Unity Software (U) Shares Surge as Q3 Earnings Beat Estimates and Analysts Raise Price Targets

Unity Software Inc. (NYSE:U) reported third-quarter results that beat Wall Street estimates on Friday, posting its first GAAP-profitable quarter since going public and sending shares to a new 52-week high, Benzinga reported. The company reported adjusted earnings of 44 cents per share, well above the 6-cent estimate, while revenue climbed 32.19% to $622.09 million, topping the $567.44 million consensus.

Vector Business Drives 126% Revenue Jump

The standout figure came from Unity’s Vector advertising business, which surged 126% year over year and 40% sequentially. Grow Solutions revenue, which includes Vector, jumped 44% to $457 million, while Create Solutions revenue increased 8% to $165 million. Adjusted EBITDA reached $257 million, with the margin expanding to 41% from 23% a year earlier.

First Profitable Quarter on a GAAP Basis

Unity posted GAAP net income of $122 million, its first profitable quarter on a GAAP basis since its IPO. The company generated $224 million in operating cash flow and $220 million in free cash flow, ending the quarter with $2.651 billion in cash, cash equivalents and restricted cash.

Fourth-Quarter Guidance Tops Estimates

Looking ahead, Unity forecast fourth-quarter revenue of $688 million to $696 million, above the $603.62 million analyst estimate. Unity projects adjusted EBITDA between $290 million and $295 million, which translates to 132% to 136% year-over-year growth.

Analysts Raise Price Targets on Vector Momentum

Needham analyst Bernie McTernan maintained a Buy rating and raised his price target to $70 from $54, keeping Unity on Needham’s Conviction List. McTernan cited Vector’s 40% sequential growth and raised his 2026 adjusted EBITDA forecast by about 23% and his 2027 forecast by about 45%. He anticipates Vector will comprise roughly 66% of Unity’s revenue by year-end, up from 28% in the first quarter of 2025.

Wedbush analyst Alicia Reese retained an Outperform rating and increased her price target to $63 from $55, drawing attention to Unity’s artificial intelligence strategy, encompassing support for coding agents and its Google Spark partnership with Alphabet Inc. BTIG analyst Clark Lampen maintained a Buy rating and raised his target to $60 from $53, noting that stronger Runtime adoption and new products could drive additional upside beyond his estimates.

Additional Upgrades Cite Google Partnership

Newsbreak reported that Jefferies maintained a Buy rating while raising its price target to $54, and Raymond James Andrew Marok upgraded the stock from Market Perform to Outperform with a $54 target. Marok cited Unity’s partnership with Google, which combines Unity’s development and runtime technology with Google’s AI capabilities and consumer reach, as addressing concerns about developer retention as platforms like Roblox expand.

Unity Stock Hits 52-Week High

Unity Software shares were up 7.54% at $52.48 at the time of publication Friday, trading at a new 52-week high according to Benzinga Pro data.

Frequently Asked Questions

What drove Unity’s revenue growth in the third quarter?

Vector revenue surged 126% year over year and 40% sequentially, driving Grow Solutions revenue up 44% to $457 million. Create Solutions revenue increased 8% to $165 million.

When did Unity become GAAP profitable?

Unity reported GAAP net income of $122 million in the third quarter, marking its first GAAP profitable quarter since its IPO.

What is Unity’s revenue guidance for the fourth quarter?

The company forecasts fourth-quarter revenue of $688 million to $696 million and adjusted EBITDA of $290 million to $295 million.