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Unity Stock on Fire, Surges 64% in 3 Months: Still Time to Buy?
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Key Takeaways
Unity stock has jumped 64% in three months, far outpacing the S&P 500 and industry peers.
The Vector ad engine, Unity 6 adoption, and new partnerships are fueling revenue momentum.
Strong profitability, $1.7B cash, and 10 straight quarters of non-gaming growth boost outlook.
Unity Software Inc. ((U - Free Report) ) continues to fire on all cylinders, with the stock up 64% in the past three months, outperforming the industry and the S&P 500’s gains of 11.8% and 10.2%, respectively.
Over the past month, Unity has outperformed its peers, including Bentley Systems, Incorporated ((BSY - Free Report) ), DocuSign, Inc. ((DOCU - Free Report) ) and Guidewire Software, Inc. ((GWRE - Free Report) ).
Price Performance
Image Source: Zacks Investment Research
Technical indicators imply U's continued strong performance. The stock is trading above its 50-day moving average, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in the U's financial health and prospects.
Decoding Potential Tailwinds Behind Unity’s Rally
Strong Momentum from Unity Vector
Unity’s new AI-driven performance engine, Vector, has been a major growth driver. Within the Unity Ad Network, Vector delivered 15% sequential revenue growth in the second quarter of 2025, with early signs that the momentum is carrying into the third quarter.
Unity acknowledged some weakness in its broader ad products in the second quarter as resources were shifted toward launching Vector, which muted overall ad revenue growth. However, management expects a stronger trajectory in the third quarter for several reasons. First, stabilization is returning to non-network ad products, supported by product upgrades and AI integration. Second, the Unity Ad Network now represents about half of ad revenue, giving its faster growth more weight in overall results. Third, Vector is delivering increasing value, with user acquisition quality and volume improving beyond the prior 15–20% lift. Together, these factors are projected to support mid-single-digit sequential growth in the ad segment for the third quarter.
Market Leadership in Gaming Ecosystem
Unity maintains a dominant role as the software backbone for game development. Roughly 70% of the top mobile games worldwide are built on Unity, giving the company a unique data advantage. This scale not only strengthens its Create and Grow segments but also positions Unity to feed Vector’s AI with high-quality behavioral data. Management views this as a long-term catalyst for sustained growth, particularly from 2026 onward.
Success of Create Segment and Unity 6 Adoption
On the development side, Unity is seeing strong results from Unity 6, its most stable and high-performing version yet, which has recorded over 6.6 million downloads. Subscription revenues in Create grew at double-digit rates, underscoring customer demand. The launch of Unity 6.2 introduced a new developer data framework, improving transparency and privacy controls, which further boosts trust and adoption.
Unity is cementing long-term relationships with industry leaders. A multiyear deal with Tencent ensures Unity’s presence in top global titles, while a collaboration with Scopely integrates Create and Grow tools for blockbuster games like Monopoly Go!. Unity also partnered with Nintendo to optimize Unity 6 for the Switch 2 launch, supporting third-party development on the platform. These partnerships highlight Unity’s strategic importance across gaming ecosystems worldwide.
The company continues to find traction outside gaming. Its technology is powering BMW’s global 3D asset management system, enhancing Mercedes-Benz’s new operating system, and supporting healthcare firms like Specto Medical in surgical planning and visualization. Non-gaming use cases have now delivered 10 consecutive quarters of subscription growth, showing Unity’s potential to scale across industries.
Financial Discipline and Strong Profitability
Unity’s second-quarter 2025 results exceeded expectations, with adjusted EBITDA margins at 21% and record free cash flow of $127 million. Management has balanced aggressive investments in AI and product development with tight cost controls, particularly in headcount and cloud expenses. The company’s $1.7 billion cash balance and flexible capital structure provide further room to fund growth initiatives without straining the balance sheet.
Long-Term AI Potential Across Create and Grow
Management emphasized that Unity is still in the early stages of an AI-driven transformation. On the Grow side, Vector’s neural network platform is scalable and expected to continuously improve as it learns from more data. On the Create side, Unity aims to integrate AI to automate repetitive tasks and enhance developer creativity, effectively redefining content creation workflows.
Unity’s Estimate Revisions
In the past 30 days, earnings estimates for 2025 and 2026 have undergone sharp upward revisions, as shown in the chart. Following the revisions, the company’s earnings per share in 2025 and 2026 are likely to witness a growth of 146.4% and 8.8%, year over year, respectively.
Image Source: Zacks Investment Research
Meanwhile, Bentley Systems, Guidewire Software and DocuSign earnings in the current year are likely to witness a growth of 13.1%, 80.7% and a decline of 0.3%, year over year, respectively.
U Trades at Premium Valuation
U stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-sales ratio of 7.9, as evidenced by the chart below. On the other hand, Bentley Systems, Guidewire Software and DocuSign are trading at a forward 12-month price-to-sales ratio of 4.4, 13.2 and 9.9.
Unity’s P/S Ratio (Forward 12-Month) vs. Industry
Image Source: Zacks Investment Research
How to Play U Stock?
Unity’s rally still looks worth buying into, because it is not just about the stock going up; it is about the company delivering real progress on solid foundations. The Vector ad engine is driving visibly better monetization while the rest of the ad stack stabilizes, creating a healthier, more diversified growth base. On the creation side, Unity 6 adoption signals stronger product-market fit and stickier subscriptions, reinforcing a high-visibility, recurring model.
Its dominant role in mobile game development provides a rare data and distribution edge that directly feeds AI performance, while marquee partnerships with leading publishers and platforms expand reach and embed Unity deeper into hit titles. Crucially, the company is showing financial discipline with improving profitability and cash generation, giving it self-funded flexibility to keep investing in AI and tooling. Add rising enterprise traction beyond gaming, in autos, industrials, and healthcare, and you have multiple engines of durable growth that can support further upside even after a big run. U currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Unity Stock on Fire, Surges 64% in 3 Months: Still Time to Buy?
Key Takeaways
Unity Software Inc. ((U - Free Report) ) continues to fire on all cylinders, with the stock up 64% in the past three months, outperforming the industry and the S&P 500’s gains of 11.8% and 10.2%, respectively.
Over the past month, Unity has outperformed its peers, including Bentley Systems, Incorporated ((BSY - Free Report) ), DocuSign, Inc. ((DOCU - Free Report) ) and Guidewire Software, Inc. ((GWRE - Free Report) ).
Price Performance
Image Source: Zacks Investment Research
Technical indicators imply U's continued strong performance. The stock is trading above its 50-day moving average, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in the U's financial health and prospects.
Decoding Potential Tailwinds Behind Unity’s Rally
Strong Momentum from Unity Vector
Unity’s new AI-driven performance engine, Vector, has been a major growth driver. Within the Unity Ad Network, Vector delivered 15% sequential revenue growth in the second quarter of 2025, with early signs that the momentum is carrying into the third quarter.
Unity acknowledged some weakness in its broader ad products in the second quarter as resources were shifted toward launching Vector, which muted overall ad revenue growth. However, management expects a stronger trajectory in the third quarter for several reasons. First, stabilization is returning to non-network ad products, supported by product upgrades and AI integration. Second, the Unity Ad Network now represents about half of ad revenue, giving its faster growth more weight in overall results. Third, Vector is delivering increasing value, with user acquisition quality and volume improving beyond the prior 15–20% lift. Together, these factors are projected to support mid-single-digit sequential growth in the ad segment for the third quarter.
Market Leadership in Gaming Ecosystem
Unity maintains a dominant role as the software backbone for game development. Roughly 70% of the top mobile games worldwide are built on Unity, giving the company a unique data advantage. This scale not only strengthens its Create and Grow segments but also positions Unity to feed Vector’s AI with high-quality behavioral data. Management views this as a long-term catalyst for sustained growth, particularly from 2026 onward.
Success of Create Segment and Unity 6 Adoption
On the development side, Unity is seeing strong results from Unity 6, its most stable and high-performing version yet, which has recorded over 6.6 million downloads. Subscription revenues in Create grew at double-digit rates, underscoring customer demand. The launch of Unity 6.2 introduced a new developer data framework, improving transparency and privacy controls, which further boosts trust and adoption.
Expanding Strategic Partnerships & Diversification
Unity is cementing long-term relationships with industry leaders. A multiyear deal with Tencent ensures Unity’s presence in top global titles, while a collaboration with Scopely integrates Create and Grow tools for blockbuster games like Monopoly Go!. Unity also partnered with Nintendo to optimize Unity 6 for the Switch 2 launch, supporting third-party development on the platform. These partnerships highlight Unity’s strategic importance across gaming ecosystems worldwide.
The company continues to find traction outside gaming. Its technology is powering BMW’s global 3D asset management system, enhancing Mercedes-Benz’s new operating system, and supporting healthcare firms like Specto Medical in surgical planning and visualization. Non-gaming use cases have now delivered 10 consecutive quarters of subscription growth, showing Unity’s potential to scale across industries.
Financial Discipline and Strong Profitability
Unity’s second-quarter 2025 results exceeded expectations, with adjusted EBITDA margins at 21% and record free cash flow of $127 million. Management has balanced aggressive investments in AI and product development with tight cost controls, particularly in headcount and cloud expenses. The company’s $1.7 billion cash balance and flexible capital structure provide further room to fund growth initiatives without straining the balance sheet.
Long-Term AI Potential Across Create and Grow
Management emphasized that Unity is still in the early stages of an AI-driven transformation. On the Grow side, Vector’s neural network platform is scalable and expected to continuously improve as it learns from more data. On the Create side, Unity aims to integrate AI to automate repetitive tasks and enhance developer creativity, effectively redefining content creation workflows.
Unity’s Estimate Revisions
In the past 30 days, earnings estimates for 2025 and 2026 have undergone sharp upward revisions, as shown in the chart. Following the revisions, the company’s earnings per share in 2025 and 2026 are likely to witness a growth of 146.4% and 8.8%, year over year, respectively.
Image Source: Zacks Investment Research
Meanwhile, Bentley Systems, Guidewire Software and DocuSign earnings in the current year are likely to witness a growth of 13.1%, 80.7% and a decline of 0.3%, year over year, respectively.
U Trades at Premium Valuation
U stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-sales ratio of 7.9, as evidenced by the chart below. On the other hand, Bentley Systems, Guidewire Software and DocuSign are trading at a forward 12-month price-to-sales ratio of 4.4, 13.2 and 9.9.
Unity’s P/S Ratio (Forward 12-Month) vs. Industry
Image Source: Zacks Investment Research
How to Play U Stock?
Unity’s rally still looks worth buying into, because it is not just about the stock going up; it is about the company delivering real progress on solid foundations. The Vector ad engine is driving visibly better monetization while the rest of the ad stack stabilizes, creating a healthier, more diversified growth base. On the creation side, Unity 6 adoption signals stronger product-market fit and stickier subscriptions, reinforcing a high-visibility, recurring model.
Its dominant role in mobile game development provides a rare data and distribution edge that directly feeds AI performance, while marquee partnerships with leading publishers and platforms expand reach and embed Unity deeper into hit titles. Crucially, the company is showing financial discipline with improving profitability and cash generation, giving it self-funded flexibility to keep investing in AI and tooling. Add rising enterprise traction beyond gaming, in autos, industrials, and healthcare, and you have multiple engines of durable growth that can support further upside even after a big run. U currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.