Unity Software (U) investor relations material

Executive summary

• Q1 2026 revenue reached $508.2 million, up 17% year-over-year, with strategic revenue up 35% to $432 million, driven by strong performance in both Create and Grow segments and significant AI adoption.

• Net loss widened to $347 million, primarily due to $279 million in impairment charges from the sunsetting of the ironSource Ad Network and planned Supersonic divestiture.

• Adjusted EBITDA improved to $138 million (27% margin), up from $84 million (19% margin) in Q1 2025.

• Free cash flow increased to $66 million from $7 million year-over-year.

• Strong AI adoption among game developers, with 90% usage, fueling a 60% year-over-year increase in new mobile app releases and 20% quarter-over-quarter growth in signups.

Financial highlights

• Strategic Grow revenue reached $279 million, up 49% year-over-year; Create revenue was $154–$157 million, up 4–15% year-over-year.

• GAAP gross margin was 31%, down from 74% in Q1 2025 due to impairment charges; adjusted gross margin remained stable at 82%.

• Adjusted EBITDA was $138 million, up 65% year-over-year, with a margin of 27%.

• Cash and equivalents totaled $2.15 billion as of March 31, 2026.

• Free cash flow was $66–$463 million, up significantly year-over-year.

Outlook and guidance

• Q2 2026 revenue guidance: $505–$515 million; strategic revenue expected at $455–$465 million, up 29–32% year-over-year.

• Strategic Grow revenue guidance: $302–$306 million (+50–52% YoY); Strategic Create revenue: $154–$158 million (+11–14% YoY, includes $12 million one-time item in Q2 2025).

• Adjusted EBITDA guidance for Q2: $130–$135 million, up 44–49% year-over-year.

• GAAP profitability expected by Q4 2026, with M&A amortization dropping significantly in 2027.

• Grow Solutions revenue is expected to shift primarily to Unity Ad Network by year-end 2026 following the exit from ironSource Ads Network and Supersonic.