Unity Software Inc.

Unity reported strategic revenue growth of 38% in Q2, with Strategic Grow revenue of $329 million, up 63% year over year, and Strategic Create revenue of $157 million, up 14% year over year excluding a one-time prior-year item. Adjusted EBITDA was $160 million, with a 29% margin, up 800 basis points year over year; free cash flow was $202 million, up 59% year over year. Q3 guidance is for strategic revenue of $540 million to $550 million, implying 44% to 47% year-over-year growth, with Strategic Grow up 68% to 70%, Strategic Create up 7% to 10%, nonstrategic revenue of $20 million, and adjusted EBITDA of $185 million to $190 million at a 33% margin. Management also pulled forward GAAP net income profitability from Q4 2026 to Q3 2026.

Matt Bromberg framed the quarter as evidence that Unity’s turnaround has moved into a new phase, saying the company is now focused on the future rather than looking backward. He emphasized an AI-driven flywheel connecting Create, Vector, commerce, live services, and runtime data, arguing that more games and more creators will expand both platform usage and ad demand. He was upbeat about Unity 7, calling it a major re-architecture that opens the platform to coding agents and broader collaboration, and highlighted the Netflix partnership as proof of Unity’s role in supporting new gaming platforms.

Jarrod Yahes highlighted the clean financial setup behind the quarter’s leverage: adjusted EBITDA of $160 million, 29% margin, and 800 basis points of year-over-year margin expansion. He noted adjusted gross margin of about 83% in Q2, free cash flow of $202 million, cash of $2.36 billion, and a shift to net cash, with the company expecting to pay off its 2026 convert in November. He also said stock comp expense fell 25% year over year to 14% of revenue, and that the sale of Supersonic and the sunset of the ironSource Ad Network should benefit margins in the second half of the year.

Analysts focused on how Vector’s growth is being driven by product improvements, runtime data, and Day 28 ROAS, and whether runtime was already materially contributing; management said it was very early but encouraging, and stressed that performance comes from a combination of product enhancements, better data, and self-learning models rather than any single input. Questions also pressed on Unity AI’s economics and the commerce product’s role; management said Unity AI is still in beta, is intended to give developers a choice between Unity’s own AI and outside models, and that commerce is free to developers with long-term benefits in conversion, data visibility, and some economics for Unity. On Unity 7 and Netflix, management said the deal is a multiyear support arrangement for Netflix’s gaming ecosystem and that Unity 7 is designed to broaden creation to agentic workflows without traditional upgrades.