Unity Software Inc. (U) | Investment Case

1. Company Snapshot

1.a. Company Description

Unity Software Inc.creates and operates an interactive real-time 3D content platform.Its platform provides software solutions to create, run, and monetize interactive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices.

The company serves content creators and developers, artists, designers, engineers, and architects to create interactive and real-time 2D and 3D content.It offers its solutions directly through its online store, field sales operations, independent distributors, and resellers in the United States, Denmark, Belgium, Canada, China, Colombia, Finland, France, Germany, Ireland, Israel, Japan, Lithuania, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, and the United Kingdom.The company was founded in 2004 and is headquartered in San Francisco, California.

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1.b. Last Insights on U

Unity Software Inc.'s recent performance was driven by its better-than-expected Q3 earnings, with quarterly earnings of $0.2 per share, beating estimates. The company's management cited "meaningful outperformance" and improved cost discipline. Additionally, Unity Software surpassed resistance at the 50-day moving average, suggesting a short-term bullish trend. New AI-powered products are near-term catalysts for the company, with potential for accelerating growth in 2026. Unity Software's growth engines, including ad-tech/SaaS, appear promising, driven by Vector, Audience Hub, and new in-app purchasing capabilities.

1.c. Company Highlights

Last Price	45.78
Change Percentage	3.69%
Open	46
Previous Close	44.15
Market Cap ( Millions)	19589
Volume	6925319
Year High	46.94
Year Low	15.33
M A 50	38.93
M A 200	30.83

FCF Yield	2.00%
Dividend Yield	0.00%
ROE	-13.64%
Debt / Equity	69.75%
Net Debt / EBIDTA	-297.56%
Price To Book	6.06
Price Earnings Ratio	-44.6
Price To FCF	50.1
Price To sales	10.86
EV / EBITDA	-176.58

2. Unity Technologies' Q3 2025 Earnings: A Strong Performance

Unity Technologies reported a strong financial performance in Q3 2025, with revenues exceeding expectations. The company's Grow segment showed an 11% quarter-over-quarter lift, driven by Vector AI, while the Create segment saw a 13% year-over-year increase in subscription software business. Adjusted EBITDA also came in above expectations, driven by the strong performance of Vector. Earnings per share (EPS) was $0.20, beating estimates of $0.17.

Publication Date: Nov -10

                                    📋 Highlights
                                    Q3 Revenue & Profit Growth::
                                                Exceeded guidance with Grow segment revenue at $318M (+11% QoQ) and $19M incremental adjusted EBITDA from $30M in high-margin Grow revenue.
Vector AI Performance::
                                                Drove $30M sequential revenue uplift, accelerating Unity ad network growth and contributing to 11% QoQ Grow segment increase.
Create Segment Growth::
                                                Subscription software revenue rose 13% YoY, highlighting long-term potential in democratizing content creation via tools like Developer Data Framework.
China Revenue Expansion::
                                                Revenue contribution grew from 15% to 20% YoY, driven by gaming success and industry adoption in automotive/tech sectors.
Q4 Guidance::
                                                Projects $480–490M revenue and $110–115M adjusted EBITDA, with mid-single-digit Grow revenue growth and Vector AI scaling benefits.

                                

Revenue Growth Drivers

The revenue growth was driven by the exceptional performance of Vector, which drove further acceleration of the Unity ad network. The company's ability to ingest larger quantums of data and respond to changes in the real-time marketplace more effectively has made Vector a scalable and highly performant solution. As Matt Bromberg noted, "Vector AI is proving to be scalable and highly performant."

Valuation Metrics

Unity's valuation metrics suggest that the market is pricing in significant growth expectations. The company's Price-to-Sales Ratio is 9.5, indicating that investors are willing to pay a premium for the company's growth prospects. The EV/EBITDA ratio is -154.78, reflecting the company's current loss-making status. However, the Free Cash Flow Yield is 2.28%, indicating that the company is generating cash from its operations.

Growth Prospects

Unity is well-positioned for growth, driven by the increasing adoption of its technology in the gaming and other industries. The company's focus on democratizing game development and making it more accessible to non-developers and regular content creators is expected to drive growth in the long term. With a strong financial performance and a solid growth outlook, Unity is an attractive investment opportunity for investors looking for exposure to the growing gaming and technology sectors.

Operational Highlights

The company's operational performance was also strong, with operating leverage across the business and a focus on organic growth opportunities. Unity is generating significant cash from its operations, with $0.5 billion in cash generated in the quarter, mostly from operations and high free cash flow conversion on EBITDA.

3. NewsRoom

Unity price target boosted on momentum across game engine, mobile ads businesses

Dec -02

Source: proactiveinvestors.com

Overlooked Stock: Unity (U) Upgrade Amid A.I. & Advertising Pivot

Dec -01

Source: youtube.com

Here Are Monday’s Top Wall Street Analyst Research Calls: Archer Aviation, Beta Technologies, Carvana, Chevron, MPLX, Toast, Zscaler and More

Dec -01

Source: 247wallst.com

Unity Software Inc. (NYSE:U) Receives Consensus Recommendation of “Hold” from Analysts

Dec -01

Source: defenseworld.net

Roblox vs. Unity: Which Metaverse Stock Is the Better Buy Now?

Nov -28

Source: zacks.com

Creative Planning Decreases Stock Holdings in Unity Software Inc. $U

Nov -24

Source: defenseworld.net

Unity Software Inc. (U) Discusses Game Development Innovation and Community Achievements at Unite Event Prepared Remarks Transcript

Nov -19

Source: seekingalpha.com

Unity shares rise on Epic Games partnership

Nov -19

Source: proactiveinvestors.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.89%)

6. Segments

Operate Solutions

Expected Growth: 2.5%

Unity's Operate Solutions growth is driven by increasing adoption of real-time 3D technology, rising demand for immersive experiences, and expansion into new industries such as architecture, engineering, and construction. Additionally, the growing need for remote collaboration and virtual events, as well as the company's strategic partnerships and investments, contribute to its 2.5% growth.

Create Solutions

Expected Growth: 3.5%

Unity Software Inc.'s 3.5% growth is driven by increasing adoption of its real-time 3D development platform across industries, expansion into emerging markets, and growing demand for immersive experiences in gaming, architecture, and e-learning. Additionally, strategic partnerships, innovative product offerings, and a strong focus on research and development are contributing to the company's growth momentum.

7. Detailed Products

Unity Engine

A cross-platform game engine that supports 2D and 3D game development, with features like physics, graphics, and animation.

Unity Simulation

A cloud-based simulation platform that enables testing, training, and validation of AI models, robots, and autonomous systems.

Unity MARS (Multiplayer and Real-time Services)

A cloud-based service that enables real-time multiplayer gaming, live updates, and social features for games and interactive experiences.

Unity Reflect

A cloud-based platform that enables architects, engineers, and construction professionals to create interactive 3D models and collaborate in real-time.

Unity Forma

A digital twin platform that enables the creation of virtual replicas of real-world systems, processes, and products.

Unity Industrial

A suite of tools and services that enable industrial companies to create interactive 3D models, simulations, and AR/VR experiences.

Unity Computer Vision

A computer vision platform that enables developers to build AI-powered applications for image and video analysis.

8. Unity Software Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Unity Software Inc. has a low threat of substitutes due to its unique game engine and development platform, making it difficult for competitors to replicate its offerings.

Bargaining Power Of Customers

Unity Software Inc. has a medium bargaining power of customers, as while customers have some negotiating power, the company's strong brand and market position mitigate this power.

Bargaining Power Of Suppliers

Unity Software Inc. has a low bargaining power of suppliers, as it is a large and influential company in the gaming industry, giving it significant negotiating power over its suppliers.

Threat Of New Entrants

Unity Software Inc. faces a high threat of new entrants, as the gaming industry is highly competitive and new companies are constantly emerging, potentially disrupting the market.

Intensity Of Rivalry

Unity Software Inc. operates in a highly competitive industry, with intense rivalry among established players, making it challenging to maintain market share and pricing power.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	46.36%
Debt Cost	3.95%
Equity Weight	53.64%
Equity Cost	15.85%
WACC	10.33%
Leverage	86.43%

11. Quality Control: Unity Software Inc. passed 5 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Blackbaud

A-Score: 4.5/10

Value: 7.1

Growth: 3.4

Quality: 7.4

Yield: 0.0

Momentum: 2.0

Volatility: 7.0

1-Year Total Return ->

Calix

A-Score: 4.4/10

Value: 2.6

Growth: 4.7

Quality: 4.8

Yield: 0.0

Momentum: 9.0

Volatility: 5.3

1-Year Total Return ->

DoubleVerify Holdings

A-Score: 4.2/10

Value: 4.2

Growth: 9.0

Quality: 7.1

Yield: 0.0

Momentum: 1.0

Volatility: 4.0

1-Year Total Return ->

Freshworks

A-Score: 4.2/10

Value: 5.9

Growth: 5.1

Quality: 4.3

Yield: 0.0

Momentum: 5.0

Volatility: 5.0

1-Year Total Return ->

Intapp

A-Score: 4.0/10

Value: 5.0

Growth: 7.8

Quality: 4.5

Yield: 0.0

Momentum: 2.0

Volatility: 4.7

1-Year Total Return ->

Unity Software

A-Score: 3.8/10

Value: 2.9

Growth: 6.0

Quality: 2.8

Yield: 0.0

Momentum: 9.0

Volatility: 2.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

23.98%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

10.33%

Unity Software Inc. - US91332U1016

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on U

1.c. Company Highlights

Average Quality

Stable Momentum

Medium Volatility

Earnings Beats

Revenues Beats

Weak Momentum

Average Growth

More Volatile

Earnings Miss

Strong Momentum

Revenues Miss

Lower Quality

Fairly Valued

2. Unity Technologies' Q3 2025 Earnings: A Strong Performance

Revenue Growth Drivers

Valuation Metrics

Growth Prospects

Operational Highlights

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.89%)

6. Segments

Operate Solutions

Expected Growth: 2.5%

Create Solutions

Expected Growth: 3.5%

7. Detailed Products

Unity Engine

Unity Simulation

Unity MARS (Multiplayer and Real-time Services)

Unity Reflect

Unity Forma

Unity Industrial

Unity Computer Vision

8. Unity Software Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Unity Software Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

45.78$

Current Price

45.78$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA