Unity Software (U) AI Stock Analysis

• Market Cap: $15.33B
• Dividend Yield: N/A
• Average Volume (3M): 10.47M
• Price to Earnings (P/E): ―
• Beta (1Y): 2.08
• Revenue Growth: -13.74%
• EPS Growth: 48.10%
• Country: US
• Employees: 4,987
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 0.18
• Shares Outstanding: 422,517,880
• 10 Day Avg. Volume: 9,363,122
• 30 Day Avg. Volume: 10,467,315
• 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: 0.72
• Enterprise Value/Revenue: 6.18
• Enterprise Value/Gross Profit: 8.31
• Enterprise Value/Ebitda: 2.88K
• 1Y Price Target: $36.99
• Price Target Upside: 1.93% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 20

• Rating: 53 Neutral
• Price Target: $37.00 ▲(1.96% Upside)

Unity Software's overall stock score reflects significant financial challenges, particularly in revenue growth and profitability, which are the most impactful factors. Technical analysis indicates bearish momentum, and valuation metrics are unattractive due to ongoing losses. The positive earnings call, highlighting exceeded expectations and strategic partnerships, provides some optimism but is outweighed by the financial and technical concerns.

Positive Factors

Strategic Partnerships

These partnerships enhance Unity's market position in gaming and expand its influence, particularly in the Chinese market, supporting long-term growth.

Cash Flow Improvement

Improved cash flow strengthens Unity's financial flexibility, enabling reinvestment in growth initiatives and providing a buffer against economic fluctuations.

New Global Partnership

The partnership with Globant expands Unity's reach into high-growth sectors like digital twins and healthcare, diversifying revenue streams and enhancing long-term prospects.

Negative Factors

Revenue Decline

A negative revenue growth trajectory poses challenges for Unity, necessitating strategic adjustments to reverse the trend and ensure sustainable financial performance.

Profitability Challenges

Ongoing profitability issues, reflected in negative margins, limit Unity's ability to generate returns, impacting its long-term viability and investment appeal.

Executive Compensation Rejection

Rejection of the compensation plan indicates potential dissatisfaction with leadership, which could affect morale and strategic direction if not addressed.

Unity Software Business Overview & Revenue Model

Company Description

Unity Software Inc. is a leading platform for creating and operating real-time 3D content, primarily serving the gaming industry but also expanding into sectors such as film, automotive, architecture, and retail. Founded in 2004, Unity provides a comprehensive suite of tools and services, including the Unity engine, which enables developers to design, build, and monetize interactive experiences across a wide range of platforms, including mobile, PC, and consoles.

How the Company Makes Money

Unity generates revenue through multiple streams, primarily from its subscription services, which include Unity Pro and Unity Enterprise. These subscriptions provide users with access to advanced features, tools, and support necessary for professional game development. Additionally, Unity earns revenue from its Software as a Service (SaaS) offerings, such as Unity Cloud Build and Unity Collaborate, which facilitate collaboration and deployment for developers. Another significant revenue source comes from Unity Asset Store, where developers can purchase and sell assets, including 3D models, scripts, and plugins. Furthermore, Unity has established partnerships with major companies in the gaming and technology sectors, which often involve revenue-sharing agreements and joint ventures that contribute to its earnings. The company also benefits from an increasing trend of non-gaming industries adopting real-time 3D technology, further expanding its potential customer base and revenue opportunities.

Unity Software Financial Statement Overview

Summary

Unity Software faces significant financial challenges, particularly in terms of revenue growth and profitability. Despite a strong gross profit margin, high operating costs lead to persistent losses. The balance sheet indicates manageable debt, but negative returns on equity highlight profitability concerns. Cash flow metrics show some positive trends, with improvements in free cash flow generation.

Income Statement

Unity Software's income statement reveals a challenging financial landscape. The company has experienced a significant decline in revenue growth, with a negative growth rate of -46.5% in the TTM period. Profitability metrics such as the net profit margin and EBIT margin are negative, indicating ongoing losses. Despite a strong gross profit margin of 74.8%, the company struggles with high operating expenses leading to negative EBIT and EBITDA margins. The negative revenue growth trajectory and persistent losses highlight the need for strategic adjustments to improve financial performance.

Balance Sheet

The balance sheet of Unity Software shows a moderate financial position. The debt-to-equity ratio stands at 0.70, indicating a manageable level of leverage. However, the return on equity is negative, reflecting the company's inability to generate profits from its equity base. The equity ratio is not explicitly calculated, but the company's equity position appears stable relative to its total assets. While the company maintains a reasonable debt level, the negative ROE suggests challenges in achieving profitability.

Cash Flow

Unity Software's cash flow statement presents a mixed picture. The company has achieved a positive free cash flow growth rate of 15.4% in the TTM period, indicating improvements in cash generation. The operating cash flow to net income ratio is 0.41, suggesting some level of cash flow efficiency despite negative net income. The free cash flow to net income ratio is high at 0.92, reflecting effective cash management. While cash flow metrics show positive trends, the company needs to address its profitability issues to sustain long-term growth.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.78B	1.81B	2.19B	1.39B	1.11B	772.45M
Gross Profit	1.32B	1.33B	1.45B	948.52M	856.90M	600.10M
EBITDA	3.83M	-234.61M	-209.35M	-663.45M	-465.53M	-231.84M
Net Income	-433.91M	-664.11M	-822.01M	-919.49M	-532.61M	-282.31M
Balance Sheet
Total Assets	6.72B	6.74B	7.24B	7.83B	4.84B	2.67B
Cash, Cash Equivalents and Short-Term Investments	1.69B	1.52B	1.59B	1.59B	1.74B	1.75B
Total Debt	2.23B	2.24B	2.71B	2.71B	1.82B	123.91M
Total Liabilities	3.28B	3.31B	3.83B	4.08B	2.45B	634.08M
Stockholders Equity	3.19B	3.19B	3.18B	3.53B	2.39B	2.04B
Cash Flow
Free Cash Flow	342.42M	273.14M	178.78M	-116.57M	-153.39M	-20.99M
Operating Cash Flow	380.67M	315.55M	234.70M	-59.43M	-111.45M	19.91M
Investing Cash Flow	-40.26M	-42.41M	44.04M	723.23M	-1.84B	-575.19M
Financing Cash Flow	61.42M	-338.31M	-174.01M	-226.63M	1.72B	1.70B

Unity Software Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 36.29
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

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 36.29 is below the 20-day moving average (MA) of 37.54, below the 50-day MA of 40.08, and above the 200-day MA of 28.22, indicating a neutral trend. The MACD of -1.43 indicates Positive momentum. The RSI at 43.77 is Neutral, neither overbought nor oversold. The STOCH value of 35.87 is Neutral, 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
NICE	77 Outperform	$8.29B	15.63	15.07%	―	11.72%	37.05%
CWAN	74 Outperform	$5.57B	12.01	34.61%	―	36.68%	―
GRAB	71 Outperform	$22.83B	204.36	1.77%	―	18.84%	―
MNDY	70 Outperform	$9.44B	259.42	3.80%	―	30.24%	-6.69%
GTLB	63 Neutral	$8.26B	―	-0.63%	―	28.97%	98.96%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
U	53 Neutral	$15.33B	―	-13.62%	―	-13.74%	48.10%

Unity Software Corporate Events

Unity Software, Inc. Highlights Q2 2025 Earnings Call

Unity Software, Inc. Shines in Q2 2025 Earnings Call

Unity Software Reports Mixed Q2 2025 Financial Results

Unity Software, Inc. is a leading platform in the gaming and interactive experiences industry, offering a suite of tools to create, market, and grow games across various platforms including mobile, PC, console, and extended reality (XR).