Unity Software (U) - Q3 2025 Earnings Call
Concise AI-driven summaries of earnings and conference calls, highlighting the numbers, context, and signals that matter most.
Call Details
Call Title: Unity Software Q3 2025 Earnings Call
Date Held: November 5, 2025
Management Team Members Present:
Matt Bromberg - CEO
Jared Yays - CFO
Alex Giamo - Head of Investor Relations
Call Summary
Financial Performance
Unity reported strong financial results in Q3 2025, with Grow revenue rising to $318 million, reflecting an 11% sequential growth and a 6% year-over-year increase. This sizable growth was primarily attributed to the performance of Unity Vector.
The Create segment generated $152 million, equating to a 3% year-over-year increase. However, after adjusting for non-strategic revenue impacts, the Create segment experienced a 13% increase.
Adjusted EBITDA stood at $109 million, which translates to 23% margins, marking an improvement of 200 basis points year over year.
Jared Yays noted a record free cash flow of $151 million, showing a 36 million year-over-year improvement, reflecting the effectiveness of Unity’s restructuring efforts.
Unity’s cash position remained solid with $1.9 billion on its balance sheet and convertible debt of $2.2 billion.
Guidance
Looking ahead, Unity anticipates fourth quarter revenue to land between $480 million and $490 million, with an adjusted EBITDA of $110 million to $115 million.
The company expects mid single-digit sequential revenue growth from the Grow segment primarily driven by the ongoing success of Vector.
Within the Create segment, steady growth is forecasted, projecting a 5% year-over-year increase in revenue after factoring out non-strategic revenue impacts.
Capital Allocation
Unity’s capital allocation strategy emphasizes investing in product development while being cautious about potential acquisitions. Jared Yays indicated a high threshold for acquisitions, as the focus remains on enhancing organic growth.
The company intends to utilize its strong cash flow generation for refinancings scheduled in the future, without the need for additional capital to meet obligations.
Jared highlighted that free cash flow generation allows Unity to sustain operational growth while maintaining flexibility in capital opportunities.
Macro & Demand Trends
Mat Bromberg expressed optimism about the gaming sector, stating, “The video game industry has already overtaken Hollywood, music, and linear video combined in scale….we believe social media and short-form video are the next targets.” This indicates a robust demand for interactive entertainment.
The potential for a significant increase in AR and VR headsets is projected, with shipments expected to grow by 39% in 2025. This growth trend aligns with Unity’s expanding capabilities in extended reality technologies.
Unity’s focus on the growing mobile in-app purchase market highlights a trend towards monetization opportunities for developers. The total mobile gaming in-app purchase figure exceeds $120 billion annually.
AI Trends
Unity’s integration of AI is a critical thrust in its strategy, indicated by the statement, “We believe the real metric for the skilled game developers of the future won’t be time to market. It will be time to innovation.” This underscores the transformative role of AI in game development.
The advancements from Unity Vector support the expectation of enhanced user targeting and improved ad placements, aiming for broad-based performance across customers and markets.
The rollout of the Developer Data Framework signifies Unity’s commitment to leveraging AI for data optimization, which the company expects to bear financial fruits in 2026.
Product Updates
Unity released significant updates to the Unity Vector, resulting in improved returns across various customer segments, which the management believes will sustain healthy revenue growth.
The Developer Data Framework was adopted by over 90% of new projects utilizing Unity 6.2, showcasing the effective engagement with tools provided to developers.
Unity’s cross-platform commerce solution introduced within Unity IAP creates a centralized dashboard for managing global commerce for developers, which is anticipated to disrupt the traditional app store models.
Expense and Headcount Trends
Yays mentioned strict cost discipline leading to the falling percentage of operating expenses related to revenues, which aligns with the company’s overall effort to drive profitability.
Significant reductions in sales and marketing and G&A costs were noted, enhancing operating profitability further.
NOTABLE QUOTES
“On our last call, we posited that the second quarter of 2025 would ultimately be seen as an inflection point in Unity’s trajectory.” - Matt Bromberg
“Our Create subscription software business increased 13% year over year, reflecting the fundamental improvements we’ve made.” - Matt Bromberg
“Advancements in artificial intelligence will enable us to enhance and extend this mission.” - Matt Bromberg
“We’re not choosing between execution and vision. We mean to achieve both.” - Matt Bromberg
“This represents our second straight quarter of record free cash flow, showcasing the success of the restructuring efforts we have taken over the last two years.” - Jared Yays
“We have a really important and growing business there.” - Matt Bromberg on Unity’s performance in China
“The cash generation is strong...there’s a very high threshold for us in consideration of the strong product opportunities.” - Jared Yays
“Vector AI is proving to be scalable and highly performant.” - Matt Bromberg
“The opportunity to understand, help our customers...is extraordinary.” - Matt Bromberg
“We believe that engagement is the coin of the realm.” - Matt Bromberg
Q&A SUMMARY
Q: Matthew Cost (Morgan Stanley), Can you break down the drivers of faster revenue growth for Grow in Q3?
A: Matt Bromberg indicated that Vector AI’s scalability and ability to ingest complex data have driven the growth. He emphasized, “Vector is able to ingest vastly larger quantums of data…responding to changes in the real-time marketplace more effectively.”
Q: Brent Phil (Jefferies), Why do you expect a sequential slowdown in Grow segment revenue guidance?
A: Jared Yays explained that the guidance is influenced by seasonality, operational metrics leading into the quarter, and expected data inflows, while maintaining optimism about their growth initiatives.
Q: Alec Brondolo (Wells Fargo), How have you leveraged learnings from Vector into non-Vector areas?
A: Matt Bromberg conveyed excitement around incorporating Vector technologies across the ad business, noting early positive results and the recognition of growth opportunities.
Q: Chris Kantarik (UBS), How should we view the in-app payments initiative in terms of monetization opportunities?
A: Matt Bromberg answered that it enhances value for developers while suggesting they will retain margins, which may fuel growth. He stated, “A lot of that leftover margin is going to be turned into a fuel for growth.”
Q: Vasily Horisiov (Cannonball), Can you detail revenue from growth segment solutions excluding Unity Vector?
A: Matt Bromberg refrained from providing specific breakdowns but affirmed positive trends across the ad businesses, highlighting their overall growth and potential.
Q: Andrew Boone (Citizens), How does your strategy democratize game development?
A: Matt Bromberg elaborated on this, stating Unity’s mission is to democratize the tools for not only professional developers but also non-developers, enhancing interactive content creation.
Q: Benjamin Black (Deutsche Bank), How has Vector changed your strategy for non-gaming revenue?
A: Matt Bromberg noted that while they focus on gaming, they see opportunities in non-gaming sectors, particularly in programmatic advertising.
Q: Clark Lampin (BTIG), Are you seeing improved ROAS across your customer sets with Vector?
A: Matt Bromberg confirmed their performance metrics are seeing broad-based improvement, saying, “We are seeing broad-based improvement across all of our customer sets.”
Q: Eric Sheridan (Goldman Sachs), How will increased compute capacity impact your business and margins?
A: Matt Bromberg outlined that while compute costs will rise with growth, efficiencies will reduce costs over time, providing a long-term positive outlook for margins.
Q: Martin Yang (Oppenheimer), What differentiates Unity’s presence in the Chinese market?
A: Matt Bromberg attributed their success in China to Unity’s compatibility with Chinese platforms and noted, “China’s been a real bright spot for us,” enhancing their growth in both segments.
These summaries are generated using artificial intelligence from publicly available earnings and conference call transcripts. The information presented reflects the author’s interpretation and does not represent the views of any other person or entity, including Altimeter Capital Management, LP (“Altimeter”). While the content is believed to be based on reliable sources, no representation or warranty, express or implied, is made as to its accuracy, timeliness, or completeness, and no liability is accepted for any errors or omissions.
This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and all employers and their affiliated persons assume no liability for this information and no obligation to update the information or analysis contained herein in the future.