Unity Software (NYSE:U) executives highlighted accelerating growth in the company’s advertising and software businesses during its fourth quarter 2025 earnings call, pointing to continued momentum in its Vector advertising platform and improved stability and adoption trends in Create.
Vector growth offsets ironSource decline
CEO Matt Bromberg said fourth quarter results “comfortably exceeded the high end” of guidance, led by “exceptional performance” from Vector. Bromberg noted Vector posted its third consecutive quarter of mid-teen sequential revenue growth, with revenue up 53% across the first three quarters since launch. January was described as Vector’s best revenue month ever—larger than December’s holiday record—and 72% larger than January of last year.
During Q&A, Bromberg pushed back on the idea that Vector’s performance is nearing a ceiling, stating the company sees “no natural ceiling” for the business and emphasized that growth has been driven by incremental advertiser demand and improved performance. He also said competitive dynamics—specifically around Meta’s efforts in iOS—have not had a meaningful impact on Unity, cautioning against “overreacting to LinkedIn posts.”
Financial results: Grow and Create both expand
CFO Jarrod Yahes said Unity delivered its “fastest growth and the highest margin” in the past two years, with improving execution enabling operating leverage and free cash flow growth.
- Grow revenue: $338 million, up 6% sequentially and 11% year-over-year.
- Create revenue: $165 million, up 8% year-over-year.
- Adjusted EBITDA: $125 million, or 25% margin, up 200 basis points year-over-year and sequentially.
Yahes said Grow upside versus guidance was driven by Vector, which represented 56% of Grow revenue in the quarter, up from 49% two quarters earlier. Grow results were partially offset by a $7 million sequential revenue decline in the ironSource ad network, which was 11% of Grow revenue in Q4.
In Create, Yahes reminded listeners Unity lapped $10 million in “non-strategic” Create revenue from the fourth quarter of 2024. Excluding that impact, he said Create grew 16% year-over-year, driven by subscription strength and contract renewals and price increases taking effect.
Cash flow, stock-based compensation, and balance sheet updates
Yahes highlighted 2025 progress on profitability and cash generation. He said Adjusted EBITDA margins rose to 22% for the year, and Unity converted 99% of Adjusted EBITDA into free cash flow. Free cash flow increased 41% in 2025 to “just over $400 million,” aided by working capital contributions and lower restructuring charges.
He also said Unity reduced stock-based compensation expense by 19% in 2025, with stock comp falling from 33% of revenue in 2024 to 21% in 2025.
On the balance sheet, Yahes said Unity refinanced $690 million of 2026 convertible notes, extending maturities to 2030. He said the company ended the year with more than $2 billion in cash and believes it can meet future obligations through cash on hand and cash generated by the business.
2026 product roadmap: runtime data, browser collaboration, and AI authoring
Management outlined several initiatives expected to shape 2026 performance. In advertising, Bromberg said Unity plans to scale testing of Runtime Engine Data in Q1 with an expectation it will be live in Vector during Q2. He said the inclusion of runtime data is not expected to create a “lightning strike moment,” but should lead to “compounding model improvements” over time by moving beyond click data and better understanding player behavior inside games.
Unity also called out new features such as a Day-28 ROAS tool already in beta, designed to help customers manage campaigns over longer horizons.
In Create, Bromberg said Unity plans “fundamental advances” in collaboration and AI authoring. He described a shift toward browser-based workflows, with authoring becoming accessible via web browser and shareable through one-click URLs. He pointed to Unity Studio, a recently announced no-code 3D editor in beta for industry customers, as an early step toward that vision. The company expects these collaboration tools to expand Unity’s addressable market beyond software developers to include broader creative teams.
On AI, Bromberg said Unity will unveil a beta of an upgraded Unity AI at the Game Developer Conference in March, designed to let developers “prompt full casual games into existence with natural language only,” native to Unity. He said the assistant will incorporate project context and runtime understanding, while leveraging frontier AI models. Bromberg also addressed “World Models,” including Google’s Genie, describing them as complementary to engines rather than replacements, and said Unity’s role is to operationalize AI-generated outputs into structured, deterministic, controllable simulations used to build and operate games.
Commerce rollout and guidance for Q1 2026
Unity also discussed its in-app purchase commerce offerings, which Bromberg said move into early access next week with general availability expected in Q2. He said customer interest has been strong and cited three benefits: faster adaptation to regulatory changes around storefronts and payment layers, potential for purchase behavior data to enhance Vector models over time, and streamlined usage through native integration into Unity’s platform.
Asked about economics, Bromberg said Unity participates in transaction economics at “an extremely high margin, but very modest,” emphasizing the goal is customer value and tighter integration rather than maximizing take rate. He also said improving commerce capabilities could enhance Unity’s platform value and improve Vector by strengthening understanding of gamer behavior.
For first quarter guidance, Yahes forecast total revenue of $480 million to $490 million and Adjusted EBITDA of $105 million to $110 million. Grow revenue is expected to be flat sequentially due to seasonality and two fewer calendar days, while Vector is expected to grow 10% sequentially. Yahes said Grow should return to sequential growth in Q2. In Create, Unity expects double-digit year-over-year revenue growth in Q1 excluding non-strategic revenue, and anticipates a similar cadence through 2026, excluding roughly $40 million of non-strategic revenue and one-time items. He also projected Adjusted EBITDA margin expansion of 300 basis points year-over-year in Q1, with improvement expected through the year despite continued investment in Vector and AI initiatives.
About Unity Software (NYSE:U)
Unity Software is a leading provider of a real-time 3D development platform that enables creators across industries to design, build and operate interactive, real-time experiences. Originally focused on the game development market, Unity’s technology now extends into sectors such as film, automotive, architecture, engineering and construction, delivering immersive content for mobile, desktop, console, augmented reality and virtual reality devices. The company’s core offering comprises a suite of authoring tools, runtime engines and cloud services that streamline the creation and deployment of interactive 3D applications.
The Unity Editor serves as the central hub where developers design scenes, script behavior and iterate on assets.
