Unity Software’s Earnings Call Highlights Growth and Caution

Unity Software, Inc. ((U)) has held its Q3 earnings call. Read on for the main highlights of the call.

Unity Software, Inc. recently held its earnings call, revealing a strong performance across its Grow and Create segments. The company showcased significant product advancements and strategic expansions, although there was a note of caution regarding sequential growth in the Grow segment and regional revenue dependence.

Record Growth in Grow Segment

The Grow segment of Unity Software experienced an impressive 11% quarter-over-quarter increase, largely driven by the innovative Vector AI. This growth translated into an additional $30 million of high-margin incremental revenue, highlighting the segment’s robust performance.

Create Segment Success

Unity’s Create segment also demonstrated success, with a 13% year-over-year increase in its subscription software business after excluding nonstrategic revenue. This growth underscores significant product improvements and heightened customer engagement, marking a positive trajectory for the segment.

Expansion into Cross-Platform Commerce

In a strategic move, Unity announced its expansion into cross-platform commerce through Unity IAP, partnering with Stripe and Coda. This initiative aims to tap into the lucrative $120 billion in-app purchase market, positioning Unity for further growth.

Adoption of Unity 6

Unity 6 has seen remarkable adoption, with over 9.4 million downloads, marking a 42% increase from the previous quarter. This surge indicates strong customer satisfaction and widespread acceptance of the new version.

Strong Financial Performance

Unity reported a record free cash flow of $151 million in Q3, reflecting a $36 million improvement year-over-year. This financial strength is a testament to the company’s successful restructuring efforts and operational efficiency.

Sequential Slowdown in Grow Segment Guidance

Looking ahead, Unity’s guidance for the Grow segment in Q4 anticipates mid-single-digit sequential growth, a slowdown from the 11% growth observed in Q3. This cautious outlook suggests a more tempered growth trajectory for the segment.

Dependence on a Few Key Markets

Unity’s significant revenue growth was notably attributed to China, raising concerns about potential over-reliance on specific regions for revenue growth. This dependence could pose risks if market dynamics shift unfavorably.

Forward-Looking Guidance

During the Q3 2025 earnings call, Unity exceeded its guidance and consensus expectations for both revenue and adjusted EBITDA. The company reported adjusted EBITDA of $109 million, representing a 23% margin and a 200 basis point improvement year-over-year. For Q4, Unity provided guidance for revenues between $480 million and $490 million and adjusted EBITDA ranging from $110 million to $115 million, with expectations for mid-single-digit sequential growth in the Grow segment and steady revenue growth in the Create segment.

In summary, Unity Software, Inc.’s earnings call highlighted a strong performance with significant growth in both the Grow and Create segments. While the company is making strategic expansions and achieving financial milestones, there are cautious notes regarding sequential growth and regional revenue dependence. Investors and stakeholders will be keenly watching how Unity navigates these challenges and capitalizes on its growth opportunities.