Unity Software
It sells the engine thousands of games are built in, and runs an advertising network that finds those game makers new players.
The scores
Growth3/4 ↑
The advertising half is compounding fast, but the record is six quarters old and the company is still smaller than it was in 2023.
Business quality3/4 ↑
A structurally scarce input nobody can buy, switched on one quarter ago, in a market where the rival without it earns far more.
Financial position3/4 →
Cash barely exceeds the convertibles and $557 million of them is already current, but cash covers that 4.2 times over.
Execution record3/4 ↑
Three consecutive guidance beats, the last of them large - against a two-year record of restructuring and a chief executive who arrived in 2024.
Per share capture2/4 →
Share count up 7.5% in eighteen months with no buyback, stock pay at 93% of adjusted profit, and $2.24 billion of convertibles behind it.
Potential2/4 →
Several independent things must land - runtime converting, Vector holding its rate, commerce scaling - and one partnership carries neither volume nor term.
Risk profile3/4 →
Greater China at 18% and rising while EMEA falls, the app stores in between, and all the growth in one model - concentrated, none binary.
Valuation2/4 ↓
About 100 times cash after stock pay, 9.9 times sales against its own 8.6 normal, after a 131% run in six months.
Evidence quality4/4 →
The annual report, both quarters, three releases, the call and three outside filers, plus a surveyed industry series and the substitute's own licence.
If it works 1.3× · if it fails you keep about 48%.
The Verdict
We rate Unity unattractive. It sells the engine thousands of games are built in, and an advertising network, now most of its revenue, that finds game makers new players. The business is mixed: the advertising turnaround is real, but its highlighted profit is mostly staff share pay added back, and the share count keeps rising. After the shares more than doubled, the price is full, not cheap: it assumes two more years of growth, so a slowdown would hurt. As a bet it is fragile: if the ad business keeps its pace, the shares are worth only a little more than today; if it stalls, about half is left.
The long caseAdvertisers keep moving money into automated auctions that pay for results, and Unity's ad tools sit inside many mobile games, so its ad business can keep growing.
The evidence under this - 7 claims
- Vector's revenue is disclosed nowhere - not in the 10-K, the 10-Q or the release - so both the growth cadence and the run rate rest entirely on management's description of a figure it does not publish.
- A sequential growth rate on an undisclosed base cannot be checked against the reported Grow Solutions line, which grew 35.4% year on year in the same quarter.
- Stock compensation fell from $469,128 thousand in 2024 and ran at $157,113 thousand in the first half of 2026, so the charge is shrinking in absolute terms while revenue grows.
- Intangible amortisation is a genuine non-cash legacy of the ironSource merger rather than a recurring cost of operating, and it falls away as the assets run off - intangibles are already down to $163,141 thousand from $650,544 thousand.
- It is a trailing figure on a business whose adjusted EBITDA is guided to rise from $160 million to $185-190 million in one quarter, so the denominator is growing faster than almost anything else in the cohort.
- Subtracting the whole stock charge assumes none of it would otherwise have been paid in cash, which overstates the adjustment for a company that competes for engineers against firms paying largely in stock.
- The record under this management is short - the chief executive arrived in 2024 - and three quarters is not long enough to distinguish conservative guidance from outperformance.
- The company restructured heavily in the period, charging $266,855 thousand in 2024 and $46,781 thousand in 2025, so the base being guided against was itself unsettled.
The company
Game studios build their games in Unity's engine, paying a subscription for each developer. It competes with engines studios write themselves and with Godot, which is free.
The other half helps those studios find players: advertisers pay Unity to place their ads inside other people's games. That half is now the bigger one, 71% of June-quarter revenue, while engine revenue fell 27.7% over the two years to 2025.
The evidence under this - 4 claims
- Management attributes part of the fall to a deliberate portfolio reset - cloud and hosting services were wound down - so the subscription line inside Create has been growing while the total fell.
- Create returned to growth in 2025 and the company reports five consecutive quarters of sequential increase, so the two-year figure describes a trough that has passed rather than a trend still running.
How it makes money
Engine money arrives as subscriptions. Advertising money is paid per ad placed, and none of it is under contract: every dollar is won again at the next auction. The only contracted revenue in the filings is about one to two quarters of engine subscriptions. Keeping both going is expensive: research and development was 50.9% of revenue in the June quarter.
The evidence under this - 3 claims
- A ratio that high is what building an engine and an advertising model at once costs, and it is the investment the whole growth case is made of rather than an overrun.
- It includes stock compensation, so part of the 50.9% is the same charge counted in the per-share argument and should not be read as a second, separate cost.
Where the money comes from, stream by stream
| Stream | Share of sales (Q2 2026) | How it earns it |
|---|---|---|
| Create Solutions | 28.8% | Subscriptions to the Unity engine and its tools, charged per seat to studios and developers, plus services and industry licences. |
| Strategic Grow | 60.2% | Advertising sold to app makers buying installs through Vector, the ad network, mediation and offerwall, paid on what each campaign delivers. |
| Non-strategic Grow | 11.0% | The ironSource Ads Network, shut on 30 April 2026, and Supersonic game publishing, sold on 4 August 2026. |
Who runs it
Matt Bromberg, who ran operations at the game maker Zynga, has been chief executive since May 2024; Jarrod Yahes became finance chief in January 2025. Insiders own under 1% of the company. The yearly bonus pays on sales, but only once a profit measure clears a bar; the long-term shares pay on sales and on profit after counting stock pay as a cost. Most shareholders voted against the pay plan in 2025, and Unity has not bought back stock since 2023.
The evidence under this - 4 claims
Two directors sit for Silver Lake and Sequoia, whose 15.3% between them, plus 2027 convertibles, gives the board a large owner's voice that the insider percentage leaves out.
- The 2025 revenue target of $1,841 million was 2% above the prior year, so the bonus paid above target for barely growing.
- Half of each 2026 award is still time-vesting RSUs, and the chief executive's August 2026 award (C33) pays on the share price alone.
It suspended the employee share purchase plan from March 2026 and halved the 2026 evergreen addition to the equity plan to 2.5%, so issuance is being cut at the source rather than bought back (S14).
Why it wins, and who could beat it
Why customers come back
The engine is compiled into the games it built, so Unity can in principle see what players do inside a game, a signal a rival ad network cannot buy at any price. Management counts 3 billion people playing Unity games.
The model meant to use it, Vector, reached 56% of the ad business within four quarters, and its growth from the quarter before stepped up from about 15% to nearly 23% in June. But the in-game signal only began feeding it at the end of June.
The evidence under this - 4 claims
- The figure is management's, stated on a call, and appears in no filing - Unity's own 10-K gives no player or install count at all.
- Access to the runtime is not the same as consent to use it: management describes customers 'continuing to opt into our data development framework', so the signal is opt-in and its coverage is undisclosed.
- Vector's revenue is disclosed nowhere - not in the 10-K, the 10-Q or the release - so both the growth cadence and the run rate rest entirely on management's description of a figure it does not publish.
- A sequential growth rate on an undisclosed base cannot be checked against the reported Grow Solutions line, which grew 35.4% year on year in the same quarter.
- Management explicitly refused to size it - 'I don't think there's analytical value for anyone to single out the impact of runtime data alone' - so no part of the reported growth can be attributed to it.
- Unity has described runtime access as a strategic advantage for years without shipping it, which is evidence about the difficulty rather than about the prize.
The threat
AppLovin is the rival that matters. It has no engine and no in-game data, and still earned 75.8 cents of operating profit on each dollar of its $5.48B of 2025 revenue.
On the engine side Godot is free, and a studio that moves to it takes away the in-game data Unity's ad model depends on.
The evidence under this - 3 claims
- AppLovin's advertising business is roughly four and a half times the size of Unity's Grow Solutions, so some of the margin gap is scale rather than a difference in what the two own.
- AppLovin's own June 2026 quarter grew 4.4% sequentially against Unity's 7.5%, so the trajectories are converging even where the levels are not.
- Management attributes part of the fall to a deliberate portfolio reset - cloud and hosting services were wound down - so the subscription line inside Create has been growing while the total fell.
- Create returned to growth in 2025 and the company reports five consecutive quarters of sequential increase, so the two-year figure describes a trough that has passed rather than a trend still running.
The rivals: APP, GOOGL, APPS, META, AMZN, MSFT, and 2 more that are private, in-house or listed abroad.
Who else does this, rival by rival
| Ticker | Rival | Where it competes | How far along | Priced against it |
|---|---|---|---|---|
| APP | AppLovin (Axon Ads Manager and MAX)Priced against it: Yes | Grow Solutions | On sale | Yes |
| Not listed | Godot EnginePriced against it: Not listed | Create Solutions | On sale | Not listed |
| Private | Epic Games (Unreal Engine)Priced against it: Private | Create Solutions | On sale | Private |
| GOOGL | Alphabet (AdMob and Performance Max)Priced against it: Yes | Grow Solutions | On sale | Yes |
| APPS | Digital TurbinePriced against it: Yes | Grow Solutions | On sale | Yes |
| META | Meta PlatformsPriced against it: Yes | - | On sale | Yes |
| AMZN | Amazon.comPriced against it: Shown, not counted | - | On sale | Shown, not counted |
| MSFT | MicrosoftPriced against it: One segment only | - | On sale | One segment only |
How big it could get
How big this could get
Americans spent $294.6B on internet advertising in 2025, and $162.4B of it was bought by automated auction, growing 20.5% while negotiated placements shrank. Unity's American revenue was 0.18% of the total. The room is enormous; the question is whether Unity's share of it grows.
The evidence under this - 2 claims
- The numerator includes Create Solutions subscriptions, which are not advertising at all, so the true advertising share of that pond is lower still.
- The denominator includes search, which is 38.8% of it and which Unity does not bid in, so the addressable part of the pond is smaller than the ratio implies.
Where the growth is coming from, business by business
Where the growth is coming from
| Business | Share of revenue | Growth: last quarter | Last half-year | Last year | Share in 3 years at its half-year rate |
|---|---|---|---|---|---|
| Grow Solutions | 71% | +35.4% | +29.5% | +15.1% | 83% |
| Create Solutions | 29% | +2.5% | +3.3% | +3.0% | 17% |
| Whole company | 100% | +23.9% | +20.4% | +11.0% | 100% |
On the filed split through 2026-06-30, if each business keeps its last half-year's growth, the company grows about 22% next year and 24% in year 3, against 14.0% over the last twelve months. Grow Solutions carries the case: it grows 29% against 3% for the rest, and would be 83% of revenue by then. A scenario, not a forecast: no business holds its rate.
How we read it: The business carrying the case: the blend still holds the ironSource network shut in April. Grow's 29.5% rests on Vector's record, with runtime signal one quarter old: a record under two years, so 3 either way.
The results
The numbers
Sales grew 14% over the twelve months to Jun 2026, faster than the 2.0% in the year to Dec 2025.
Operating margin is −30%, up from −38% in the year to Dec 2023.
Running costs take 95¢ of each sales dollar, down from 125¢ in the year to Dec 2021.
Shareholders' money lost 19% a year, up from −24% in the year to Dec 2021.
It turned 27% of sales into free cash, $538M over the last twelve months.
Yearly sales growth has ranged from −17% to +57% over the last 5 years, with sales falling in 1 of them.
The share count rose 55% in 4.5 years, and pay in shares costs 17% of sales.
All the numbers
Filed figures from the company's 10-K and 10-Q, read 2026-10-04. Fiscal years end in December.
| Dec 2021 | Dec 2022 | Dec 2023 | Dec 2024 | Dec 2025 | 12 mo to Jun 2026 | |
|---|---|---|---|---|---|---|
| Size and growth | ||||||
| Sales | $1.11B | $1.39B | $2.19B | $1.81B | $1.85B | $2.03B |
| Sales growth | +44% | +25% | +57% | −17% | +2.0% | +14% |
| Profit | ||||||
| Gross margin | 77% | 68% | 66% | 73% | 74% | 65% |
| Operating margin | −48% | −63% | −38% | −42% | −26% | −30% |
| Net margin | −48% | −66% | −38% | −37% | −22% | −29% |
| What growth costs, per sales dollar | ||||||
| Research and development | 63% | 69% | 48% | 51% | 50% | 51% |
| Sales and marketing | 31% | 36% | 38% | 42% | 35% | 32% |
| General and admin | 31% | 27% | 18% | 23% | 15% | 12% |
| Pay in shares | 31% | 40% | 30% | 33% | 21% | 17% |
| Capital spending | 3.8% | 4.1% | 2.6% | 1.6% | 1.0% | 0.8% |
| Cash | ||||||
| Cash from operations | −$111M | −$59.4M | $235M | $316M | $423M | $554M |
| Free cash flow | −$153M | −$117M | $179M | $286M | $404M | $538M |
| Balance sheet | ||||||
| Cash and short-term investments | $1.74B | $1.59B | $1.59B | $1.52B | $2.06B | $2.35B |
| Returns and shares | ||||||
| Shares (diluted) | 282M | 311M | 380M | 396M | 421M | 438M |
What growth costs
Unity's costs per sales dollar have fallen for two years, but mostly because it cut admin, selling and stock pay while sales shrank, not because it grew. Research still takes about half of every sales dollar. The latest quarter is the first where growth itself helped: sales rose quickly and most of the operating loss went away. One quarter is not yet a trend.
The evidence under this - 2 claims
The trailing sales and marketing figure carries $47 million of the March 2026 impairment (C20); on the 2025 year it was 35.3 cents, a smaller fall.
One quarter is not a trend, and the June quarter's revenue still included the businesses being shut (C41).
The last report (6 Aug)
Quarter ended June 2026, filed figures.
The June quarter of 2026 was the best case for the turnaround: revenue of $546.5M, up 23.9%, against $505M to $515M guided, the third beat in a row. The loss from operations narrowed to $32.2M from $118.8M, and the shares rose 15.1% the next day.
The company prefers its own measure, 'Strategic' revenue, which grew 38% by leaving out the ad network it shut and the business it sold. On the ordinary measure growth was 24%, and the loss is still a loss.
What it did to the thesisIt was the best evidence yet that the turnaround is real, with a third straight beat and a smaller loss. It did not change the view: the business still loses money on the ordinary measure, and the price already pays for years more of improvement.
The quarter in detail
Sales growth from the previous quarter, filed figures.
Earnings per share $-0.05 against $-0.11 expected; $-0.05 as filed, with no adjustments.
The evidence under this - 4 claims
- The record under this management is short - the chief executive arrived in 2024 - and three quarters is not long enough to distinguish conservative guidance from outperformance.
- The company restructured heavily in the period, charging $266,855 thousand in 2024 and $46,781 thousand in 2025, so the base being guided against was itself unsettled.
- The excluded businesses are genuinely being disposed of - ironSource Ads was sunset on 30 April 2026 and Supersonic was sold on 4 August 2026 - so the Strategic figure is the better guide to what a buyer is acquiring.
- Every company that reshapes its portfolio faces the same choice, and Unity's disclosure gives both numbers side by side rather than only the flattering one.
What management did with the money
It issued shares rather than buying them back: the count rose 7.5% in eighteen months. Cash of $2.35B barely covers $2.24B of convertible bonds, $557.2M of them due within a year.
The evidence under this - 2 claims
The price, and where we disagree
In short. Full. The turnaround is real, but the price already pays for two more years of it. It looks fair only once real profit arrives and pay in shares shrinks.
The shares are up 130.6% in 120 sessions and 51.6% in the last 20, and sit 11.5% below their high.
Management expects the first reported profit in Unity's history and guides the September quarter to $185M to $190M of adjusted profit. The November results test both, and whether stock pay keeps falling as a share of revenue.
The evidence under this - 3 claims
- The June quarter still lost $(22,672) thousand at the net line and $(32,219) thousand at the operating line, so profitability requires roughly one more quarter of the same improvement with nothing going wrong.
- GAAP profitability would be reached with stock compensation still running near 15% of revenue, so crossing zero changes the accounting rather than the per-share economics.
- Stock compensation fell from $469,128 thousand in 2024 and ran at $157,113 thousand in the first half of 2026, so the charge is shrinking in absolute terms while revenue grows.
- Intangible amortisation is a genuine non-cash legacy of the ironSource merger rather than a recurring cost of operating, and it falls away as the assets run off - intangibles are already down to $163,141 thousand from $650,544 thousand.
How we read the multiple
Counting its debt, buyers pay about 9.9 times Unity's yearly sales, a little above its own usual level and its rivals'. It still reported a loss of about $401M in 2025.
The profit it highlights is mostly pay in shares added back: $380.2M of 2025's $408.8M. Count that pay as a real cost and the whole company costs about 100 times the cash left each year. For the price to be right, Vector has to keep this pace through 2027.
Against its own history. Only a little dearer than its own normal on sales, so the objection is less the price tag than what the cash is worth after stock pay.
The evidence under this - 4 claims
- Stock compensation fell from $469,128 thousand in 2024 and ran at $157,113 thousand in the first half of 2026, so the charge is shrinking in absolute terms while revenue grows.
- Intangible amortisation is a genuine non-cash legacy of the ironSource merger rather than a recurring cost of operating, and it falls away as the assets run off - intangibles are already down to $163,141 thousand from $650,544 thousand.
- It is a trailing figure on a business whose adjusted EBITDA is guided to rise from $160 million to $185-190 million in one quarter, so the denominator is growing faster than almost anything else in the cohort.
- Subtracting the whole stock charge assumes none of it would otherwise have been paid in cash, which overstates the adjustment for a company that competes for engineers against firms paying largely in stock.
- Unity is also the only member whose profitability is inflecting rather than established, and a sales multiple cannot express that a business is about to cross from loss to profit.
- On price to free cash flow it is third of five at 37.4 against a median of 48.1, so the ranking depends on which line is chosen and the cash line is kinder.
Priced against its rivals
The competitors its own annual report names, each confirmed against the rival's filing. Measured on company value for each $1 of sales, cheapest first:
| Ticker | Company | company value for each $1 of sales |
|---|---|---|
| APPS | Digital Turbine | 2.7× |
| META | Meta Platforms | 6.7× |
| GOOGL | Alphabet | 9.6× |
| U | Unity Software | 9.9× |
| APP | AppLovin | 14.8× |
| AMZN | Amazon.com not in the median | 3.8× |
The middle of the other 4 is 8.2. Amazon.com, Inc. competes with it in one product line inside a much bigger company, so its price says little about this business and it is not counted in the middle. Unity Software Inc. is 2nd dearest of 5.
Rivals' figures come from a data provider, so read the spread of the group rather than any single pair.
Second dearest for each dollar of sales among the rivals its filing names, while earning the lowest margin of them: the higher price is Unity's own.
Private or foreign rivals that cannot be priced: Epic Games (Unreal Engine), Godot Engine, Cocos2d-x (Chukong Technologies), Tencent Holdings, Moloco, Voodoo.
The bet: what it pays if it works
This bet is on one business only: Grow Solutions, the advertising half, where Vector lives. The engine, Create Solutions, is counted separately at a modest price for each dollar of its sales, because it barely grows and has no profit line of its own.
If Grow keeps its recent pace for three more years, the stock is worth only a little more than today, so this is an expensive bet. If Vector stalls, the engine alone is a small slice of today's price: the price already pays for Vector.
| Grow Solutions revenue in two to three years | Vectors at today's run rate needed | Valued like its peers | Like the cheapest |
|---|---|---|---|
| $1.50B | about 2 at 100% kept | 0.8× | 0.4× |
| $2.67B (the big win) | about 3 at 100% kept | 1.3× | 0.5× |
| $2.96B | about 3 at 100% kept | 1.4× | 0.6× |
To pay 2× (a Fair bet) it would need about $4.34B of Grow Solutions revenue (about 4 Vectors at today's run rate); to pay 5× (a Cheap bet), about $11.33B of Grow Solutions revenue (about 11 Vectors at today's run rate), at the same multiple.
Each row is Grow Solutions alone, plus the rest of the company (Create Solutions) counted at about $2.67B.
The steps it has to take
- Done Vector rebuilt and shipped, 56% of Grow Solutions revenue by the fourth quarter of 2025
- Done The ironSource Ads Network sunset and Supersonic exited, leaving the strategic perimeter
- Done Runtime signal from the engine feeding the advertising model
- In progress September 2026 quarter: Strategic Grow inside the guided $380-385 million and adjusted EBITDA of $185-190 million due 2026-11
- In progress Vector holds 15% sequential growth for two quarters, and Create Solutions stops declining due 2027-02
- Not started First GAAP operating profit, with stock pay falling as a share of revenue due 2027-02
- Not started 2027 Grow Solutions revenue of about $2.06 billion, the half-year rate held for two years due 2028-02
The detail behind the label
The evidence under this - 5 claims
- Vector's revenue is disclosed nowhere - not in the 10-K, the 10-Q or the release - so both the growth cadence and the run rate rest entirely on management's description of a figure it does not publish.
- A sequential growth rate on an undisclosed base cannot be checked against the reported Grow Solutions line, which grew 35.4% year on year in the same quarter.
- The record under this management is short - the chief executive arrived in 2024 - and three quarters is not long enough to distinguish conservative guidance from outperformance.
- The company restructured heavily in the period, charging $266,855 thousand in 2024 and $46,781 thousand in 2025, so the base being guided against was itself unsettled.
- Management attributes part of the fall to a deliberate portfolio reset - cloud and hosting services were wound down - so the subscription line inside Create has been growing while the total fell.
- Create returned to growth in 2025 and the company reports five consecutive quarters of sequential increase, so the two-year figure describes a trough that has passed rather than a trend still running.
Where we disagree with the market
Vector has made Unity a growth company again, and the engine gives it something AppLovin can never buy.
The mechanism is real and the returns are not yet: the in-game data reached the model one quarter ago.
The difference is in what gets added back. Amortisation of past acquisitions runs off on a schedule; stock pay does not, and only stock pay adds to the share count.
The evidence against us: three guidance beats in a row, the last a large one, and a board that set the chief executive's first price hurdle at $50, 8% above where the shares traded.
What analysts say, and the evidence
The evidence under this - 5 claims
- Management explicitly refused to size it - 'I don't think there's analytical value for anyone to single out the impact of runtime data alone' - so no part of the reported growth can be attributed to it.
- Unity has described runtime access as a strategic advantage for years without shipping it, which is evidence about the difficulty rather than about the prize.
- Stock compensation fell from $469,128 thousand in 2024 and ran at $157,113 thousand in the first half of 2026, so the charge is shrinking in absolute terms while revenue grows.
- Intangible amortisation is a genuine non-cash legacy of the ironSource merger rather than a recurring cost of operating, and it falls away as the assets run off - intangibles are already down to $163,141 thousand from $650,544 thousand.
- The record under this management is short - the chief executive arrived in 2024 - and three quarters is not long enough to distinguish conservative guidance from outperformance.
- The company restructured heavily in the period, charging $266,855 thousand in 2024 and $46,781 thousand in 2025, so the base being guided against was itself unsettled.
- Price hurdles are set to be reachable enough to motivate, so they say more about a compensation committee's calibration than about intrinsic value.
- The hurdles run to August 2031 and the service conditions to 2029, so the third at $75 is a five-year aspiration rather than a near-term view.
What could go wrong, and how we would know
The risks
- Stock pay that never stops. Stock pay equals 63% of the last year's free cash flow, and it keeps adding shares.
- A rival that earns far more. AppLovin brings in $6.10M of revenue per employee; Unity brings in $419,000.
- Slowest grower of its rivals. Over the last year revenue grew 14.0%, the slowest of the four comparable rivals its own filing names.
- An engine business shrinking. Every studio that leaves the engine takes its in-game data, and the ad advantage, with it.
The evidence under this - 6 claims
- Stock compensation is non-cash, so free cash flow is not overstated as cash; what it understates is the cost of the labour that produced it, and the share count is where that shows up.
- The charge is falling as a share of revenue - 14.6% in the June quarter against 23.0% in the same quarter of 2025 - so the ratio improves on its own if revenue keeps growing.
- Unity builds and maintains a game engine as well as an ad network, and an engine is a large permanent engineering commitment that AppLovin does not carry.
- Revenue per employee is a ratio of two things that do not have to move together, and Unity's is rising fast - the June quarter annualises to $496 thousand on a headcount that has not grown.
- The trailing figure spans the portfolio reset, so it measures a company being shrunk on purpose; the June quarter alone grew 23.9% and guided Strategic Grow is up 68% to 70%.
- Unity is also the only member of the cohort that has deliberately closed a revenue line during the period, which no trailing growth rate can adjust for.
- Management attributes part of the fall to a deliberate portfolio reset - cloud and hosting services were wound down - so the subscription line inside Create has been growing while the total fell.
- Create returned to growth in 2025 and the company reports five consecutive quarters of sequential increase, so the two-year figure describes a trough that has passed rather than a trend still running.
What we still do not know
- Whether in-game data makes the ad model better. It has fed the model for one quarter.
- What the Netflix agreement is worth. Unity discloses neither its size nor its length.
- How much profit the engine or the ads make on their own. Unity reports them as one business.
The evidence under this - 3 claims
- Management explicitly refused to size it - 'I don't think there's analytical value for anyone to single out the impact of runtime data alone' - so no part of the reported growth can be attributed to it.
- Unity has described runtime access as a strategic advantage for years without shipping it, which is evidence about the difficulty rather than about the prize.
- Neither the 10-K nor the two 10-Qs mention Netflix, so an agreement described as important on a call was not material enough to disclose in a filing.
- Management describes the deal as calling for Unity to INVEST in supporting Netflix's gaming initiatives, which is a cost commitment as well as a revenue one, and neither side is quantified.
What would change our view
- Unattractive→AttractiveProfitability arrives with the stock charge falling, at a normal multiple
It needs all of:
- ○Unity makes its first reported profit by the fourth quarter of 2026, with stock pay shrinking as a share of revenue.checked at the next results, due in Nov 2026
- ✓The shares fall to the company's own six-year normal of about 8.6 times last year's sales, from 9.9 today.reached, at $40.10
- Reopens the researchVector's momentum proves durable
It needs:
- ○Vector grows 15% or more from the quarter before for two quarters, ad revenue beats the $380M floor, and engine revenue stops falling.checked at the next results, due in Nov 2026
What is coming
- November 2026 2026 convertible notes mature: Whether $558 million is repaid in cash as the 10-Q says, leaving cash against $1.69 billion of notes due 2027 and 2030 rather than issuing shares.
Every dated event ahead
- November 2026 2026 convertible notes mature: Whether $558 million is repaid in cash as the 10-Q says, leaving cash against $1.69 billion of notes due 2027 and 2030 rather than issuing shares.
- 4 November 2026 Third quarter 2026 results (date from the vendor calendar; Unity has not yet announced it): Strategic Grow against the guided $380-385 million, adjusted EBITDA against $185-190 million, a first GAAP profit, and whether stock pay keeps falling as a share of revenue.
- February 2027 Fourth quarter 2026 results and the 2026 annual report: The first full year with the shut businesses gone: whether cost per sales dollar keeps falling with growth, and whether the share count still rises.
Since we wrote this
- 8 OctNewsGoogle and Unity announce Playground and Unity Spark, with no financial terms. View heldGoogle and Unity announce a gaming platform partnership.
- 5 OctThesis reviewThe bet now names what it ridesThe owner asked that every bet name the macro trend behind it, after BWXT's bet was missing its chief executive's case for nuclear over gas.
- 4 OctThesis reviewOwner's checklist: revenue streams, cost of growth, management, catalystsThe owner's checklist found the method silent on who runs the company, what growth costs, where the money comes from and what is dated ahead; this pass fills those four blocks from the proxy and filings.
- 26 SepThesis reviewConvertible debt corrected to $2.2B outstanding; view heldOne claim gave the 2026 convertible notes at their $1.7B issue size; $558M is outstanding. Every conclusion already used the right $2.2B total, and the opening entry now records the view it was written with.
- 25 AugThesis writtenUnattractive, medium convictionWritten weeks after the June quarter moved the shares 15.1%. The advertising turnaround is real, but the price already pays for two more years of it.
Also checked 28 times with nothing new to act on.
Sources 14
Sources - 14
Every claim above cites one of these, or states the reasoning that derived it. The quote is frozen at the date it was read: a link can rot, and an agent fetch returns a reading of a page rather than the page. Backs counts the whole claim ledger, so it can name a claim this page does not surface.
- S01primarycompany filing2026-02-11Item 1 on the two product sets and the competitors named for each, the single-segment statement and the revenue disaggregation by source and geography, FY2025 statements, the adjusted EBITDA and adjusted EPS reconciliations, the convertible notes, headcount and the share countbacksC01C02C03C04C07C09C10C13C14C21C22C23C24C26C27C28C30C37C38C39C40C45C47
- S02primarycompany filing2026-08-06the June quarter's income statement and revenue split, the balance sheet, stock compensation and depreciation in the cash-flow statement, and the impairment note explaining the March quarterbacksC01C02C04C16C17C19C20C24C25C26C27C28C29C30C40C41C45C46C47
- S03primarycompany filing2026-05-07the $279 million of impairment charges, $227 million of them inside cost of revenue, and the decision to sunset the ironSource Ads Network and exit SupersonicbacksC18C20
- S04primarycompany release2026-08-06the Strategic and Non-Strategic revenue split the company invented for itself, the third-quarter guidance, adjusted EBITDA and free cash flow, and the date Supersonic was sold
Strategic Grow Revenue $328,955 $201,334 63% Strategic Create Revenue $157,456 $150,605 5% Total Strategic Revenue $486,411 $351,939 38%
backsC18C35C36C41 - S05primarycompany release2026-05-07the guidance range the June quarter was measured against, and the first quarter's own strategic split
Strategic Grow Revenue of $302 million to $306 million, up 50% - 52% year-over-year ... Adjusted EBITDA of $130 million to $135 million, up 44% - 49% year-over-year
backsC35 - S06primarycompany release2026-02-11Vector's share of the ad business at the end of 2025, the shrinking network beside it, and the first-quarter 2026 guidance
mid-teen sequential quarterly revenue growth from Unity Vector, which represented 56% of total Grow Solutions revenue in the fourth quarter. The growth was partially offset by declines in the IronSource Ad Network, which represented 11% of total Grow Solutions revenue in the fourth quarter.
backsC07C35 - S07primarytranscript2026-08-06Vector's sequential growth cadence and run rate, the date runtime signals began feeding it, the margin-expansion arithmetic, the first-ever-GAAP-profit expectation, and the Netflix relationship
We've now had four straight quarters of 15% growth, which then stepped up to nearly 23% growth in the second quarter ... It's now our biggest and fastest-growing business, significantly more than $1 billion on a run-rate ... We began implementing signals from the runtime into Vector towards the end of the second quarter.
backsC05C06C08C15C21C36 - S08primarycompany filing2026-08-19880,000 performance-based price-vesting units granted to the chief executive on 17 August 2026, with the three stock-price hurdles and the service dates attached to thembacksC33
- S09primarycompany filing2026-02-19AppLovin Form 10-K, fiscal year ended 31 December 2025 AppLovin Corporationthe attacker's own description of the same product, its named rivalry with Unity, and the economics a pure advertising business in this market can reach
Axon Ads Manager, our user acquisition solution, is the cornerstone of our advertising solutions. Axon Ads Manager is powered by our Axon AI advertising recommendation engine and matches advertiser demand with publisher supply through auctions at vast scale and at microsecond-level speeds.
backsC10C19C29C38 - S10primaryother2026-08-25Godot Engine - licence terms Godot Engine projectthe price of the free substitute for the half of Unity that gives it its name, stated by the substitute rather than by Unity
Godot Engine is free and open source software released under the permissive MIT license
backsC09 - S11primaryindustry data2026-04-30IAB/PwC Internet Advertising Revenue Report, full-year 2025 results Interactive Advertising Bureau and PricewaterhouseCoopersthe size and growth of the advertising pond, measured by somebody who does not sell advertising
U.S. digital advertising revenues, which rose 13.9% year over year (YoY) in 2025 to a record $294.6 billion. ... Programmatic advertising revenue grew by $27.6 billion to a total of $162.4 billion in 2025, a YoY increase of 20.5%. ... non-programmatic placements (excluding search) declined 13.9% but still totalled $18.0 billion ... Search revenues maintained the largest market share at 38.8% but grew more slowly YoY at 11.0% compared to 15.9%
backsC12C13C14 - S12primaryvendor data2026-08-25Research pack for U, frozen beside this thesiscontent/U/research-pack.jsonprice, the 252-day range and returns, the analyst split, insider filings, the cohort multiples struck on the filed competitor set, the six-year multiple history, and the disagreement between the vendor's operating income and the filer'sbacksC19C21C27C28C29C30C31C32C33C34C39
- S13primarycompany filing2026-05-26Digital Turbine Form 10-K, fiscal year ended 31 March 2026 Digital Turbine, Inc.a second listed rival naming Unity back, and what the same market looks like for a company without an engine or an audience
App Developers and other performance-focused advertisers execute mobile user acquisition campaigns for their apps and products on the Company's direct mobile app inventory.
backsC11 - S14primarycompany filing2026-03-27the executive officers and their start dates, beneficial ownership as of 16 March 2026, the 2025 bonus plan and its payout, the PSU metrics and their 2026 reweighting, the 2025 say-on-pay result, the ESPP suspension and evergreen cut, and the ironSource merger agreement datebacksC42C43C44C46