Unity Software Inc. (U) came out with quarterly earnings of $0.2 per share, beating the Zacks Consensus Estimate of $0.17 per share. This compares to a loss of $0.31 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +17.65%. A quarter ago, it was expected that this company would post a loss of $0.25 per share when it actually produced a loss of $0.26, delivering a surprise of -4%.Over the last four quarters, the company has surp ...

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]

Revenue Performance - Total revenue for the three months ended September 30, 2025, was $470.6 million, an increase from $446.5 million in the same period of 2024, while total revenue for the nine months ended September 30, 2025, decreased to $1.35 billion from $1.36 billion in 2024[94][100]. - The dollar-based net expansion rate increased to 103% as of September 30, 2025, compared to 94% in the prior year, driven by subscription revenue growth and existing customers upgrading to enterprise offerings[90]. - The company had 1,338 customers contributing more than $100,000 of revenue in the trailing 12 months as of September 30, 2025, up from 1,242 in 2024, indicating growth in subscription revenue and increased advertising spend[88]. - Create Solutions revenue for the three months ended September 30, 2025, was $152.4 million, slightly up from $147.4 million in 2024, while Grow Solutions revenue increased to $318.3 million from $299.1 million[98]. - The company expects revenue associated with its non-strategic portfolio to decline further, with approximately $24 million in revenue for the nine months ended September 30, 2025, compared to $75 million in 2024[98]. Expenses and Cost Management - Research and development expenses for the three months ended September 30, 2025, were $244.4 million, up from $215.2 million in 2024, primarily due to increased amortization costs[110]. - Operating expenses for the nine months ended September 30, 2025, totaled $1.37 billion, a decrease from $1.62 billion in 2024, reflecting workforce reductions and restructuring efforts[94][107]. - Sales and marketing expenses for the three and nine months ended September 30, 2025 decreased compared to the prior year due to a reduction in personnel costs from headcount reductions[112]. - General and administrative expenses for the three months ended September 30, 2025 decreased moderately compared to the prior year, driven by cost discipline and reductions in personnel-related costs[114]. - The company incurred approximately $23 million in employee separation costs and $16 million in non-employee charges related to workforce reductions in the nine months ended September 30, 2025[87][107]. Profitability Metrics - The gross profit margin for the three months ended September 30, 2025, was 74%, down from 75% in 2024, while the gross profit margin for the nine months was also 74%, compared to 73% in the prior year[94]. - Adjusted gross profit for the three months ended September 30, 2025 was $388.4 million, compared to $374.4 million in 2024, with adjusted gross margin at 82%[126]. - Adjusted EBITDA for the three months ended September 30, 2025 was $109.5 million, compared to $91.7 million in 2024[126]. Cash Flow and Financial Position - Free cash flow for the nine months ended September 30, 2025 was $285.2 million, an increase from $180.3 million in 2024[130]. - As of September 30, 2025, the company had cash and cash equivalents totaling $1.9 billion, primarily for working capital purposes[131]. - Net cash provided by operating activities for the nine months ended September 30, 2025, was $301,520,000, an increase from $203,361,000 in 2024[137]. - Net cash used in investing activities during the same period was $(18,271,000), a decrease from $(35,967,000) in 2024[137]. - Net cash provided by financing activities was $76,113,000, compared to $(357,697,000) in the previous year[137]. - The net change in cash, cash equivalents, and restricted cash for the nine months ended September 30, 2025, was $381,207,000, a significant improvement from $(188,299,000) in 2024[137]. - The decrease in net loss contributed to the increase in cash provided by operating activities, adjusted for non-cash items[138]. - Cash used in investing activities primarily consisted of purchases of property and equipment and non-marketable investments[139]. - Financing activities included proceeds from the issuance of convertible notes and common stock under employee equity plans[140]. Tax and Interest - Interest expense for the three and nine months ended September 30, 2025 increased due to the amortization of new debt issuance costs from the issuance of the 2030 notes[115]. - Interest income and other income (expense), net, for the three months ended September 30, 2025 decreased primarily due to losses from foreign exchange, with a recognized gain of $61.4 million in Q1 2024 compared to $42.7 million in Q1 2025[117]. - Provision for income taxes for the three and nine months ended September 30, 2025 increased due to higher earnings in foreign jurisdictions and the absence of a tax benefit recognized in Q1 2024[120]. Strategic Focus - The company has begun to reset its product and service offerings to focus on its core businesses, referred to as the "Strategic Portfolio," which includes the Unity Engine and related consumption services[86]. - There have been no material changes to critical accounting policies and estimates since the last annual report[142]. - Market risk exposure assessment has not changed materially since the previous annual report[143].

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh. ...

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]

Unity Software is launching a free payments product that will allow video game-makers to get around the high fees charged by distribution platforms like Apple’s App store. https://t.co/8TnB0jiVJD ...

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]

Core Viewpoint - Unity Software (NYSE: U) is at an inflection point in growth, with a buy rating suggested due to its two core segments, CS and GS, and the launch of Vector [1] Company Analysis - The investment approach focuses on understanding the core economics of a business, including competitive moat, unit economics, reinvestment runway, and management quality [1] - The emphasis is on long-term free cash flow generation and shareholder value creation [1] Investment Strategy - The analysis is driven by fundamental research, particularly in sectors with strong secular tailwinds [1] - The goal is to identify businesses with the potential to scale over time and unlock significant terminal value [1] Professional Background - The analyst has 10 years of experience in investment banking and is currently managing personal funds, seeded from friends and family [1] - The motivation for sharing insights is to provide value to readers and gather feedback from fellow investors [1]