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Unity Software (U)
NYSE:U
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Unity Software
(NYSE:U)
Rating:73Outperform
Price Target:
$29.00
▲(16.09%Upside)
Positive Factors
Advertising Performance
Momentum in the ads side of Unity's business is building under the leadership of Felix Thé.
Financial Performance
Unity reported results ahead of consensus, with disciplined cost control and stabilization across core segments supporting the beat.
Operational Discipline
Feedback from investors indicates encouragement on the new management team's operational discipline and renewed focus on the advertising side of the business.
Negative Factors
Competitive Risks
The company faces competitive risks in AAA development from Unreal and macro exposure in international markets, posing challenges to its market position.
Management Changes
The departure of CTO Steven Collins is a near-term speed bump for Unity's fresh management team.
Unity Software (U) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$10.07B
Dividend YieldN/A
Average Volume (3M)13.76M
Price to Earnings (P/E)―
Beta (1Y)2.39
Revenue Growth-16.74%
EPS Growth49.75%
CountryUS
Employees4,987
SectorTechnology
Sector Strength82
IndustrySoftware - Application
Share Statistics
EPS (TTM)0.24
Shares Outstanding415,694,640
10 Day Avg. Volume18,317,841
30 Day Avg. Volume13,759,317
Financial Highlights & Ratios
PEG Ratio-0.17
Price to Book (P/B)2.52
Price to Sales (P/S)0.00
P/FCF Ratio-76.15
Enterprise Value/Market Cap1.00
Enterprise Value/Revenue1.32
Enterprise Value/Gross Profit7.55
Enterprise Value/Ebitda-10.97
Forecast
1Y Price Target
$26.65Price Target Upside6.69% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering15
Unity Software Business Overview & Revenue Model
Company DescriptionUnity Software Inc. is a leading platform for creating and operating interactive, real-time 3D content. The company operates in the technology sector and primarily focuses on providing a comprehensive set of software solutions for developers across various industries, including gaming, architecture, automotive, and film. Unity's core products include its real-time 3D development platform, which empowers creators to build, run, and monetize their content across multiple platforms and devices.
How the Company Makes MoneyUnity Software generates revenue through a diversified model primarily consisting of software subscriptions, services, and revenue-sharing agreements. The company's key revenue streams include subscriptions to its Unity Pro and Unity Enterprise software, which provide access to advanced tools and features for professional developers. Additionally, Unity generates significant income through its Operate Solutions, which include monetization services such as Unity Ads and Unity In-App Purchases that allow developers to generate revenue from their applications. The company also partners with strategic technology and industry players to enhance its platform capabilities and expand its market reach.
Unity Software Key Performance Indicators (KPIs)
Any
Customers Over $100k
Tracks the number of customers generating over $100k in revenue, indicating the company's ability to attract and retain high-value clients, which is crucial for sustained growth.
Tracks the number of customers generating over $100k in revenue, indicating the company's ability to attract and retain high-value clients, which is crucial for sustained growth.
Data provided by:
Main Street Data
Main Street DataUnity Software Earnings Call Summary
Earnings Call Date:May 07, 2025
(Q1-2025)
| % Change Since: 17.17%|
Next Earnings Date:Aug 12, 2025
Earnings Call Sentiment Positive
The earnings call reflects a positive outlook with strong performance in several key areas, including exceeding financial guidance, successful technological advancements, and expansion into new verticals. However, there are challenges such as declines in specific revenue segments and high debt levels. The sentiment remains optimistic, driven by strategic innovations and financial health.Q1-2025 Updates
Positive Updates
Exceeded Revenue and EBITDA Guidance
Unity surpassed the top end of their guidance for both revenue and adjusted EBITDA in the first quarter, with revenue exceeding by $20 million and adjusted EBITDA by $19 million.
Successful Migration to Unity Vector
The migration of the Unity ad network to the AI platform Unity Vector was completed ahead of schedule, providing a 15% to 20% lift in installs and in-app purchase value on iOS.
Unity 6 Adoption
Unity 6 saw significant adoption with 4.4 million downloads and 43% of active users already migrated to the new version.
Growth Outside Gaming
The Unity platform experienced growth beyond gaming, with new customers like Phillips, Siemens, and Toshiba Elevator in various industry verticals.
Increased Cash Flow and Strong Balance Sheet
Free cash flow improved by $22 million year-over-year, and Unity maintains a strong balance sheet with $1.5 billion in cash.
Negative Updates
Decline in Grow and Create Revenue
Grow revenue decreased by 4% year-over-year and Create revenue declined by 8% year-over-year, attributed to a transition from low-margin professional services.
Non-Strategic Revenue Decline
A decline in non-strategic revenue is expected to impact the second quarter results, following a $17 million contribution in Q1.
Debt Levels
Unity has a debt of $2.2 billion, although mitigated by a recent $690 million convertible offering to extend maturities.
Company Guidance
In the call, Unity provided guidance for the second quarter of 2025, forecasting total revenues between $415 million and $425 million and adjusted EBITDA ranging from $70 million to $75 million. In the first quarter of 2025, Unity exceeded expectations, with revenue surpassing the high end of guidance by $20 million and adjusted EBITDA by $19 million. The company highlighted the significant progress of their new AI platform, Unity Vector, which has already shown a 15% to 20% lift in iOS installs and in-app purchases. Unity's subscription revenue in the Create segment grew double digits year-over-year, with Unity 6 achieving over 4.4 million downloads. Additionally, Unity’s transformation towards a high-margin subscription business is evident, as it now constitutes nearly 80% of Create revenue.Unity Software Financial Statement Overview
Summary
Unity Software demonstrates robust revenue growth and strong gross margins, reflecting product strength. However, persistent operating losses and negative net margins pose challenges to profitability. The balance sheet reflects a sound equity structure, although leverage remains a consideration. Cash flow generation is a notable strength, supporting liquidity and operational flexibility.Income Statement
Unity Software's revenue demonstrated strong growth from 2020 to 2023, with a CAGR of approximately 31%. However, the company has consistently reported negative EBIT and EBITDA, reflecting ongoing operational challenges. The TTM (Trailing-Twelve-Months) gross profit margin is robust at 74.83%, indicating strong product margins, but the net profit margin remains negative due to high operating expenses relative to revenue.72
Positive
Balance Sheet
Unity maintains a relatively high debt-to-equity ratio of 0.70, indicating moderate leverage. The equity ratio stands at 47.93%, signifying a balanced financial structure. However, the negative return on equity due to consistent net losses highlights profitability challenges. The company's asset base is primarily financed through equity, suggesting financial stability despite ongoing losses.65
Positive
Cash Flow
Unity's cash flow management exhibits strength, with positive operating cash flow of $335.95 million in the TTM period. Free cash flow has shown a positive trend, with a growth rate of 7.63% from 2023 to 2024. The operating cash flow to net income ratio is favorable, indicating efficient cash generation despite accounting losses.78
Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 1.79B | 1.81B | 2.19B | 1.39B | 1.11B | 772.45M | Gross Profit |
| 1.34B | 1.33B | 1.45B | 948.52M | 856.90M | 600.10M | EBIT |
| -471.84M | -755.15M | -762.42M | -882.21M | -531.66M | -274.81M | EBITDA |
| -124.01M | -234.61M | -209.35M | -663.45M | -465.53M | -231.84M | Net Income Common Stockholders |
| -450.68M | -664.11M | -822.01M | -919.49M | -532.61M | -282.31M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 1.54B | 1.52B | 1.59B | 1.59B | 1.74B | 1.75B | Total Assets |
| 6.65B | 6.74B | 7.24B | 7.83B | 4.84B | 2.67B | Total Debt |
| 2.23B | 2.24B | 2.71B | 2.71B | 1.82B | 123.91M | Net Debt |
| 690.97M | 721.25M | 1.12B | 1.22B | 763.53M | -1.15B | Total Liabilities |
| 3.22B | 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 | ||||
| 307.88M | 286.00M | 178.78M | -116.57M | -153.39M | -20.99M | Operating Cash Flow |
| 335.95M | 315.55M | 234.70M | -59.43M | -111.45M | 19.91M | Investing Cash Flow |
| -40.94M | -42.41M | 44.04M | 723.23M | -1.84B | -575.19M | Financing Cash Flow |
| 62.94M | -338.31M | -174.01M | -226.63M | 1.72B | 1.70B |
Unity Software Technical Analysis
Positive
24.98
Price Trends
21.64
Positive
22.07
Positive
21.78
Positive
Market Momentum
0.96
Positive
57.86
Neutral
21.75
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 24.98 is above the 20-day moving average (MA) of 23.76, above the 50-day MA of 21.64, and above the 200-day MA of 21.78, indicating a bullish trend. The MACD of 0.96 indicates Positive momentum. The RSI at 57.86 is Neutral, neither overbought nor oversold. The STOCH value of 21.75 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for U.
Unity Software Risk Analysis
Unity Software disclosed 64 risk factors in its most recent earnings report. Unity Software reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Unity Software Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $8.26B | 111.61 | 25.23% | ― | 18.63% | -55.09% | |
75 Outperform | $7.53B | 116.01 | 6.40% | ― | 21.75% | 116.24% | |
73 Outperform | $10.07B | ― | -14.15% | ― | -16.74% | 49.75% | |
68 Neutral | $8.78B | 192.75 | -12.98% | ― | 17.04% | -273.13% | |
62 Neutral | $11.92B | 10.48 | -7.50% | 2.95% | 7.40% | -8.18% | |
61 Neutral | $8.02B | 435.01 | 2.53% | ― | 29.31% | ― | |
47 Neutral | $9.28B | ― | ― | 26.08% | -62.42% |
* Technology Sector Average
Performance Comparison
U
Unity Software
24.98
8.20
48.87%
CVLT
CommVault Systems
186.09
71.63
62.58%
ESTC
Elastic
83.25
-29.28
-26.02%
SRAD
Sportradar Group AG
25.33
14.25
128.61%
GTLB
Gitlab
43.71
-1.52
-3.36%
TTAN
ServiceTitan, Inc. Class A
102.87
2.87
2.87%
Unity Software Corporate Events
Executive/Board Changes
Unity Software Announces Board Member Resignations
Neutral
Apr 2, 2025
On March 28, 2025, Unity Software announced the upcoming resignations of Michelle K. Lee and David Kostman from its Board of Directors, effective June 9, 2025. The company clarified that their departures were not due to any disagreements, and expressed gratitude for their contributions, indicating a smooth transition without internal conflict.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.