Unity (U) Q2 Cash Flow Jumps 59%

Core Insights - Unity Software reported Q2 2025 GAAP revenue of $441 million, exceeding analyst estimates of $427.79 million, while adjusted EPS was $0.18, beating the $0.14 estimate [1][5] - Despite outperforming expectations, both revenue and profits declined year-over-year, with revenue down 1.8% from $449 million in Q2 2024 and adjusted EPS down 18.2% from $0.22 [1][2][5] Financial Performance - Adjusted EPS (Non-GAAP) for Q2 2025 was $0.18, compared to $0.14 estimate and $0.22 in Q2 2024, reflecting an 18.2% decline [2] - GAAP revenue was $441 million, surpassing the estimate of $427.79 million but down 1.8% from $449 million in Q2 2024 [2] - Adjusted EBITDA reached $90.5 million, down from $113.5 million in Q2 2024, with a margin decrease from 25% to 21% [8] - Free cash flow (Non-GAAP) was $126.7 million, up 59.2% from $79.6 million in Q2 2024 [2][9] - Net cash provided by operating activities was $133.1 million, a 50.6% increase from $88.4 million in Q2 2024 [2][9] Business Segments - Create Solutions generated $154 million in GAAP revenue, a 2% year-over-year increase, largely due to a one-time $12 million license sale [6] - Grow Solutions reported $287 million in GAAP revenue, down 4% year-over-year, although the Unity Ad Network saw a 15% sequential quarterly gain [7] Strategic Focus - Unity is focusing on expanding its platform to new devices, integrating AI innovations, and enhancing engagement with its creator community [4] - The launch of Unity 6 and the migration to Unity Vector aim to improve advertising monetization and support for third-party devices [10][11] Future Guidance - Management projected Q3 2025 revenue between $440 million and $450 million, with adjusted EBITDA guidance of $90 million to $95 million [12] - Expectations include mid-single-digit sequential revenue growth in Grow and a slight decline in Create due to the fading impact of one-off licensing [12]