Unity Software Q2 Earnings and Revenues Top Estimates, Rise Y/Y

Unity Software U reported second-quarter 2026 adjusted earnings per share (EPS) of 28 cents, marking a 55.6% increase year over year. The figure beat the Zacks Consensus Estimate by 16.67%.

On a GAAP basis, the company posted a net loss of $23 million, or 5 cents per share, narrower than a net loss of $107 million, or 26 cents per share, in the year-ago quarter. GAAP net loss margin improved to (4)% from (24)% a year earlier.

Net revenues of $546.47 million rose 24% year over year. The figure beat the consensus mark by 6.77%.

Total Strategic Revenue, which excludes the ironSource Ads Network and Supersonic, grew 38% year over year to $486.41 million and accounted for 89% of total revenues, up from roughly 80% a year earlier. Non-Strategic Revenue fell 33% year over year to $60.06 million as the company continued to wind down its non-core ad and publishing businesses.

Q2 Details of Unity Software

Unity Software reported Create Solutions revenues of $158 million, up 2% year over year. The increase was driven by higher subscription revenues, partially offset by declines in cloud and hosting services revenues tied to the company's 2025 portfolio reset. Strategic Create Revenue, which excludes non-strategic items, was $157.46 million, up 5% year over year, or up 14% year over year excluding the impact of a $12 million one-time revenue item recorded in the second quarter of 2025.

Grow Solutions revenues were $389 million, up 35% year over year. The growth was driven by the Unity Ads Network, propelled by Unity Vector, partially offset by declines in the ironSource Ads Network. Strategic Grow Revenue was $328.96 million, up 63% year over year, again outpacing total Grow growth and reflecting Vector's continued momentum.

Operating Details of Unity

In the second quarter, adjusted gross profit increased 24% year over year to $453.25 million. Adjusted gross margin was 83%, flat year over year.

Research & development expenses on an adjusted basis grew 17.2% year over year to $161.1 million. Adjusted R&D, as a percentage of revenues, contracted 100 basis points to 30%.

Sales and marketing expenses on an adjusted basis declined 2.2% year over year to $94.06 million. Adjusted S&M, as a percentage of revenues, contracted 500 basis points to 17%.

General & administrative expenses on an adjusted basis decreased 8.6% year over year to $37.9 million. Adjusted G&A, as a percentage of revenues, contracted 200 basis points to 7%.

Unity Software reported adjusted EBITDA of $160.19 million, up 77% year over year. The company's adjusted EBITDA margin of 29% improved 800 basis points compared with the prior year, driven by higher revenues and continued cost control.

Net loss for the quarter (before noncontrolling interest allocation) was $22.67 million, narrowing 78.9% year over year from a net loss of $107.37 million in the year-ago quarter.

Unity Software's Balance Sheet & Cash Flow

As of June 30, 2026, Unity had cash, cash equivalents and restricted cash of $2.357 billion compared with $2.15 billion as of March 31, 2026.

Operating cash flow was $205.62 million in the reported quarter, up 54.5% year over year from $133.1 million in the year-ago quarter. Free cash flow during the quarter was $201.96 million, up 59.5% year over year from $126.65 million in the prior-year quarter. 

The current portion of convertible notes was $557.17 million as of June 30, 2026.

Significant Q2 Developments

Unity Software completed the sunset of the ironSource Ads Network, effective April 30, 2026, as previously announced. Subsequent to quarter-end, on Aug. 4, 2026, the company completed the sale of its Supersonic mobile game publishing business; second-quarter Non-Strategic Revenue and third-quarter guidance each incorporate roughly one month of residual Supersonic contribution.

Management noted that Unity Vector, the company's AI-powered advertising platform, continues to be a primary growth driver behind the sharp acceleration in Strategic Grow Revenue, and that the company has begun incorporating behavioral data from the Unity runtime — which reaches billions of monthly players across games built on the platform — into Vector's models as a further competitive differentiator.

The company now expects to reach GAAP profitability in the third quarter of 2026, moved up from its prior target of the fourth quarter of 2026. Management also reiterated plans to repay its 2021 convertible notes in November 2026 as part of continued balance-sheet deleveraging, and indicated that the completed Supersonic divestiture and ironSource Ads Network wind-down are expected to support faster revenue growth and materially higher profitability in the second half of 2026.

Unity Software's Guidance for Q3 2026

For the third quarter of 2026, Unity Software anticipates Strategic Revenue between $540 million and $550 million, implying a rise of 44-47% year over year. Within that, Strategic Grow Revenue is expected between $380 million and $385 million, suggesting an increase of 68-70% year over year, and Strategic Create Revenue is guided in the range of $159-$163 million, indicating a rise of 7-10% year over year.

Non-Strategic Revenue is expected to be approximately $20 million, reflecting roughly one month of residual revenues from the divested Supersonic business.

Adjusted EBITDA is expected in the range of $185-$190 million, indicating year-over-year growth of 69-74%.

Zacks Rank & Other Stocks to Consider

Unity Software currently carries a Zacks Rank #2 (Buy).

Kimball Electronics KE, Quantum QMCO and Lumentum LITE are among the top-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. Currently, Kimball Electronics sports a Zacks Rank #1 (Strong Buy), while Quantum and Lumentum carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Kimball Electronics shares have inched up 1.8% in the past six months. KE is scheduled to report its fiscal fourth-quarter 2026 results on Aug. 13.
 
Quantum's shares have surged 96% in the past six months. QMCO is scheduled to report its fiscal first-quarter 2027 results on Aug. 10, 2026.
 
Lumentum shares have gained 48.9% in the past six months. LITE is slated to report its fiscal fourth-quarter 2026 results on Aug. 11.

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