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    Earnings call· Jun 2026(Q2 FY26)

    Unity Software Q2 FY26 earnings call U

    Aug 6, 2026 Source

    Executive summary

    Unity Software Inc. Q2 FY26 — Record Performance Driven by Vector Growth and AI Integration

    Unity delivered an exceptional Q2 FY26, driven by the accelerated growth of its Vector business and significant margin expansion. The company is leveraging AI to enhance product velocity and quality, integrating runtime data into its Vector platform, and launching Unity 7 to foster broader interactive content creation. This strategy aims to capitalize on a "flywheel" effect, connecting game creation, platform usage, and discovery, positioning Unity for sustained growth and profitability in the AI era.

    Highlights

    5

    • Strategic grow revenue increased 63% year-over-year to $329 million.

    • Unity Vector achieved 23% quarter-over-quarter growth, reaching an annual run rate of over $1 billion two quarters ahead of schedule.

    • Adjusted EBITDA reached $160 million, with margins at 29%, expanding 800 basis points year-over-year.

    • Free cash flow increased 59% year-over-year to $202 million, moving the company to a net cash position.

    • GAAP net income profitability expectation pulled forward to Q3 2026 from Q4 2026.

    Guidance & targets

    9
    CategoryTargetConfidence
    Strategic Revenue
    $540 million to $550 million
    high materiality
    High
    Strategic Grow Revenue
    68% to 70% year-over-year growth
    medium materiality
    High
    Unity Vector sequential growth
    19% to 21%
    medium materiality
    High
    Strategic Create Revenue
    7% to 10% year-over-year growth
    medium materiality
    High
    Nonstrategic Revenue
    $20 million
    low materiality
    High
    Adjusted EBITDA
    $185 million to $190 million
    high materiality
    High
    GAAP net income profitability
    Achieved
    high materiality
    High
    Unity 7 launch
    Beta release
    high materiality
    High
    Unity 7 launch
    Full release
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Strategic Grow
    Growth accelerated both quarter-on-quarter and year-over-year based on tremendous momentum at Unity Vector. The sunsetting of the ironSource Ads Network had a negligible positive impact on Vector growth in the quarter with only $3 million in Q2 Vector revenue growth from ironSource customers.
    Unity Vector QoQ growth: 23%Unity Vector annual run rate: >$1 billion
    		$329 million63%——
    Strategic Create
    Growth is year-over-year when excluding the impact of a one-time revenue item in the prior year. Momentum continues to be driven by ARPU growth, supported by price increases and minimum annual customer commitments, as well as strong growth in China.
    		$157 million14%——

    Operational metrics

    5
    Adjusted EBITDA
    $160 million77% year-over-year
    Q2 FY26

    Rapid revenue growth, high gross margins and disciplined cost management resulted in significant operating leverage.

    Adjusted EBITDA margin
    29%800 basis points year-over-year
    Q2 FY26

    Approaching 30% for the first time ever.

    Cash and investments balance
    $2.36 billion
    Q2 FY26 end

    Unity flipping from a net debt position to a net cash position this quarter.

    Stock comp expense as % of revenues
    14%down 25% year-on-year
    Q2 FY26

    Lowest level ever.

    Adjusted gross margin
    82% to 83%
    Q2 FY26

    Structurally high contribution margins.

    Industry KPIs

    3
    MetricValueDetails
    Revenue growth$486 millionUSD
    Operating FCF margin rule of 4029%%
    Ai product adoption monetizationOpen beta

    Product announcements

    5
    ProductTypeDetails
    Unity 7launch
    Day 28 Return on Advertising Spend (ROAS) capabilityupdate
    Runtime data incorporation into Vector AI modelsmilestone
    Unity AIupdate
    Unity Commerce (IAP SDK 5.4)milestone

    Deals & partnerships

    4
    NetflixComprehensive support for Netflix's multi-platform games ecosystem with the Unity engine.multi-year

    Netflix chose Unity to support its gaming initiatives, presenting a social game experience for consumers on the biggest screen without requiring downloads, registration, or purchases.

    AppsFlyerStrategic investment in mobile measurement leader.

    Investment made alongside partners Meta, Google, and Moloco.

    Tripledot StudiosSale of Supersonic.

    Supersonic finds an outstanding home with Tripledot, one of the largest and most successful mobile game publishers in the world. The sale closed on August 4.

    ironSource Ads NetworkSubstantially completed the closure of the ironSource Ads Network.

    Closure effective April 30.

    What to watch in Q3 FY26

    5

    Unity Vector sequential growth

    Q3 FY26
    Current23% QoQ (Q2 FY26)
    Target19%-21% QoQ

    Why it matters

    Continued strong sequential growth in Vector is key to Unity's overall revenue acceleration and profitability.

    Our guidance assumes 19% to 21% sequential growth rates for Unity Vector.

    Q&A highlights

    5

    How do Vector and Create businesses drive each other, especially with Unity AI? What was the material contribution of runtime data to Vector's Q2 strength, and what's its future potential?

    Matt Bromberg explained the "flywheel" where more games (Create) drive more platform usage and discovery (Vector). He noted runtime data's initial incorporation into Vector models towards the end of Q2 was very encouraging, but its impact is part of overall product enhancements, not a single isolatable factor. He emphasized the long-term strategic advantage of runtime data.

    “We began implementing signals from the run time into Vector towards the end of the second quarter. We're super pleased with what we're seeing. We are having continued success around customers continuing to opt into our data development framework, which sits underneath all these efforts in run time.”

    asked by Matthew Cost · answered by Matthew Bromberg

    2 min read5 chapters

    Detailed Narrative

    01

    AI-Powered Flywheel Driving Growth

    Unity's core strategy is an AI-powered flywheel, where increased game creation leads to greater platform usage and enhanced discovery, thereby accelerating the ad business. This cycle is fueled by unique insights derived from approximately 3 billion people playing Unity-powered games monthly, which helps creators build better games, acquire users, and operate successful live services. AI is identified as the most crucial driver of both product velocity and quality, and increasingly, demand.

    02

    Vector's Exceptional Performance and Runtime Data Integration

    The Unity Vector business delivered 23% quarter-over-quarter growth, significantly surpassing expectations of 12%-13%, and reached an annual run rate of over $1 billion two quarters ahead of schedule. This performance is attributed to continuous product enhancements, higher-quality data, and compounding model improvements. A key development in Q2 was the initial incorporation of runtime data signals into Vector's AI models, leveraging the connection with 3 billion monthly players, which is expected to be a deep and sustainable competitive advantage.

    03

    Unity 7: The Future of Collaborative Creation

    Unity 7, set for beta launch in Q4 2026 and full release in Q1 2027, is presented as a transformative platform for game creation. It re-architects Unity to be an open, collaborative environment where developers, artists, producers, and coding agents can work together across the full development lifecycle. By making the authoring platform free, opening APIs, and automatically configuring downstream services like Vector and commerce, Unity 7 aims to expand the total addressable market for interactive entertainment creation and simplify the development process.

    04

    Strategic Actions and Enhanced Profitability

    Unity has completed significant strategic actions, including the sale of Supersonic to Tripledot Studios and the sunsetting of the ironSource Ads Network, effective April 30. These actions are expected to contribute to margin expansion in the second half of the year. Combined with rapid revenue growth and disciplined cost management, these efforts resulted in adjusted EBITDA margins of 29% in Q2 and a 59% year-over-year increase in free cash flow, leading to a net cash position for the company. The company also pulled forward📎 its GAAP net income profitability expectation to Q3 2026.

    05

    Netflix Partnership and Platform Evolution

    Unity announced a new multi-year partnership with Netflix to comprehensively support their multi-platform games ecosystem. This collaboration highlights Unity's role in enabling innovation across evolving distribution platforms, helping studios build great games and get them to players wherever they are. The partnership exemplifies Unity's ability to support new and revolutionary gaming experiences, such as Netflix's social game experience on the biggest screen in the house without downloads or purchases.

    AI-generated summary of the company’s earnings call. Not investment advice.