Unity Software (U) AI Stock Analysis

• Market Cap: $21.17B
• Dividend Yield: N/A
• Average Volume (3M): 9.37M
• Price to Earnings (P/E): ―
• Beta (1Y): 2.06
• Revenue Growth: -8.23%
• EPS Growth: 48.57%
• Country: US
• Employees: 4,987
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 0.20
• Shares Outstanding: 427,912,840
• 10 Day Avg. Volume: 6,364,196
• 30 Day Avg. Volume: 9,365,048
• PEG Ratio: 0.60
• Price to Book (P/B): 2.79
• Price to Sales (P/S): 4.91
• P/FCF Ratio: 32.57
• Enterprise Value/Market Cap: 0.83
• Enterprise Value/Revenue: 9.80
• Enterprise Value/Gross Profit: 13.19
• Enterprise Value/Ebitda: 471.15
• 1Y Price Target: $47.77
• Price Target Upside: -2.97% Downside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 21
• EPS Forecast (FY): 0.84
• Revenue Forecast (FY): $1.84B

• Rating: 65 Neutral
• Price Target: $48.00 ▼(-2.50% Downside)

Unity Software's overall stock score reflects strong technical momentum and positive earnings call highlights, including record free cash flow and strategic product advancements. However, challenges in profitability and valuation, along with regional revenue concentration risks, temper the overall outlook.

Positive Factors

Strategic Partnerships

The partnership with Epic Games allows Unity to tap into Fortnite's massive user base, enhancing its market reach and potential revenue streams through the Fortnite Creator Economy.

Revenue Growth in Create Segment

The growth in the Create segment reflects strong product improvements and customer engagement, indicating a robust demand for Unity's tools and services in content creation.

Free Cash Flow Growth

Record free cash flow demonstrates effective cash management and operational efficiency, providing Unity with greater financial flexibility for strategic investments.

Negative Factors

Profitability Challenges

Ongoing profitability issues, as evidenced by negative net margins, highlight challenges in cost management and the need for improved operational efficiency to achieve sustainable profits.

Regional Revenue Dependence

Heavy reliance on specific regions like China for revenue growth poses risks if geopolitical or economic conditions change, potentially impacting Unity's revenue stability.

Sequential Slowdown in Grow Segment

The anticipated slowdown in the Grow segment suggests potential challenges in maintaining momentum, which could affect future revenue growth and market competitiveness.

Unity Software Business Overview & Revenue Model

Company Description

Unity Software Inc. creates and operates an interactive real-time 3D content platform. Its platform provides software solutions to create, run, and monetize interactive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices. The company serves content creators and developers, artists, designers, engineers, and architects to create interactive and real-time 2D and 3D content. It offers its solutions directly through its online store, field sales operations, independent distributors, and resellers in the United States, Denmark, Belgium, Canada, China, Colombia, Finland, France, Germany, Ireland, Israel, Japan, Lithuania, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, and the United Kingdom. The company was founded in 2004 and is headquartered in San Francisco, California.

How the Company Makes Money

Unity Software generates revenue through multiple streams, with the primary source being its subscription-based model for the Unity engine. Developers pay for different tiers of licenses that offer varying levels of access to features and support. Additionally, Unity earns revenue from the sale of assets through its Unity Asset Store, where creators can buy and sell game assets and tools. The company also monetizes through its advertising platform, Unity Ads, which allows developers to integrate advertisements into their games, generating revenue based on ad impressions and clicks. Furthermore, Unity has established partnerships with various industries, including automotive and film, that contribute to its earnings by providing tailored solutions and services. Overall, Unity's diverse revenue model is bolstered by its extensive ecosystem of products, services, and partnerships.

Unity Software Financial Statement Overview

Summary

Unity Software shows strong revenue growth and gross profit margins, but profitability remains a challenge with negative net income and EBIT margins. The balance sheet is stable with moderate leverage, though returns on equity are negative. Cash flow management shows positive trends, particularly in free cash flow growth, but further improvements in operational efficiency are needed.

Income Statement

Unity Software shows a strong gross profit margin of 74.29% TTM, indicating efficient cost management. However, the company struggles with profitability, evidenced by a negative net profit margin of -24.15% TTM. Revenue growth is positive at 1.35% TTM, but the negative EBIT and EBITDA margins highlight ongoing operational challenges.

Balance Sheet

The debt-to-equity ratio of 0.70 TTM suggests moderate leverage, which is manageable. However, the return on equity is negative at -13.62% TTM, indicating inefficiencies in generating returns for shareholders. The equity ratio stands at 47.21% TTM, reflecting a stable capital structure.

Cash Flow

Unity Software's free cash flow growth is strong at 14.19% TTM, and the free cash flow to net income ratio is nearly 1, indicating effective cash management. However, the operating cash flow to net income ratio of 0.44 TTM suggests room for improvement in converting income into cash.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.80B	1.81B	2.19B	1.39B	1.11B	772.45M
Gross Profit	1.34B	1.33B	1.45B	948.52M	856.90M	600.10M
EBITDA	37.51M	-234.61M	-209.35M	-663.45M	-465.53M	-231.84M
Net Income	-435.53M	-664.11M	-822.01M	-919.49M	-532.61M	-282.31M
Balance Sheet
Total Assets	6.78B	6.74B	7.24B	7.83B	4.84B	2.67B
Cash, Cash Equivalents and Short-Term Investments	1.90B	1.52B	1.59B	1.59B	1.74B	1.75B
Total Debt	2.23B	2.35B	2.71B	2.71B	1.82B	123.91M
Total Liabilities	3.33B	3.31B	3.83B	4.08B	2.45B	634.08M
Stockholders Equity	3.20B	3.19B	3.18B	3.53B	2.39B	2.04B
Cash Flow
Free Cash Flow	391.00M	273.14M	178.78M	-116.57M	-153.39M	-20.99M
Operating Cash Flow	413.71M	315.55M	234.70M	-59.43M	-111.45M	19.91M
Investing Cash Flow	-24.71M	-42.41M	44.04M	723.23M	-1.84B	-575.19M
Financing Cash Flow	95.50M	-338.31M	-174.01M	-226.63M	1.72B	1.70B

Unity Software Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 49.23
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For U, the sentiment is Positive. The current price of 49.23 is above the 20-day moving average (MA) of 42.56, above the 50-day MA of 39.66, and above the 200-day MA of 31.36, indicating a bullish trend. The MACD of 2.66 indicates Negative momentum. The RSI at 70.87 is Negative, neither overbought nor oversold. The STOCH value of 83.39 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for U.

Unity Software Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CWAN	79 Outperform	$6.34B	14.28	32.91%	―	50.91%	54812.50%
ADSK	74 Outperform	$63.76B	58.26	40.33%	―	15.62%	2.59%
EA	69 Neutral	$50.98B	59.57	13.20%	0.37%	-1.45%	-11.99%
U	65 Neutral	$21.17B	―	-13.64%	―	-8.23%	48.57%
GTLB	62 Neutral	$6.57B	―	-5.17%	―	27.35%	18.18%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
RBLX	51 Neutral	$66.23B	―	-324.24%	―	32.70%	12.57%

Unity Software Corporate Events

Unity Software Announces Leadership Transition Agreement

On November 6, 2025, Unity Software Inc. announced an agreement with Anirma Gupta regarding her transition from the role of Senior Vice President and Chief Legal Officer, effective November 14, 2025. Ms. Gupta will remain with the company as a Strategic Legal Advisor until her departure on May 15, 2026. During this transition period, she will continue to receive her base salary and equity awards, and upon her departure, she will receive various financial benefits including cash payments and extended stock option exercise periods.