TLDR
- Unity Q1 revenue hit $508.2 million, up 16.8% year on year, beating estimates of $503.8 million
- Adjusted EPS of $0.23 missed the $0.24 consensus by $0.01
- Strategic revenue surged 35% YoY to $432.4 million
- Adjusted EBITDA reached $138 million with a 27% margin, up from 19% a year ago
- Stock jumped 6.4% to $29.01 following the report
Unity Software (NYSE: U) posted Q1 2026 results that topped revenue expectations, sending the stock up 6.4% to $29.01 after the report dropped Thursday.
Revenue came in at $508.2 million, up 16.8% year on year and ahead of the $503.8 million Wall Street consensus. It was a clean beat on the top line.
Adjusted EPS of $0.23 missed estimates by $0.01, coming in just under the $0.24 analysts had penciled in.
The headline number that turned heads was Strategic Revenue, which surged 35% year on year to $432.4 million. Within that, Strategic Grow Revenue was up 49% and Strategic Create Revenue grew 15%.
$U Q1’26 EARNINGS HIGHLIGHTS
🔹 Revenue: $508M (Est. $506M) 🟢; +17% YoY
🔹 EPS: $0.23 (Est. $0.23) 🔴; -4% YoY
🔹 Grow Solutions Revenue: $352M; +24% YoY
🔹 Gross Margin: 82.0% (Est. 82.8%) 🔴
🔹 Adjusted EBITDA: $138M; +65% YoYQ2'26 Guide:
🔹 Revenue: $505M-$515M (Est.… pic.twitter.com/2HXGB2Sm8y— Wall St Engine (@wallstengine) May 7, 2026
Adjusted EBITDA came in at $138 million, carrying a 27% margin. That compares to $84 million and a 19% margin in Q1 2025. The improvement was driven by higher revenue and tighter cost control.
Free cash flow was $66 million, up from just $7 million a year ago. That’s a meaningful jump.
Impairment Charges Weigh on GAAP Results
On a GAAP basis, the picture looked different. Net loss widened to $347 million, or $0.80 per share, compared to a $78 million loss in Q1 2025.
The bulk of that came from $279 million in impairment charges tied to the sunset of the ironSource Ads Network and the planned divestiture of the Supersonic game publishing business.
Adjusted Operating Income came in at -$274.2 million, badly missing the analyst estimate of $111.7 million.
Billings reached $515.6 million, up 18.5% year on year. Over the last four quarters, billings averaged 8.7% annual growth, which has been underwhelming relative to peers.
Q2 Guidance Comes in Ahead of Estimates
For Q2, Unity guided revenue of $505 million to $515 million. The $510 million midpoint sits slightly above the $507.2 million analyst consensus.
Strategic Revenue guidance for Q2 is $455 million to $465 million, implying 29% to 32% year on year growth.
Adjusted EBITDA is guided to $130 million to $135 million for Q2, with the $132.5 million midpoint above the $131.1 million analyst estimate.
“We are delivering exceptional revenue growth and margin expansion while executing on the most exciting product roadmap in Unity’s history,” said CEO Matt Bromberg.
Operating margin for Q1 was -69.1%, down from -29.4% in the same quarter last year, reflecting the impairment charges.
Customer acquisition costs remain elevated. Unity’s CAC payback period stood at 115.5 months this quarter, pointing to a competitive market where winning and keeping customers isn’t cheap.
Free cash flow margin was 13.1%, down from 23.6% in the prior quarter.
Sell-side analysts expect revenue to grow 12.8% over the next 12 months, below the software sector average.
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