Unity Software (U) Q1 Preliminary Results Beat Estimates on Vector Growth

TLDR

• Unity’s Q1 revenue came in at $505M–$508M, topping guidance of $480M–$490M and analyst estimates of $494M.
• Adjusted EBITDA guidance was raised to $130M–$135M, a 58% year-over-year jump and well above prior guidance of $105M–$110M.
• The AI-powered Vector ad engine was the main driver, now making up nearly 80% of Strategic Grow revenue.
• Unity is exiting the ironSource Ads Network on April 30 and hiring a financial advisor to sell its Supersonic publishing business.
• Analysts at Citizens, Wedbush, and William Blair all maintained Buy or Outperform ratings; Citizens holds a $37 price target.

Unity Software beat its own Q1 forecasts by a wide margin, sending the stock up around 15% in premarket trading on Friday. The results came from a preliminary earnings release issued after the close on Thursday.

Unity Software Inc., U

The company now expects Q1 revenue between $505 million and $508 million. That compares to its earlier guidance of $480 million to $490 million and a FactSet analyst consensus of $494 million. Revenue is up roughly 17% year-over-year.

Unity Software Inc., U

On the profit side, Unity expects adjusted EBITDA of $130 million to $135 million. Its prior guidance was $105 million to $110 million. That works out to a 58% increase from the same quarter last year.

CEO Matt Bromberg credited Vector, Unity’s AI-powered ad tool, as the key growth driver. Vector matches players with games and has been delivering better long-term results for advertisers, the company said.

Vector now accounts for nearly 80% of Strategic Grow revenue. The Grow segment overall is expected to bring in around $352 million in Q1.

Unity Cutting Loose Two Underperforming Units

Unity also announced it is exiting the ironSource Ads Network, effective April 30. In the most recent quarter, ironSource had shrunk to just 11% of total revenue growth.

On top of that, Unity has hired a financial advisor to explore a sale of its Supersonic game publishing business. The company said these moves will drive faster revenue growth, higher adjusted EBITDA, and improved margins.

The streamlining effort is viewed positively by analysts. William Blair’s Dylan Becker said the Grow business, stripped of these legacy units, is already growing considerably faster than the overall company.

Citizens analyst reiterated a Market Outperform rating and a $37 price target. The firm said Vector momentum is continuing, and that data integration with Vector is now in testing. Unity’s in-app purchase commerce platform is also ramping.

Wedbush held its Buy rating with a $30 price target. BofA Securities upgraded Unity from Underperform to Neutral, citing an improved balance of risk.

Analyst Targets Suggest Room to Run

Unity’s EPS is forecast to swing from -$0.96 to $1.02 this year, according to InvestingPro. Citizens expects EBITDA margins to expand as the high-margin Vector business takes up a larger share of revenue.

William Blair’s Becker noted that the stock still trades at a discount to direct peers on 2026 revenue and EBITDA multiples.

Unity is also reportedly exploring options for its China business, including a potential sale that could value the unit at over $1 billion.

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