Unity Software Inc.

Q3 strategic revenue was $597 million, up 59% year over year. Strategic Grow revenue was $432 million, up 90% year over year and 69% of total revenue; Strategic Create revenue was $165 million, up 11% year over year. Adjusted EBITDA was $257 million, up 134% year over year, with 41% margin, up 1,800 basis points year over year. Unity reported $122 million of net income and a 20% net margin, its first GAAP profitable quarter since the IPO. Free cash flow was a record $220 million and ending cash was $2.65 billion. For Q4, Unity guided to total strategic revenue of $683 million to $691 million, or 65% to 67% year-over-year growth, and adjusted EBITDA of $290 million to $295 million, with a 42% margin. Within Q4 guidance, Strategic Grow is expected to grow 105% to 107% year over year, Strategic Create 4% to 6%, Vector 21% to 23% sequentially, and non-strategic Grow revenue is expected to be $5 million, going to 0 in 2027. For full-year 2026, Management said Strategic Create is expected to grow 9% year over year, with similar annual growth going forward.

Matt Bromberg framed the quarter as evidence that Unity’s AI-driven “flywheel” is starting to compound, linking more creator activity, more game launches, more platform usage, and more advertising demand. He said Vector’s outperformance came from better prediction, higher-quality data, and ongoing product improvements rather than changes in take rate, and stressed that the business is still early in its runway. His tone was very upbeat and confident, repeatedly describing Unity as being at the “dawn” of a generational opportunity.

Jarrod Yahes emphasized the financial leverage in the model, pointing to 41% adjusted EBITDA margins, 200 basis points of sequential adjusted gross margin improvement, and flat-to-down dollar spending in R&D, sales and marketing, and G&A versus Q2. He noted adjusted sales and marketing fell $22 million sequentially to 12% of revenue, helped by the Supersonic sale, and said amortization should step down from $77 million in Q3 to $50 million in Q4 and to $15 million per quarter in 2027. He also highlighted record free cash flow of $220 million, $2.65 billion of cash, and plans to pay the convertible debt due November 15 with cash on hand, while saying the company has flexibility for product investment, M&A, and shareholder returns.

Analysts focused heavily on why Vector outperformed so sharply, whether the quarter was a one-off, and how durable the growth could be into 2027. Management said there was no single “silver bullet”; instead, growth came from continuous product enhancements, model retraining, higher-quality data, and better customer ROAS, with 90% of Q3 Vector growth coming from existing advertisers and 27% more advertiser accounts added sequentially. Questions also centered on Spark and whether AI tools diminish the need for a traditional engine; Matt argued Unity’s edge is its full-stack authoring platform and cross-platform distribution, while Jarrod added that Spark could monetize through freemium, subscriptions, advertising, and Asset Store integrations.