Key Highlights
- First quarter revenue reached $508.2 million, representing 16.8% year-over-year growth and exceeding analyst projections of $503.8 million
- Earnings per share (adjusted) came in at $0.23, falling a penny short of the $0.24 consensus forecast
- Strategic revenue jumped 35% YoY, reaching $432.4 million
- Adjusted EBITDA climbed to $138 million with margins expanding to 27%, compared to 19% in the prior-year period
- Shares rallied 6.4% to $29.01 in response to the earnings announcement
Unity Software (NYSE: U) delivered first quarter 2026 financial results that exceeded revenue forecasts, propelling shares 6.4% higher to $29.01 when results were released on Thursday.
The company reported quarterly revenue of $508.2 million, marking a 16.8% increase from the same period last year and surpassing the Street’s $503.8 million estimate. This represented a solid revenue outperformance.
On the earnings front, adjusted EPS landed at $0.23, narrowly missing projections by a single cent versus the $0.24 figure Wall Street anticipated.
The standout metric that captured investor attention was Strategic Revenue, which skyrocketed 35% year-over-year to reach $432.4 million. Breaking this down further, Strategic Grow Revenue posted 49% growth while Strategic Create Revenue expanded 15%.
Adjusted EBITDA totaled $138 million, translating to a 27% margin. This marks significant improvement from the $84 million and 19% margin recorded in the first quarter of 2025. The expansion reflects both stronger revenue performance and more disciplined expense management.
Free cash flow generation reached $66 million, a substantial increase from the modest $7 million produced a year earlier. This represents notable operational improvement.
GAAP Losses Expand Due to Asset Impairments
Looking at GAAP metrics, the financial snapshot appeared less favorable. The net loss expanded to $347 million, or $0.80 per diluted share, versus a $78 million loss in the first quarter of 2025.
The majority of this loss stemmed from $279 million in impairment charges related to winding down the ironSource Ads Network and the anticipated sale of the Supersonic game publishing division.
Adjusted Operating Income registered at -$274.2 million, significantly underperforming the analyst consensus of $111.7 million.
Billings totaled $515.6 million, up 18.5% from the prior year. Looking at trailing four-quarter performance, billings growth has averaged 8.7% annually, a pace that lags behind industry competitors.
Second Quarter Outlook Tops Analyst Projections
For the second quarter, Unity issued revenue guidance of $505 million to $515 million. The midpoint of $510 million edges above the $507.2 million analyst consensus expectation.
Strategic Revenue for the second quarter is projected at $455 million to $465 million, suggesting year-over-year growth between 29% and 32%.
The company forecasts adjusted EBITDA of $130 million to $135 million for the upcoming quarter, with the $132.5 million midpoint exceeding the $131.1 million Street estimate.
“We are delivering exceptional revenue growth and margin expansion while executing on the most exciting product roadmap in Unity’s history,” said CEO Matt Bromberg.
The operating margin for the first quarter registered at -69.1%, deteriorating from -29.4% in the comparable year-ago quarter, primarily due to the impairment charges.
Customer acquisition expenses continue running high. Unity’s CAC payback period extended to 115.5 months this quarter, suggesting intense competition where acquiring and retaining clients requires substantial investment.
Free cash flow margin measured 13.1%, declining from 23.6% in the previous quarter.
Wall Street analysts project revenue growth of 12.8% over the coming twelve months, trailing the broader software industry average.
