen over 90% adoption in new projects built with Unity 6.2 [12] - The company is actively pursuing partnerships with payment providers to enhance its commerce capabilities [13] Q&A Session Summary Question: Drivers of faster revenue growth in the Grow segment - Management highlighted that Vector AI's scalability and performance improvements were key drivers, allowing for better ad targeting and broader customer reach [27] Question: Impact of the Developer Data Framework in 2026 - Management indicated that the runtime data would provide a long-term growth opportunity, enhancing the capabilities of Vector AI over time [29][30] Question: Guidance for Grow segment and expected sequential slowdown - Management explained that the guidance reflects seasonality and the current run rate, but they remain optimistic about continued growth [34][36] Question: Improvements in non-Vector Grow business - Management noted plans to leverage learnings from Vector to enhance other ad businesses, with early positive results observed [40][41] Question: Unity In-App Payments initiative - Management emphasized the opportunity for developers to manage cross-platform commerce, which could lead to increased profitability and growth [45][46] Question: Performance of Vector and strategy for e-commerce - Management expressed optimism about the potential for Vector in non-gaming advertising and the launch of the Audience Hub to help brands reach new audiences [79][81] Question: Momentum in China and unique aspects of the ecosystem - Management highlighted Unity's strong position in China, with significant revenue growth and compatibility with local platforms [97][99]

Core Insights - Unity Software reported a strong third quarter, exceeding both revenue and earnings expectations, marking a significant recovery from its poor performance in Q1 of the same year [1] Financial Performance - The company demonstrated a dramatic turnaround in its financial results compared to Q1, which was characterized by disappointing outcomes [1]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number: 001-39497 UNITY SOFTWARE INC. (Exact name of registrant as specified in its charter) Delaware 27-0334803 (State ...

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Revenue Performance - Revenue for Q3 2025 was $471 million, representing a 5% increase year-over-year from $447 million in Q3 2024[7] - Create Solutions revenue was $152 million, up 3% year-over-year, driven by strong subscription growth[4] - Grow Solutions revenue reached $318 million, a 6% increase year-over-year, primarily due to the performance of the Unity Ad Network[5] - Revenue for Q3 2025 was $470.6 million, an increase from $446.5 million in Q3 2024, while revenue for the nine months ended September 30, 2025, was $1.35 billion, slightly down from $1.36 billion in the same period of 2024[28] - The company expects Q4 2025 revenue to be between $480 million and $490 million[11] - In Q4, the company anticipates mid-single digit sequential revenue growth in Grow and high-single digit year-over-year growth in Create[14] Profitability Metrics - Adjusted EBITDA for the quarter was $109 million, with a margin of 23%, compared to $92 million and a margin of 21% in Q3 2024[9] - Adjusted EBITDA for Q3 2025 was $109.5 million, representing an adjusted EBITDA margin of 23%, compared to $91.7 million and a margin of 21% in Q3 2024[28] - GAAP net loss for Q3 2025 was $126.8 million, with a net loss margin of 27%, compared to a net loss of $124.5 million and a margin of 28% in Q3 2024[28] - Basic and diluted net loss per share was $0.30, compared to $0.31 for the same period in 2024[6] - Adjusted EPS for Q3 2025 was $0.20, up from $0.19 in Q3 2024, reflecting a 5.3% increase[32] Cash Flow and Operating Activities - Net cash provided by operating activities was $155 million, up from $122 million in Q3 2024[8] - Free cash flow for the quarter was $151 million, compared to $115 million in Q3 2024[9] - Free cash flow for Q3 2025 was $151.3 million, compared to $115.2 million in Q3 2024, representing a 31.3% increase[32] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $301.5 million, up from $203.4 million in the same period of 2024[32] Expenses and Cost Management - GAAP research and development expense for Q3 2025 was $244.4 million, accounting for 52% of revenue, while adjusted research and development expense was $138.7 million, or 30% of revenue[30] - GAAP sales and marketing expense for Q3 2025 was $165.9 million, representing 35% of revenue, while adjusted sales and marketing expense was $100.7 million, or 21% of revenue[30] - GAAP general and administrative expense for Q3 2025 was $65.9 million, accounting for 14% of revenue, while adjusted general and administrative expense was $39.5 million, or 8% of revenue[30] - Stock-based compensation expense for Q3 2025 was $91.6 million, down from $105.3 million in Q3 2024[28] - Amortization of intangible assets expense for Q3 2025 was $125.3 million, compared to $88.5 million in Q3 2024[28] - The company is managing costs effectively to drive improvements in operating margins over time[33] Strategic Initiatives and Future Outlook - Unity expects to enhance its platform and accelerate product innovation, particularly with the upcoming launch of Unity 6.3[33] - The company is focusing on artificial intelligence tools as part of its strategic initiatives[33] - Unity anticipates multi-year growth of its product portfolio, leveraging behavioral data through Unity Runtime[33] - The company reported a total impact on diluted net loss per share from non-GAAP adjustments of $1.42 for the nine months ended September 30, 2025[32] - Unity's weighted-average common shares used in GAAP diluted net loss per share increased to 424.3 million in Q3 2025 from 398.8 million in Q3 2024[32]

Core Viewpoint - The article compiles significant research calls from Wall Street, highlighting upgrades for various companies based on their recent performance and outlook. Group 1: Company Upgrades - Jefferies upgraded Apple (AAPL) to Hold from Underperform with a price target of $246.99, up from $203.07, after September quarter revenue grew about 8% and gross margin came in at 47.2%, or about 0.5% better than expected including a $1.1B tariff [2] - Goldman Sachs upgraded Roblox (RBLX) to Buy from Neutral with a price target of $180, up from $155, following the Q3 earnings report, citing strength in bookings, revenue, and daily active user growth, with management optimistic about long-term scaling [2] - BTIG upgraded Unity (U) to Neutral from Sell and removed the prior $27 price target, noting healthy spending trends based on recent surveys of gaming and non-advertising professionals [2] - Piper Sandler upgraded Hershey (HSY) to Neutral from Underweight with an unchanged price target of $167, highlighting the company's plans to be "on-algorithm" in 2026 for better visibility [2] - Stifel upgraded Idexx Laboratories (IDXX) to Buy from Hold with a price target of $700, up from $640, expecting accelerated recurring revenue growth in the Companion Animal Group [2]

Core Industry Trends - Software stocks are benefiting from the digitalization wave and strong adoption of AI, including generative AI and Agentic AI [1] - The proliferation of SaaS, migration to cloud platforms, and demand for hybrid work solutions are major tailwinds for software companies [1] - Increased customer-centric approaches and subscription-based models are driving recurring revenues and affordability for small and medium-sized businesses [5] Factors Supporting Software Stocks - The rise of AI-powered applications in various sectors, including voice recognition and telemedicine, is positively impacting software companies [2] - The adoption of cloud-based services, IoT, AR/VR devices, and 5G deployment is aiding software stock performance [3] - Rising cyber threats are prompting enterprises to invest more in cloud-based security solutions, shifting preference towards software-defined models [4] Company-Specific Insights - CoreWeave is expected to report revenues between $1.26 billion and $1.3 billion, with a year-over-year revenue increase of 207% and a backlog of $30.1 billion [8][9] - BILL Holdings anticipates first-quarter revenues of $390.6 million, reflecting a 9% year-over-year increase, while earnings are projected to decline by 19.1% [11] - Affirm Holdings expects first-quarter revenues of $885 million, indicating a 26.7% year-over-year growth, with earnings per share improving from a loss of 31 cents to a profit of 11 cents [14][15] - Unity Software forecasts revenues of $447.6 million for the third quarter, with a slight year-over-year growth of 0.2% and an expected earnings per share improvement from a loss of 31 cents [17] Strategic Developments - CoreWeave is capitalizing on the generative AI boom, focusing on scaling capacity and enhancing services to drive strong momentum [10] - BILL is leveraging AI to enhance its solutions for SMBs and is integrating generative AI to improve customer experience [12][13] - Affirm is expanding its partnerships and entering new markets, including the U.K. and Western Europe, to drive growth [16] - Unity Software is transitioning its product mix towards the AI-powered Unity Vector platform, which is expected to deliver long-term value despite short-term revenue friction [18][19]

Core Insights - The technology sector, particularly companies like AMD and Unity Software, is poised for growth driven by artificial intelligence (AI) advancements and infrastructure spending [2][4]. Group 1: Advanced Micro Devices (AMD) - AMD has a diversified portfolio of chips catering to data centers, gaming consoles, PCs, and AI workloads, with a stock increase of 90% in 2025 [4]. - The company is well-positioned to capture growth in the data center market, with major AI companies like Microsoft and Tesla utilizing its chips [4][6]. - Analysts project AMD's earnings to increase by 59% next year, supported by its new Instinct GPUs for data centers [6][4]. Group 2: Unity Software - Unity Software powers about 70% of the top mobile games, indicating its strong market presence in game design [7]. - The company is leveraging valuable user data to enhance its AI-powered advertising tool, Unity Vector, which has improved user acquisition by 15% to 20% [9][10]. - Analysts expect Unity to return to double-digit percentage growth in 2026 after a period of flat revenue performance [10].

Core Insights - Unity has announced the general availability of Android XR support in Unity 6, enhancing the platform for developers to reach new audiences and platforms with their games and apps [1] Group 1: Product Development - The integration of Android XR tools into Unity 6 was achieved through close collaboration with Google and Samsung [1] - The tools were verified with developers in real production environments prior to the launch, ensuring reliability and effectiveness [1]

Core Insights - Unity Software Inc (NYSE:U) has seen its stock price increase by 65% this year, but it has recently faced a 20% decline in the past month due to pressures in the tech sector [1] - The stock trades at a high valuation of nearly 130 times forward earnings and 8.97 times trailing-year sales, which is more than double its valuation from a year ago [2] - Technical analysis suggests a bearish head-and-shoulders pattern, indicating a potential drop to a support level around $24 [3] Quantitative Analysis - The quantitative approach evaluates U stock using mathematical models and data, distinguishing it from fundamental and technical analyses that are often subjective [6][7] - Projected 10-week returns indicate a price clustering around $36.40, with a profitability rate of 51% at the tenth week [8] - Under current conditions, U stock has shown a 4-6-D sequence, indicating four up weeks and six down weeks, with an overall downward trend [9] Price Density Zones - The analysis identifies two price density zones under 4-6-D conditions, approximately $36.70 and $40.50, both above the expected clustering price of $36.40 [10][11] - The exceedance ratio at the tenth week is projected to reach 63.2%, suggesting a favorable risk-reward scenario despite potential downside risks [11] Trading Strategy - A bullish trading strategy involving a 37/40 bull call spread is proposed, which could yield a maximum payout of 140% if the stock rises above $40 at expiration [14] - The breakeven point for this trade is set at $38.25, with empirical data supporting price clustering above $40 [14][15]