Unity Software Inc.
Needham, Wedbush and BTIG raised their price forecasts as Unity's Vector business accelerated. The company also issued fourth-quarter guidance above Wall Street estimates.
Unity Beats Estimates, Raises Growth Expectations
Unity reported adjusted earnings of 44 cents per share, beating Wall Street's estimate of 6 cents. Earnings rose from 20 cents per share a year earlier.
Revenue climbed 32.19% to $622.09 million, topping the $567.44 million estimate.
Adjusted EBITDA reached $257 million, while the margin expanded to 41% from 23%.
Unity also reported GAAP net income of $122 million, marking its first GAAP profitable quarter since its IPO.
Grow Solutions revenue jumped 44% to $457 million. Vector revenue surged 126% year over year and 40% sequentially.
Create Solutions revenue increased 8% to $165 million.
Unity generated $224 million in operating cash flow and $220 million in free cash flow. The company ended the quarter with $2.651 billion in cash, cash equivalents and restricted cash.
For the fourth quarter, Unity forecasts revenue of $688 million to $696 million, above the $603.62 million analyst estimate.
The company expects adjusted EBITDA of $290 million to $295 million, representing 132% to 136% year-over-year growth.
Needham Sees Stronger Vector Growth Ahead
Needham analyst Bernie McTernan maintained a Buy rating and raised his price forecast to $70 from $54. He also kept Unity on Needham's Conviction List.
McTernan cited Vector's 40% sequential growth as a key driver. He raised his 2026 adjusted EBITDA forecast by about 23% and his 2027 forecast by about 45%.
He now expects Vector to grow about 6.5% sequentially on average in 2027, up from his previous 5% estimate. That implies roughly 63% annual growth.
McTernan expects Vector to account for about 66% of Unity's revenue by year-end, compared with 28% in the first quarter of 2025.
He raised his 2026 revenue forecast to $2.37 billion from $2.19 billion and adjusted EBITDA to $847 million from $690.3 million.
For 2027, he increased his revenue estimate to $3.09 billion from $2.50 billion. His adjusted EBITDA forecast rose to $1.37 billion from $946.4 million.
His $70 price forecast reflects 20 times next-12-month adjusted EBITDA.
Wedbush Highlights AI Opportunities
Wedbush analyst Alicia Reese maintained an Outperform rating and raised her price forecast to $63 from $55.
Reese increased her 2028 adjusted EBITDA estimate to $1.55 billion from $1.35 billion. Her valuation reflects roughly 20 times that forecast.
She highlighted Unity's artificial intelligence strategy, including support for coding agents and its Google Spark partnership with Alphabet Inc.
Reese also pointed to Meta Platforms Inc.
She expects Create revenue to grow about 9% in 2026, with similar growth in subsequent years.
Reese raised her 2026 revenue forecast to $2.37 billion from $2.23 billion. Her adjusted EBITDA estimate increased to $847.4 million from $691.6 million.
For 2027, she lifted her revenue estimate to $3.04 billion from $2.82 billion and adjusted EBITDA to $1.31 billion from $1.05 billion.
BTIG Sees More Upside From New Products
BTIG analyst Clark Lampen maintained a Buy rating and raised his price forecast to $60 from $53.
Lampen increased his fourth-quarter strategic revenue forecast to $692 million from $630 million. He also raised his adjusted EBITDA estimate to $294 million from $231 million.
For 2026, Lampen now expects revenue of $2.369 billion, up from $2.263 billion. His adjusted EBITDA forecast rose to $849 million from $725 million.
He raised his 2027 revenue estimate to $2.999 billion from $2.803 billion and adjusted EBITDA to $1.425 billion from $1.144 billion.
His $60 price forecast reflects 17.3 times projected 2027 EBITDA and assumes $5.91 in net cash per share.
Lampen said his estimates already account for slower sequential growth in 2027.
However, stronger Runtime adoption, new products and expansion beyond gaming could drive additional upside.
U Price Action: Unity Software shares were up 7.54% at $52.48 at the time of publication on Friday. The stock is trading at a new 52-week high, according to Benzinga Pro data.
