Unity Software Q2 Earnings Call Highlights

Unity Software Q2 Earnings Call Highlights

Unity delivered strong Q2 results: Strategic revenue rose 38% year over year, adjusted EBITDA increased 77% to $160 million, and free cash flow climbed 59% to $202 million. The company ended the quarter with $2.36 billion in cash and shifted to a net-cash position.

Vector drove advertising growth: Unity’s performance-marketing platform grew 23% sequentially, reaching an annual run rate substantially above $1 billion two quarters ahead of schedule. Strategic Grow revenue rose 63% to $329 million, supported by product updates, improved data and AI model enhancements. Unity raised expectations for continued profitability: The company forecast Q3 strategic revenue of $540 million to $550 million and adjusted EBITDA of $185 million to $190 million, while bringing forward its expected timeline for GAAP net-income profitability to Q3 2026. Growth initiatives include the Unity 7 beta, Commerce expansion and a multiyear partnership with Netflix.

Unity Software NYSE: U reported what Chief Executive Officer Matt Bromberg described as “arguably the best quarter in Unity’s history as a public company,” driven by accelerating growth in its Vector advertising platform, expanding profitability and continued product development centered on artificial intelligence. For the second quarter of 2026, Unity reported strategic revenue growth of 38% and adjusted EBITDA growth of 77%, according to Chief Financial Officer Jarrod Yahes. Adjusted EBITDA totaled $160 million, while adjusted EBITDA margin reached 29%, an increase of 800 basis points from a year earlier.

Unity also generated $202 million of free cash flow in the quarter, up 59% year over year, bringing its cash balance to $2.36 billion. Yahes said the company moved from a net-debt position to a net-cash position during the period and plans to repay its 2026 convertible note in November.

Vector exceeds growth expectations The company’s performance-marketing product, Unity Vector, was the primary driver of quarterly momentum. Bromberg said Vector grew 23% sequentially in the second quarter, nearly double Unity’s prior expectation for 12% to 13% quarter-over-quarter growth. He said the platform reached an annual run rate of “substantially over $1 billion,” two quarters ahead of the company’s expectations.

Yahes said strategic Grow revenue was $329 million, up 63% from the prior year. The wind-down of the ironSource ad network had only a negligible impact on Vector’s expansion, contributing roughly $3 million of Vector revenue growth from former ironSource customers during the quarter, he said. Unity attributed the advertising business’s performance to product updates, improved data and ongoing model enhancements. The company said it deployed more than 20 major Vector updates in the second quarter, including expanded day-28 return-on-ad-spend capabilities for in-app advertising and hybrid campaigns. Day-28 ROAS campaigns measure advertiser returns over a longer period than Unity’s standard seven-day product. Bromberg said spending on day-28 campaigns increased nearly threefold from the first quarter, with more than 25% of Unity’s advertiser base adopting the approach. Unity also began incorporating signals from its runtime into Vector’s AI models near the end of the second quarter. Bromberg said Unity’s runtime reaches approximately 3 billion people each month who play games built with Unity. While he characterized the initiative as early, he said the initial results were encouraging and could represent a durabl...