Unity’s fourth quarter was marked by notable growth in its core Vector advertising platform and a rebound in its Create software business, but the market’s negative reaction reflected concerns about the sustainability of these trends. CEO Matthew Bromberg highlighted that “Vector experienced its third consecutive quarter of mid-teen sequential revenue growth,” while Create saw its fastest year-over-year growth in over two years, particularly in China. However, management also acknowledged that the sharp decline in its legacy IronSource ad network masked some of the positive momentum from new products. Elevated investments in sales, marketing, and R&D, including cloud and AI hiring, contributed to margin improvements but did not fully alleviate investor unease about the company’s trajectory.
Is now the time to buy U? Find out in our full research report (it’s free for active Edge members).
Unity (U) Q4 CY2025 Highlights:
- Revenue: $503.1 million vs analyst estimates of $492.1 million (10.1% year-on-year growth, 2.2% beat)
- Adjusted EPS: $0.24 vs analyst estimates of $0.21 (15.5% beat)
- Adjusted Operating Income: $124.9 million vs analyst estimates of $107.2 million (24.8% margin, 16.5% beat)
- Revenue Guidance for Q1 CY2026 is $485 million at the midpoint, below analyst estimates of $489.1 million
- EBITDA guidance for Q1 CY2026 is $107.5 million at the midpoint, below analyst estimates of $116.7 million
- Operating Margin: -21.2%, up from -27.1% in the same quarter last year
- Billings: $499.1 million at quarter end, up 10.1% year on year
- Market Capitalization: $7.95 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Unity’s Q4 Earnings Call
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Matthew Cost (Morgan Stanley) pressed about Vector’s growth runway and the diminishing impact of IronSource. CEO Matthew Bromberg stated there was “no natural ceiling” for Vector’s growth and IronSource would soon be immaterial.
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Alec Brondolo (Wells Fargo) asked about the competitive impact of Meta and new entrants like CloudX. Bromberg said competition was unchanged and mediation platforms were not central to Unity’s strategy.
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Brent Thill (Jefferies) questioned the implications of Google Genie and world model AI on Unity’s engine. Bromberg explained world models are complementary, not replacements, and Unity’s focus remains on being a platform for assembling and deploying interactive content.
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William Lampen (BTIG) inquired about pricing strategy and monetizing a broader creator base as AI opens up the market. Bromberg said Unity is exploring flexible monetization models, including value-added services and consumption-based pricing.
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Andrew Boone (Citizens) sought clarity on the timing and contribution of runtime data to ad models, and monetization of collaboration tools. Bromberg detailed plans for Q2 integration and said new collaborator licenses and AI token usage could diversify revenue.
Catalysts in Upcoming Quarters
In future quarters, the StockStory team will be watching (1) the impact of runtime behavioral data on Vector’s ad performance and revenue growth, (2) the adoption rate and monetization potential of browser-based authoring and AI-driven creation tools, and (3) continued progress in phasing out IronSource and expanding into high-growth markets like China. These milestones will be critical for assessing Unity’s ability to achieve sustainable margin improvement and diversified revenue streams.
Unity currently trades at $18.29, down from $29.06 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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