Unity Software (U) Stock Jumps 6% After Beating Revenue and Raising EBITDA Guidance

TLDR

• Unity Q1 revenue hit $508.2 million, up 16.8% year on year, beating estimates of $503.8 million
• Adjusted EPS of $0.23 missed the $0.24 consensus by $0.01
• Strategic revenue surged 35% YoY to $432.4 million
• Adjusted EBITDA reached $138 million with a 27% margin, up from 19% a year ago
• Stock jumped 6.4% to $29.01 following the report

Unity Software (NYSE: U) posted Q1 2026 results that topped revenue expectations, sending the stock up 6.4% to $29.01 after the report dropped Thursday.

Unity Software Inc., U

Revenue came in at $508.2 million, up 16.8% year on year and ahead of the $503.8 million Wall Street consensus. It was a clean beat on the top line.

Adjusted EPS of $0.23 missed estimates by $0.01, coming in just under the $0.24 analysts had penciled in.

The headline number that turned heads was Strategic Revenue, which surged 35% year on year to $432.4 million. Within that, Strategic Grow Revenue was up 49% and Strategic Create Revenue grew 15%.

Adjusted EBITDA came in at $138 million, carrying a 27% margin. That compares to $84 million and a 19% margin in Q1 2025. The improvement was driven by higher revenue and tighter cost control.

Free cash flow was $66 million, up from just $7 million a year ago. That’s a meaningful jump.

Impairment Charges Weigh on GAAP Results

On a GAAP basis, the picture looked different. Net loss widened to $347 million, or $0.80 per share, compared to a $78 million loss in Q1 2025.

The bulk of that came from $279 million in impairment charges tied to the sunset of the ironSource Ads Network and the planned divestiture of the Supersonic game publishing business.

Adjusted Operating Income came in at -$274.2 million, badly missing the analyst estimate of $111.7 million.

Billings reached $515.6 million, up 18.5% year on year. Over the last four quarters, billings averaged 8.7% annual growth, which has been underwhelming relative to peers.

Q2 Guidance Comes in Ahead of Estimates

For Q2, Unity guided revenue of $505 million to $515 million. The $510 million midpoint sits slightly above the $507.2 million analyst consensus.

Strategic Revenue guidance for Q2 is $455 million to $465 million, implying 29% to 32% year on year growth.

Adjusted EBITDA is guided to $130 million to $135 million for Q2, with the $132.5 million midpoint above the $131.1 million analyst estimate.

Operating margin for Q1 was -69.1%, down from -29.4% in the same quarter last year, reflecting the impairment charges.

Customer acquisition costs remain elevated. Unity’s CAC payback period stood at 115.5 months this quarter, pointing to a competitive market where winning and keeping customers isn’t cheap.

Free cash flow margin was 13.1%, down from 23.6% in the prior quarter.

Sell-side analysts expect revenue to grow 12.8% over the next 12 months, below the software sector average.

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