Unity's Q1 2025: Navigating Contradictions in Vector Rollout, Revenue Growth, and Advertising Strategy

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Strong Financial Performance:
- Unity exceeded the top end of its guidance for Q1 2025, revenue by 5% and adjusted EBITDA by 29%.
- The growth was driven by strength in both Grow and Create segments, with the migration of the Unity ad network to the Vector platform and increased adoption of Unity 6 enhancing performance.

Unity Vector Performance:
- The Unity Vector platform showed a significant improvement, with 15% to 20% increase in both installs and in-app purchases compared to the old model, within a few months of operation.
- This performance is attributed to better data analysis and optimization, which has led to improved return on investment for advertisers.

Subscription Revenue Growth:
- Subscription revenues in the Create segment grew double-digits year-over-year, with Unity 6 registering more than 4.4 million downloads since launch.
- The growth is driven by increased adoption of Unity's latest stable and performant version, enhanced customer connection, and pricing strategies.

Revenue Mix and Structural Changes:
- Grow revenue was $285 million, down 4% year-over-year, while Create revenue was $150 million, down 8% year-over-year.
- The decline in Grow revenue was due to the transition away from low-margin professional services to high-margin subscription business, representing nearly 80% of Create revenue.