Unity Software (U) AI Stock Analysis

• Market Cap: $8.03B
• Dividend Yield: N/A
• Average Volume (3M): 21.21M
• Price to Earnings (P/E): ―
• Beta (1Y): 2.12
• Revenue Growth: -8.23%
• EPS Growth: 48.57%
• Country: US
• Employees: 4,987
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 0.24
• Shares Outstanding: 432,987,600
• 10 Day Avg. Volume: 28,736,322
• 30 Day Avg. Volume: 21,205,266
• PEG Ratio: 1.08
• Price to Book (P/B): 5.74
• Price to Sales (P/S): 10.05
• P/FCF Ratio: 46.03
• Enterprise Value/Market Cap: 0.96
• Enterprise Value/Revenue: 4.19
• Enterprise Value/Gross Profit: 5.93
• Enterprise Value/Ebitda: 93.39
• 1Y Price Target: $36.61
• Price Target Upside: 100.60% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 19
• EPS Forecast (FY): 0.96
• Revenue Forecast (FY): $2.10B

• Rating: 54 Neutral
• Price Target: $28.00 ▲(53.42% Upside)
• Action: Reiterated Date: 02/12/26
• Date: Action: Reiterated 02/12/26

The score is anchored by mixed fundamentals: strong and improving free cash flow and a stabilizing balance sheet are offset by continued sizable net losses and uneven revenue growth. Technicals are a major drag given the pronounced downtrend and negative momentum signals. Offsetting these, the latest earnings call was notably positive on guidance, Vector growth, and margin expansion trajectory, helping keep the score in the mid-range despite weak valuation support from negative earnings.

Positive Factors

Improving free cash flow

Consistently positive and growing free cash flow in 2025 strengthens financial flexibility, funds product and AI investment without needing immediate external capital, and provides a durable cushion for multi-quarter execution risk. This improves long-term runway and supports strategic reinvestment.

Rapid product momentum (Vector & Unity 6)

Sustained mid‑teen sequential growth for Vector and rapid Unity 6 adoption indicate product-led expansion and stronger monetization of runtime data. These durable product advantages raise switching costs, widen addressable monetization opportunities, and support multi-quarter compounding revenue as integrations and data improve model performance.

High gross margins and improving EBITDA conversion

Strong gross margins (~74%) and rising adjusted EBITDA margins, combined with near‑complete conversion of EBITDA into free cash flow, indicate durable unit economics. This supports sustainable operating leverage as revenue scales and enables reinvestment for product and customer expansion without eroding margins.

Negative Factors

Ongoing net losses

Material recurring net losses and negative net margins limit return on equity and reflect that profitability still lags despite cash generation. Over a 2–6 month horizon this constrains balance sheet returns and requires sustained cash discipline to avoid pressure on strategic investments or capital structure flexibility.

Uneven top-line growth

Inconsistent revenue trends complicate forecasting and capital allocation: lumpy segment performance and seasonality make it harder to rely on steady compounding. Persistently uneven growth raises execution risk for multi‑quarter product initiatives and can slow progress toward sustained profitability.

Competitive and mix pressure on Grow

Broader competitive threats to ad inventory and platform-level AI initiatives, plus the winding down of the IronSource network, create durable pressure on Grow monetization and product positioning. Competition from large incumbents could compress ad economics and slow long‑term revenue compounding absent clear differentiation.

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

Cash generation is a clear strength (2025 operating cash flow ~$423M and free cash flow ~$404M, improving vs. 2024). However, profitability remains weak with a sizable 2025 net loss (~$403M, ~-22% margin) and uneven revenue growth. Balance sheet leverage is improving with a meaningful equity base, but returns remain negative.

Income Statement

Revenue growth has been uneven (down in 2024, modestly up in 2025), with 2025 revenue of ~$1.85B. Gross margins are strong and improving versus 2022–2023 (about 74% in 2025), indicating solid unit economics. However, profitability remains the core issue: the company is still posting operating losses and a 2025 net loss of ~$403M (about -22% net margin), albeit improved from 2024’s larger loss. Overall, strong gross profit profile but still meaningfully loss-making with inconsistent top-line momentum.

Balance Sheet

The balance sheet shows meaningful scale with ~$6.84B in assets (2025) and a sizable equity base of ~$3.24B, providing some cushion. Leverage is moderate for a software company, with debt-to-equity around 0.69 in 2025 and total debt of ~$2.24B, improving from higher leverage in 2023–2024. The key weakness is ongoing negative returns on equity (about -12% in 2025), reflecting continued net losses and limiting balance-sheet quality despite the improving leverage trend.

Cash Flow

Cash generation is a relative strength: 2025 operating cash flow was ~$423M and free cash flow was ~$404M, both positive and higher than 2024. Free cash flow has remained positive since 2023, showing improved cash discipline versus 2021–2022 when operating cash flow and free cash flow were negative. A notable risk is that cash conversion is not consistently strong relative to profitability (cash flow coverage metrics are well below 1), suggesting working-capital/adjustment-driven variability even as headline free cash flow is healthy.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	1.85B	1.81B	2.19B	1.39B	1.11B
Gross Profit	1.37B	1.33B	1.45B	948.52M	856.90M
EBITDA	38.37M	-234.61M	-209.35M	-663.45M	-465.53M
Net Income	-402.76M	-664.11M	-822.01M	-919.49M	-532.61M
Balance Sheet
Total Assets	6.84B	6.74B	7.24B	7.83B	4.84B
Cash, Cash Equivalents and Short-Term Investments	2.06B	1.52B	1.59B	1.59B	1.74B
Total Debt	2.39B	2.35B	2.71B	2.71B	1.82B
Total Liabilities	3.34B	3.31B	3.83B	4.08B	2.45B
Stockholders Equity	3.24B	3.19B	3.18B	3.53B	2.39B
Cash Flow
Free Cash Flow	403.93M	273.14M	178.78M	-116.57M	-153.39M
Operating Cash Flow	422.95M	315.55M	234.70M	-59.43M	-111.45M
Investing Cash Flow	-24.02M	-42.41M	44.04M	723.23M	-1.84B
Financing Cash Flow	110.09M	-338.31M	-174.01M	-226.63M	1.72B

Unity Software Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 18.25
• 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 18.25 is below the 20-day moving average (MA) of 27.61, below the 50-day MA of 38.07, and below the 200-day MA of 35.18, indicating a bearish trend. The MACD of -6.08 indicates Positive momentum. The RSI at 23.75 is Positive, neither overbought nor oversold. The STOCH value of 3.58 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
EA	70 Outperform	$50.11B	75.18	10.03%	0.37%	-1.45%	-11.99%
CWAN	68 Neutral	$6.78B	-170.17	-2.58%	―	50.91%	54812.50%
GTLB	68 Neutral	$4.88B	-110.71	-5.17%	―	27.35%	18.18%
ADSK	64 Neutral	$48.70B	44.48	40.33%	―	15.62%	2.59%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
U	54 Neutral	$8.03B	-19.34	-12.53%	―	-8.23%	48.57%
RBLX	52 Neutral	$44.69B	-41.80	-345.84%	―	32.70%	12.57%

Unity Software Corporate Events

Unity Software Reshapes Board With New Director Appointment

Unity Software announced on February 10, 2026, that gaming and technology veteran Bernard Kim will join its Board of Directors as an independent Class I director and member of the Nominating and Corporate Governance Committee, effective May 1, 2026. Kim, whose term will run until the 2027 annual meeting, brings more than two decades of experience at Match Group, Zynga, and Electronic Arts, bolstering Unity’s board-level expertise at the intersection of gaming, advertising technology, and consumer platforms.

The company also disclosed that directors and company founders David Helgason and Tomer Bar-Zeev resigned from the Board effective February 5, 2026, while director Mary Schmidt Campbell will retire at the 2026 annual meeting when her term expires. In connection with these departures and Kim’s appointment, Unity reduced the size of its Board to nine members, signaling a streamlined governance structure as the company continues to evolve its leadership profile within the gaming and interactive experiences market.

The most recent analyst rating on (U) stock is a Buy with a $38.00 price target. To see the full list of analyst forecasts on Unity Software stock, see the U Stock Forecast page.

Unity Software Announces Planned Retirement of Chief Accounting Officer

On February 9, 2026, Unity Software Inc. announced that its Chief Accounting Officer, Mark Barrysmith, has notified the company of his intention to retire, effective June 15, 2026. Barrysmith is expected to remain in his current role until that date to support an orderly transition, and the company has already initiated a search for his successor, signaling a planned leadership change in its finance and accounting function.

The retirement and transition plan underscore Unity’s effort to manage executive turnover in a structured manner, aiming to minimize disruption to its accounting operations and financial reporting. For investors and other stakeholders, the move highlights an upcoming change in a key financial leadership role, though the phased timeline may help reduce operational risk during the succession process.

The most recent analyst rating on (U) stock is a Buy with a $38.00 price target. To see the full list of analyst forecasts on Unity Software stock, see the U Stock Forecast page.

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.