Unity Software Inc. (NYSE:U) drew bullish analyst reactions Friday after reporting stronger-than-expected third-quarter results.
Needham, Wedbush and BTIG raised their price forecasts as Unity’s Vector business accelerated. The company also issued fourth-quarter guidance above Wall Street estimates.
Unity Beats Estimates, Raises Growth Expectations
Unity reported adjusted earnings of 44 cents per share, beating Wall Street’s estimate of 6 cents. Earnings rose from 20 cents per share a year earlier.
Revenue climbed 32.19% to $622.09 million, topping the $567.44 million estimate.
Adjusted EBITDA reached $257 million, while the margin expanded to 41% from 23%.
Unity also reported GAAP net income of $122 million, marking its first GAAP profitable quarter since its IPO.
Grow Solutions revenue jumped 44% to $457 million. Vector revenue surged 126% year over year and 40% sequentially.
Create Solutions revenue increased 8% to $165 million.
Unity generated $224 million in operating cash flow and $220 million in free cash flow. The company ended the quarter with $2.651 billion in cash, cash equivalents and restricted cash.
For the fourth quarter, Unity forecasts revenue of $688 million to $696 million, above the $603.62 million analyst estimate.
The company expects adjusted EBITDA of $290 million to $295 million, representing 132% to 136% year-over-year growth.
Needham Sees Stronger Vector Growth Ahead
Needham analyst Bernie McTernan maintained a Buy rating and raised his price forecast to $70 from $54. He also kept Unity on Needham’s Conviction List.
McTernan cited Vector’s 40% sequential growth as a key driver. He raised his 2026 adjusted EBITDA forecast by about 23% and his 2027 forecast by about 45%.
He now expects Vector to grow about 6.5% sequentially on average in 2027, up from his previous 5% estimate. That implies roughly 63% annual growth.
McTernan expects Vector to account for about 66% of Unity’s revenue by year-end, compared with 28% in the first quarter of 2025.
He raised his 2026 revenue forecast to $2.37 billion from $2.19 billion and adjusted EBITDA to $847 million from $690.3 million.
For 2027, he increased his revenue estimate to $3.09 billion from $2.50 billion. His adjusted EBITDA forecast rose to $1.37 billion from $946.4 million.
His $70 price forecast reflects 20 times next-12-month adjusted EBITDA.
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Wedbush Highlights AI Opportunities
Wedbush analyst Alicia Reese maintained an Outperform rating and raised her price forecast to $63 from $55.
Reese increased her 2028 adjusted EBITDA estimate to $1.55 billion from $1.35 billion. Her valuation reflects roughly 20 times that forecast.
She highlighted Unity’s artificial intelligence strategy, including support for coding agents and its Google Spark partnership with Alphabet Inc. (NASDAQ:GOOGL).
Reese also pointed to Meta Platforms Inc. (NASDAQ:META) virtual reality support.
She expects Create revenue to grow about 9% in 2026, with similar growth in subsequent years.
Reese raised her 2026 revenue forecast to $2.37 billion from $2.23 billion. Her adjusted EBITDA estimate increased to $847.4 million from $691.6 million.
For 2027, she lifted her revenue estimate to $3.04 billion from $2.82 billion and adjusted EBITDA to $1.31 billion from $1.05 billion.
BTIG Sees More Upside From New Products
BTIG analyst Clark Lampen maintained a Buy rating and raised his price forecast to $60 from $53.
Lampen increased his fourth-quarter strategic revenue forecast to $692 million from $630 million. He also raised his adjusted EBITDA estimate to $294 million from $231 million.
For 2026, Lampen now expects revenue of $2.369 billion, up from $2.263 billion. His adjusted EBITDA forecast rose to $849 million from $725 million.
He raised his 2027 revenue estimate to $2.999 billion from $2.803 billion and adjusted EBITDA to $1.425 billion from $1.144 billion.
His $60 price forecast reflects 17.3 times projected 2027 EBITDA and assumes $5.91 in net cash per share.
Lampen said his estimates already account for slower sequential growth in 2027.
However, stronger Runtime adoption, new products and expansion beyond gaming could drive additional upside.
U Price Action: Unity Software shares were up 7.54% at $52.48 at the time of publication on Friday. The stock is trading at a new 52-week high, according to Benzinga Pro data.
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