Unity’s second quarter results reflected a balance of progress and ongoing challenges, as management attributed performance to strong adoption of its AI-powered Vector ad platform and continued growth in its Create subscription business. CEO Matthew Bromberg highlighted that the Unity Ad Network saw 15% sequential revenue growth due to Vector, while Create segment momentum was supported by double-digit subscription increases and high-profile partnerships. However, Bromberg also acknowledged that softness in other ad products, resulting from resource redeployment toward Vector’s rollout, tempered overall segment gains.
Is now the time to buy U? Find out in our full research report (it’s free).
Unity (U) Q2 CY2025 Highlights:
- Revenue: $440.9 million vs analyst estimates of $427.5 million (1.9% year-on-year decline, 3.1% beat)
- Adjusted EPS: $0.18 vs analyst estimates of $0.15 (22% beat)
- Adjusted Operating Income: $90.5 million vs analyst estimates of $66.38 million (20.5% margin, 36.3% beat)
- Revenue Guidance for Q3 CY2025 is $445 million at the midpoint, below analyst estimates of $447.6 million
- EBITDA guidance for Q3 CY2025 is $92.5 million at the midpoint, below analyst estimates of $93.25 million
- Operating Margin: -26.9%, up from -28.8% in the same quarter last year
- Billings: $472.7 million at quarter end, up 3.6% year on year
- Market Capitalization: $15.76 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Unity’s Q2 Earnings Call
- Matthew Cost (Morgan Stanley) asked if the Vector AI technology could be deployed across other ad products. CEO Matthew Bromberg explained Vector is modular and there are no technical barriers, with plans for gradual expansion.
- Brent Thill (Jefferies) inquired about the next steps for Grow and areas for improvement. Bromberg highlighted ongoing investment in AI and leveraging Unity’s position in the gaming ecosystem for future performance.
- Andrew Boone (Citizens JMP Securities) questioned guidance implications for Grow, asking if Vector gains are slowing. CFO Jarrod Yahes clarified that while non-Vector ad products are stabilizing, Unity Ad Network is set for double-digit sequential growth.
- Alec Brondolo (Wells Fargo) sought insight into whether Unity Ad Network growth was cannibalizing other ad products. Bromberg stated that cannibalization is “less than 10%” and most growth is incremental from the broader ad market.
- Dylan Becker (William Blair) asked about the impact of AI on Create and the potential for margin improvements. Bromberg and Yahes pointed to content creation efficiencies and higher contribution margins as key benefits from ongoing investments.
Catalysts in Upcoming Quarters
Looking forward, our analysts will be monitoring (1) the rate at which Vector’s AI capabilities are implemented across additional ad products, (2) the impact of new partnerships with gaming giants like Tencent and Nintendo on Create adoption and international growth, and (3) the initial feedback and adoption trends following the launch of Unity 6.2 and its developer data framework. Updates on non-gaming verticals and continued operating margin progress will also be important signposts.
Unity currently trades at $37.99, up from $33.96 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).
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