Unity Software (U) Q2 2025 earnings summary

Executive summary

• Q2 2025 revenue was $441 million, down 2% year-over-year but exceeded guidance; net loss narrowed to $107.4 million from $125.7 million year-over-year, with net loss margin improving to (24)% from (28)%.

• Adjusted EBITDA reached $90.5 million with a 21% margin, surpassing expectations.

• Unity Vector AI engine and Unity Ad Network drove product innovation and 15% sequential Ad Network growth, now 49% of Grow Solutions revenue.

• Major partnerships were announced with Tencent, Scopely, and Nintendo, expanding reach in gaming and non-gaming sectors.

• Workforce and office reductions in H1 2025 resulted in $20 million in employee separation costs and $11 million in non-employee charges.

Financial highlights

• Q2 revenue exceeded guidance by $16 million; adjusted EBITDA was $90 million, $15 million above guidance.

• Create Solutions revenue was $154 million, up 2% year-over-year, driven by a $12 million term license and higher subscriptions.

• Grow Solutions revenue was $287 million, down 4% year-over-year but up 1% sequentially, with Ad Network strength offsetting declines.

• Free cash flow was $127 million in Q2, up $47 million year-over-year; six-month free cash flow was $134 million, up from $65 million.

• Cash and equivalents at quarter end were $1.7 billion; convertible debt stood at $2.2 billion.

Outlook and guidance

• Q3 2025 revenue guidance: $440–$450 million; adjusted EBITDA: $90–$95 million.

• Grow Solutions expected to see mid-single-digit sequential revenue growth, with Ad Network driving double-digit sequential growth.

• Create Solutions forecasted for a slight sequential decline due to a large Q2 customer win, but strategic Create revenue expected to rise high single digits year-over-year.

• Management expects gross profit and operating expenses to fluctuate in the short term as the business stabilizes post-restructuring.

• Continued aggressive investment in Unity Vector, AI, and R&D, with expectations for further margin expansion.