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 durable competitive advantage for the company.
Create business and Unity 7 roadmap
Unity’s Create business also returned to growth. Yahes said Create strategic revenue was $157 million, up 14% year over year excluding a one-time revenue item in the prior-year period. He cited higher average revenue per user, price increases, minimum annual customer commitments and growth in China as contributing factors.
At its Unite conference in Seoul, Unity announced Unity 7, a new version of its game-development software scheduled to enter beta in the fourth quarter of 2026 and launch fully in the first quarter of 2027.
Bromberg said Unity 7 is intended to enable developers, artists, producers and coding agents to collaborate across the game-development process. Unity has made its model context protocol free and opened its application programming interface, allowing developers to use command-line tools and coding agents within their own workflows.
“This isn’t just another engine upgrade for us,” Bromberg said during the question-and-answer session. He said the product was re-architected to support collaboration among creators and coding agents, while retaining compatibility with Unity 6 projects.
The company expects the broader authoring platform to connect game creators with downstream services including Vector, commerce offerings and live-game operations. Bromberg said these services will be configured automatically under the Unity 7 framework, with no additional software development kits or engineering time required.
Commerce, Netflix partnership and portfolio changes
Unity said its Commerce product became generally available June 30. Bromberg said the offering enables game publishers to support direct-to-consumer purchases without managing separate software development kits or storefronts. He said the company sees three main benefits: helping publishers avoid high fees, gaining visibility into purchase-behavior data that can improve advertising models, and generating a smaller economic benefit for Unity over time.
The company also announced a multiyear partnership with Netflix to support Netflix’s multiplatform games ecosystem using the Unity engine. Bromberg said Unity will invest in supporting Netflix’s gaming initiatives and helping developers build games for the platform.
Separately, Yahes said Unity completed the sale of its Supersonic business to Tripledot Studios on Aug. 4. Unity substantially completed the closure of the ironSource ad network, effective April 30. Yahes said the actions should benefit margins in the second half of 2026 and further focus the company on faster-growing and more profitable businesses.
Third-quarter outlook
For the third quarter, Unity forecast strategic revenue of $540 million to $550 million, representing year-over-year growth of 44% to 47%. The company expects Grow Solutions revenue growth of 68% to 70%, supported by continued Vector performance, and Create Solutions growth of 7% to 10%.
Unity expects Vector to grow 19% to 21% sequentially in the third quarter. It also forecast approximately $20 million in non-strategic revenue, primarily from Supersonic’s contribution in July before the sale closed.
The company projected adjusted EBITDA of $185 million to $190 million, implying a 33% margin and year-over-year adjusted EBITDA growth of 69% to 74%. Yahes said Unity now expects to achieve GAAP net-income profitability in the third quarter of 2026, one quarter earlier than its prior expectation for the fourth quarter.
About Unity Software (NYSE:U)
Unity Software is a leading provider of a real-time 3D development platform that enables creators across industries to design, build and operate interactive, real-time experiences. Originally focused on the game development market, Unity's technology now extends into sectors such as film, automotive, architecture, engineering and construction, delivering immersive content for mobile, desktop, console, augmented reality and virtual reality devices. The company's core offering comprises a suite of authoring tools, runtime engines and cloud services that streamline the creation and deployment of interactive 3D applications.
The Unity Editor serves as the central hub where developers design scenes, script behavior and iterate on assets.
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