Unity Software, Inc. Highlights Q2 2025 Earnings Call

Unity Software, Inc. ((U)) has held its Q2 earnings call. Read on for the main highlights of the call.

Unity Software, Inc. Shines in Q2 2025 Earnings Call

Unity Software, Inc. showcased a strong performance in its recent earnings call, highlighting significant achievements and strategic initiatives. The company expressed a positive sentiment, driven by robust performance in its Unity Ad Network and promising partnerships with industry giants Tencent and Scopely. Despite some challenges, such as a year-over-year decline in Grow revenue and an anticipated sequential decline in the Create segment for the next quarter, Unity’s strategic moves and product enhancements are positioning it well for future growth.

Unity Vector Exceeds Expectations

Unity Vector played a pivotal role in driving a 15% sequential revenue growth in Q2 2025 within the Unity Ad Network. This growth is expected to continue into Q3, with improvements in both the volume and quality of new users, providing a 15% to 20% lift. This performance underscores Unity’s ability to innovate and capture market opportunities effectively.

Partnerships with Tencent and Scopely

Unity announced major multiyear partnerships with Tencent and Scopely, which are expected to leverage Unity’s platform to enhance growth and operations. These partnerships signify Unity’s strategic focus on expanding its reach and influence in the gaming industry, potentially unlocking new revenue streams and enhancing its competitive edge.

Strong Performance in Create Segment

The Create segment reported a 16% year-over-year revenue growth after adjusting for nonstrategic revenues. Unity 6 has seen significant traction, with over 6.6 million downloads, marking a 50% increase from the previous quarter. This growth highlights the segment’s resilience and Unity’s commitment to innovation.

Record Free Cash Flow

Unity reported a record free cash flow of $127 million in Q2 2025, an improvement of $47 million year-over-year. This was driven by increased profitability and the timing of publisher payments, reflecting Unity’s strong financial management and operational efficiency.

Positive Momentum in Non-Gaming Sectors

Unity’s non-gaming subscription business emerged as the fastest-growing segment, marking a sequential increase for the 10th consecutive quarter. This momentum indicates Unity’s successful diversification strategy and its ability to tap into new markets beyond gaming.

Decline in Grow Revenue Year-over-Year

Despite the overall positive performance, Grow revenue was $287 million, down 4% year-over-year. This decline was partially due to decreases in other ad products outside of the Unity Ad Network, highlighting areas for potential improvement.

Sequential Revenue Decline Expected in Create for Q3

Unity anticipates a slight sequential decline in Create revenue from Q2 to Q3, primarily due to the impact of a large customer win in Q2 that is not expected to repeat. This forecast suggests a need for strategic adjustments to maintain momentum in the Create segment.

High Dependence on Unity Ad Network

The Unity Ad Network comprises approximately half of the total Grow revenue, indicating a high dependency that could pose a risk if growth expectations are not met. This reliance underscores the importance of continued innovation and diversification in Unity’s revenue streams.

Forward-Looking Guidance

Unity Technologies exceeded the high end of its guidance for both revenue and adjusted EBITDA in Q2 2025, with revenue surpassing expectations by $16 million and adjusted EBITDA by $15 million. The company is focusing on leveraging AI advancements to enhance product offerings and drive future growth, with expectations of mid-single-digit sequential growth in the Grow segment for the third quarter. Unity’s strong financial standing, highlighted by an 83% adjusted gross margin, positions it well for continued investment in high-potential initiatives like AI and Unity Vector.

In conclusion, Unity Software, Inc.’s earnings call reflected a positive outlook, driven by strategic partnerships, strong performance in key segments, and robust financial management. While challenges remain, particularly in the Grow revenue and Create segment, Unity’s strategic initiatives and focus on innovation position it well for future growth and success.