Unity 2025 Q1 Earnings Narrowed Losses Amid Revenue Decline

Unity (U) reported its fiscal 2025 Q1 earnings on May 6th, 2025. The company's revenue decreased by 5.5% to $435 million, down from $460.38 million in 2024 Q1. Unity narrowed its losses to $0.19 per share from a loss of $0.75 per share last year, marking a 74.7% improvement. Despite this, the revenue fell short of expectations, indicating ongoing financial challenges. Unity's guidance for Q2 2025 forecasts revenue between $415 million and $425 million and Adjusted EBITDA in the range of $70 to $75 million.

Revenue
Unity's total revenue reached $435 million in 2025 Q1, a 5.5% decline from $460 million in the first quarter of 2024. The Create Solutions segment generated $150 million, reflecting an 8% decrease mainly due to lower professional services and consumption services revenue, partially offset by subscription growth. Meanwhile, Grow Solutions revenue dropped by 4% to $285 million, influenced by declines in certain Grow products, though the early rollout of Unity Vector provided some offset.

Earnings/Net Income
Unity narrowed its net loss to $77.91 million in 2025 Q1, showcasing a significant reduction in losses compared to the $291.48 million net loss in 2024 Q1. The improvement in EPS, from a loss of $0.75 to $0.19, signals a positive trend in financial performance.

Post-Earnings Price Action Review
Over the past five years, the strategy of buying Unity shares after an earnings miss and holding for 30 days has yielded mixed results. Although there were brief periods of positive performance, the approach generally underperformed the S&P 500 benchmark. The stock price experienced a 7.6% decline in the 30 days following the earnings miss in 2025 Q1. While there was a modest recovery with a 1.8% gain after holding for 30 days, this was still behind the S&P 500's 2.6% increase during the same period. Overall, the strategy resulted in a total return of -6.2%, significantly lagging the S&P 500's 3.3% gain over the same timeframe. This historical underperformance suggests that the strategy may not be effective for long-term investors, as it failed to capitalize on broader market appreciation.

CEO Commentary
"The Company’s first quarter results once again meaningfully exceeded expectations on both revenue and Adjusted EBITDA, highlighting our progress as we continue to build a culture of execution and discipline," said Matt Bromberg, President and CEO of Unity. Bromberg emphasized the early success of Unity Vector and the strong demand for Unity 6, which underscore Unity's positioning as the leading integrated platform supporting developers throughout the full lifecycle of game development. Despite a year-over-year revenue decline, the company remains focused on improving operational efficiency and fostering growth through its strategic initiatives.

Guidance
Unity expects revenue for Q2 2025 to be in the range of $415 to $425 million and Adjusted EBITDA to be between $70 and $75 million. These estimates reflect the company's confidence in its ongoing operational improvements and strategic initiatives, despite the challenges faced in the current market landscape.

Additional News
In recent weeks, Unity announced a strategic shift towards integrating more artificial intelligence (AI) capabilities into its platform. This move aligns with Unity's broader focus on enhancing its engine's performance and stability while expanding platform support. Additionally, Unity has unveiled its roadmap for Unity 6, promising significant updates throughout 2025 that include AI-powered workflows and broader platform capabilities, such as support for large and foldable Android screens. This comes amid internal changes, including a new round of layoffs, as Unity aims to streamline operations and focus on core business areas to drive future growth.