Unity Software (U) AI Stock Analysis

• Market Cap: $12.45B
• Dividend Yield: N/A
• Average Volume (3M): 6.36M
• Price to Earnings (P/E): ―
• Beta (1Y): 2.01
• 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: 7,140,933
• 30 Day Avg. Volume: 6,362,370
• 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: 1.03
• Enterprise Value/Revenue: 7.09
• Enterprise Value/Gross Profit: 9.54
• Enterprise Value/Ebitda: 340.96
• 1Y Price Target: $50.00
• Price Target Upside: 71.82% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 20
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 57 Neutral
• Price Target: $30.00 ▲(3.09% Upside)

The score is held back primarily by weak profitability metrics despite strong gross margins and improving cash flow. Technicals are notably bearish with the stock far below major moving averages, partially offset by oversold readings. The latest earnings call was a bright spot, showing improving EBITDA and record free cash flow with supportive guidance, but valuation remains constrained by continued net losses.

Positive Factors

High Gross Margin

A 74.29% gross margin reflects scalable, software-driven economics and sizable pricing power. Sustained high gross margins provide durable cushion to fund R&D, platform improvements and customer success investments, supporting long-term margin expansion as revenue scales.

Strong Cash Generation

Consistent free cash flow growth improves strategic flexibility and reduces reliance on external financing. Durable cash generation funds ongoing product development, platform investments and potential M&A, enabling multi-quarter execution of growth initiatives without immediate capital stress.

Product Adoption and Network Effects

Rapid Unity 6 adoption demonstrates strong developer engagement and reinforces ecosystem network effects. Broad platform uptake increases switching costs, boosts recurring subscription and services revenue potential, and underpins durable competitive advantages across multiple industries.

Negative Factors

Persistent Unprofitability

A -24.15% net margin and negative EBIT/EBITDA indicate ongoing core profitability gaps. Persistent losses erode retained capital and force continued restructuring or reliance on scale to reach break-even, leaving medium-term sustainability dependent on sustained operational improvements.

Geographic Revenue Concentration

Material contribution from China creates concentration risk that can amplify exposure to regional regulatory shifts, policy changes or macro slowdowns. Without broader geographic diversification, revenue and cash generation remain vulnerable to country-specific shocks across the 2–6 month horizon.

Moderate Leverage and Negative ROE

A 0.70 debt/equity level with ROE at -13.62% signals moderate leverage paired with inefficient capital returns. Until ROE turns positive, leverage constrains strategic flexibility and raises the bar on future investments, as capital deployment must first remedy weak shareholder returns.

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

Strong gross margin (74.29% TTM) and improving cash generation (free cash flow growth 14.19% TTM), but overall profitability remains weak with negative net margin (-24.15% TTM) and negative ROE (-13.62% TTM). Leverage is moderate (debt-to-equity 0.70 TTM).

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: Negative
• Last Price: 29.10
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Positive
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For U, the sentiment is Negative. The current price of 29.1 is below the 20-day moving average (MA) of 42.54, below the 50-day MA of 43.57, and below the 200-day MA of 35.05, indicating a bearish trend. The MACD of -2.04 indicates Positive momentum. The RSI at 21.17 is Positive, neither overbought nor oversold. The STOCH value of 7.32 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for U.

Unity Software Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CWAN	74 Outperform	$7.06B	15.75	32.91%	―	50.91%	54812.50%
GTLB	68 Neutral	$5.89B	-134.75	-5.17%	―	27.35%	18.18%
EA	66 Neutral	$51.00B	59.60	13.20%	0.37%	-1.45%	-11.99%
ADSK	64 Neutral	$53.61B	49.09	40.33%	―	15.62%	2.59%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
U	57 Neutral	$12.45B	-27.72	-13.64%	―	-8.23%	48.57%
RBLX	52 Neutral	$46.16B	-46.13	-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.

The most recent analyst rating on (U) stock is a Buy with a $52.00 price target. To see the full list of analyst forecasts on Unity Software stock, see the U Stock Forecast page.