Core Viewpoint - SoundHound AI's stock price surged over 26% following the announcement of its Q2 earnings, indicating strong market confidence in the company's performance and future outlook [1] Financial Performance - SoundHound AI reported a record Q2 revenue of $42.7 million, representing a year-over-year increase of 217% [1] - The company incurred a net loss of $74.7 million, with an adjusted net loss of $11.9 million [1] Future Outlook - SoundHound AI raised its full-year revenue guidance, projecting total revenue between $160 million and $178 million for 2025 [1] Market Reaction - Other AI application software stocks also experienced gains, with Tempus AI up over 1.9%, Applovin up over 5%, and Palantir, Unity Software, and Datadog each rising over 1% [1]

Core Viewpoint - SoundHound AI's stock price surged over 26% following the announcement of its Q2 earnings, indicating strong market confidence in the company's performance and future outlook [1] Financial Performance - SoundHound AI reported a record Q2 revenue of $42.7 million, representing a year-over-year growth of 217% [1] - The company incurred a net loss of $74.7 million, with an adjusted net loss of $11.9 million [1] Future Outlook - SoundHound AI raised its full-year revenue guidance, projecting total revenue between $160 million and $178 million for 2025 [1] Market Trends - Other AI application software stocks also experienced gains, with Tempus AI up over 1.9%, Applovin up over 5%, and Palantir, Unity Software, and Datadog each rising over 1% [1]

Core Insights - Unity Software Inc. launched Unity Vector, an AI-powered advertising platform, in early 2025, enhancing its digital platform capabilities [1] - The launch resulted in a 15-20% increase in app installations and in-app purchase value, indicating strong initial performance [2] - Unity Software anticipates long-term revenue growth and improved margins from Vector, despite short-term instability during the phased rollout [3] Digital Platform Expansion - Unity Vector, along with other digital tools like Unity Ad Network and Unity Mediation, is expected to improve revenue visibility and profitability [2] - The company is investing in Vector to ensure efficiency and real-time processes, which are crucial for its long-term success [3] Growth Solutions Segment - The Grow Solution segment is projected to benefit from Vector's capabilities, with expectations of mid-single-digit sequential revenue growth in Q3 2025 [4] Competitive Landscape - Unity Software faces competition from major players like Microsoft and AppLovin in the advertising and gaming sectors [5][7] - Microsoft offers development toolkits and has a strong presence in the gaming ecosystem, while AppLovin competes directly in mobile advertising [6][7] Stock Performance and Valuation - Unity Software's stock has increased by 50% year-to-date, outperforming industry benchmarks [8][9] - The stock is trading at a forward 12-month price-to-sales ratio of 7.04, indicating a premium valuation compared to industry peers [10] Earnings Estimates - EPS estimates for 2025 and 2026 have been revised to a loss of 80 cents and 65 cents, respectively, but still reflect year-over-year growth of 52.4% and 18.1% [11]

Core Insights - Unity's advertising segment, Unity Ads, has shown strong growth, with a sequential increase of over 10% for two consecutive quarters, totaling a cumulative growth of over 25% [1][5][10] - The company is optimistic about the potential for profit margin improvement in the Grow segment, even with significant investments in future growth [1][11] - The Vector initiative is still in its early stages, with expected noticeable results starting in 2026, which will continue to enhance performance over the years [1][3][12] Financial Performance - Unity Ads has achieved a sequential growth of 15% in the previous quarter, contributing to a total growth of over 25% in the last two quarters [1][5] - The company anticipates a mid-single-digit sequential revenue growth of approximately 5% from Q2 to Q3, with the non-Vector portion of the advertising business remaining stable [1][5][10] - Create business subscription revenue has seen a year-over-year increase of double digits, with strategic revenue growing by 16% [4][5] Vector Initiative - The Vector system is a modular platform that has been successfully deployed, with expectations for ongoing enhancements in AI model performance and data processing capabilities [2][3][12] - The company believes that the integration of Vector will significantly transform its business model and enhance overall growth [3][12] - The introduction of Vector has already led to an increase in installation rates and user value, exceeding previous quarterly growth rates of 15% to 20% [3][12] Market Dynamics - Unity's advertising network growth has not significantly cannibalized other advertising expenditures, such as those from ironSource, indicating a strong value proposition for clients [1][10] - The company is optimistic about the growth potential in the Chinese market, with a revenue increase of approximately $20 million, driven by both Create and Grow business segments [8][10] - Unity's strategy focuses on enhancing user acquisition capabilities and overall platform value, rather than solely relying on mediation market gains [15][16] Future Outlook - The company is confident in the continued growth of Unity Ads, with expectations for sustained performance improvements into the third quarter [1][16] - Future enhancements in AI capabilities and data quality are seen as critical to maintaining growth momentum [10][11] - The company is committed to ongoing investments in both the Grow and Create segments to drive long-term profitability and market leadership [11][12]

Business Performance & Strategy - The company views the second quarter of 2025 as a potential inflection point for its turnaround, driven by accelerated product development and improved customer offerings [2] - The primary focus is on building a growing and enduring business [2] - The company does not focus on market share, but rather on delivering value to customers, which drives increased spending and business growth [9][10] Mobile Gaming Market - Mobile gaming is the biggest priority for the company [4] - The company is effectively the operating system for the mobile gaming business globally [4] - 70% of the mobile games in the world are built on the company's platform [5] - 85 of the top 100 mobile game advertisers use the company's advertising solutions [5] Product & Technology - The company is delivering better products for the mobile gaming business, leading to business growth [5] - Unity 6 has seen the fastest adoption rate of any version of Unity and is considered stable and performant [7] - The company provides tools for developers to build and operate their businesses, helping them monetize and acquire users [12][13] Investor Relations - The company believes the stock reaction is likely due to the over 100% run-up in the past year, anticipating better results [8]

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Core Viewpoint - US AI application software stocks experienced an initial rise on Monday, indicating positive market sentiment towards this sector [1] Company Summaries - Palantir (PLTR.US) saw an increase of over 3% ahead of its latest earnings report scheduled for after market close today [1] - Unity Software (U.US) rose by more than 7%, reflecting strong investor interest [1] - Shopify (SHOP.US) increased by over 4.5%, suggesting positive market dynamics for e-commerce platforms [1] - Cloudflare (NET.US) experienced a rise of over 3.7%, indicating continued growth in the cloud services sector [1]

Core Viewpoint - The AI application software stocks in the US market experienced an upward trend on Monday, with notable gains in several companies ahead of their earnings reports [1] Company Summaries - Palantir (PLTR.US) saw an increase of over 3% and is set to release its latest earnings report after the market closes today [1] - Unity Software (U.US) rose by more than 7% [1] - Shopify (SHOP.US) increased by over 4.5% [1] - Cloudflare (NET.US) gained more than 3.7% [1]

Group 1 - The article discusses a significant legislative change regarding the expensing of research and development (R&D) costs for U.S. companies, which is expected to have a major impact on corporate financials starting in 2025 [4][6][7] - The new rule allows companies to deduct R&D expenses immediately in the year they are incurred, reversing the previous requirement to amortize these costs over five years [6][7] - This change is anticipated to enhance the appearance of earnings and cash flow for companies, potentially leading to increased investor interest and higher stock valuations [8][9] Group 2 - Lyft is highlighted as a company that will benefit from the new R&D expensing rule, as it spends approximately $375 million annually on U.S. R&D, which will now positively impact its reported income [11][12] - Unity Software, with a high R&D-to-revenue ratio of nearly 70%, is expected to see a significant improvement in its profitability and cash flow metrics due to the new expensing rule [13][14] - Snap Inc. is identified as a sleeper stock that could surprise investors with improved earnings per share (EPS) as a result of the new R&D expensing treatment [17][19] Group 3 - Palantir Technologies is noted for its strong R&D spending, which will now enhance its reported earnings quality and free cash flow optics under the new rules [20][21] - Rivian Automotive, despite being a cash-burning EV manufacturer, is expected to benefit from the ability to immediately expense its R&D costs, improving its perceived stability [22][23] - The article emphasizes that these opportunities may not be immediately recognized by the market, suggesting a potential for significant gains as analysts adjust their models [24][25]

Group 1 - Morgan Stanley is optimistic about Unity Software's advertising business prospects, citing significant improvements in product competitiveness due to strategic restructuring and technological investments over the past 18 months [1] - Recent feedback from Unity's advertising clients indicates a substantial increase in campaign effectiveness, with installation and purchase conversion rates rising by 15%-20%, aligning with management's statements in the Q2 earnings report [1] - The firm anticipates that as Unity continues to provide efficient technological solutions, advertising budgets will increasingly shift towards its platform, driven by a strong focus on return on advertising spend (ROAS) [1] Group 2 - Three key drivers supporting this trend are highlighted: the full launch of Unity's new Vector advertising model in May, which has shown technical strength within just two months, leveraging Unity's scale and leading position in the gaming engine market [2] - Unity's unique user behavior data, recently utilized for ad targeting, is expected to enhance the performance of the Vector model as more real-time gaming data is inputted [2] - The adoption rate of Unity 6 is rapidly increasing, nearing 50% in Q2, with 80% of clients planning to upgrade, which could lead to subscription revenue growth for the Create department and provide richer data sources for Unity Ads, thereby improving clients' ROAS [2] Group 3 - Morgan Stanley believes that Unity's recovery indicates a multi-win scenario in the market, suggesting that if the Vector model can provide differentiated insights, the overall advertising market size may expand rather than being a zero-sum game [2] - The firm maintains a positive outlook on Unity's investment in its high-margin advertising network and the utilization of its unique data assets, noting that market skepticism regarding Unity's competitiveness in advertising presents significant upside potential for its expectations and valuations [2] - Morgan Stanley retains an "overweight" rating on Unity with a target price of $25, suggesting that under bullish scenarios, valuations could reach $40, corresponding to a 10% annual growth rate in the advertising business [2]