TLDR
- Unity Software plummeted 26% in premarket Wednesday after forecasting Q1 2026 revenue of $480-$490 million versus analyst expectations of $492 million.
- Q4 results beat estimates with adjusted EPS of 24 cents per share compared to the 21-cent consensus and revenue of $503.1 million.
- EBITDA guidance of $105-$110 million for the current quarter fell short of the $116.9 million Wall Street forecast.
- Shares had already dropped 34% year-to-date as investors worry about AI competition from Google’s Project Genie tool.
- The game-development software maker faces mounting pressure from generative AI technologies that could disrupt traditional platforms.
Unity Software stock nosedived in premarket trading Wednesday after the game-development platform delivered weak guidance that overshadowed better-than-expected quarterly results.
$U (Unity Software) #earnings are out: pic.twitter.com/G6WZ7FjcBL
— The Earnings Correspondent (@earnings_guy) February 11, 2026
Shares tanked 26% before the market opened. The stock had already tumbled 34% in 2026 through Tuesday’s close at $29.06.
The company reported fourth-quarter adjusted earnings of 24 cents per share. That topped analyst estimates of 21 cents by three cents. Revenue jumped 10% year-over-year to $503.1 million, beating the $492.8 million consensus.
But the forward-looking numbers disappointed. Unity projected first-quarter revenue between $480 million and $490 million. Wall Street wanted $492 million.
Margin Pressure Adds to Concerns
The EBITDA guidance raised additional red flags. Unity expects earnings before interest, taxes, depreciation, and amortization of $105 million to $110 million. Analysts had forecast $116.9 million for the period.
The shortfall suggests margin compression in the current quarter. The midpoint of revenue guidance implies roughly flat sequential performance. That’s unusual for a growth-oriented software company.
Unity faces headwinds from multiple directions. The company competes in the crowded game-development market where margins can fluctuate based on customer mix and pricing dynamics.
AI Threat Looms Large
Investor sentiment soured last month when Google launched Project Genie. The AI-powered tool creates interactive 3D environments from simple text prompts or images.
While Project Genie remains early-stage, it represents a potential paradigm shift. Generative AI could eventually reduce reliance on complex development platforms like Unity’s software.
The threat isn’t immediate. Project Genie has limited capabilities compared to mature development tools. But the technology showcases how AI might transform game creation over time.
Unity helps developers build and operate games across multiple devices and platforms. The company serves both large studios and independent creators. Its business model depends on recurring revenue from subscriptions and usage-based fees.
The stock rallied 49.5% over the past year before this week’s collapse. But recent performance tells a different story. Shares declined 20.9% in the three months leading up to the earnings report.
Analysts had maintained optimism heading into results. Unity saw two positive earnings estimate revisions and zero negative revisions in the prior 90 days. The weak guidance reset expectations dramatically.
The company’s financial health scores as “fair performance” according to investment research platforms. That rating may face downward pressure if the current quarter unfolds as management projects.
Unity’s first-quarter outlook calls for revenue roughly $13-$23 million below the fourth quarter’s $503.1 million. The sequential decline breaks from typical software industry patterns where companies build momentum across quarters.
Management has not detailed the specific factors behind the conservative forecast. The guidance could reflect seasonal gaming industry patterns, specific business challenges, or caution about AI disruption affecting customer spending.
Unity’s EBITDA guidance of $105-$110 million compares to analyst expectations of $116.9 million for the first quarter of 2026.
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