Unity Software Inc. 2026 Q2 Earnings Call

Good morning, everyone. Welcome to Unity's second quarter 2026 earnings call. Today, I'm joined by our CEO, Matt Bromberg, and our CFO, Jarrod Yahes. Before we begin, I want to note that today's discussion contains forward-looking statements, including statements about goals, business outlook, industry trends, and expectations for future financial performance, all of which are subject to risks, uncertainties, and assumptions. You can find more information in the Risk Factor section of our filings at sec.gov. Actual results may differ, and we take no obligation to revise or update any forward-looking statements. Finally, during today's meeting, we will discuss non-GAAP financial measures. These non-GAAP financial measures are an addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A full reconciliation of GAAP to non-GAAP is available in our press release and on the sec.gov website.

With that, I will turn it over to Matt.

Thank you, Alex. Good morning. For everyone on the phone, thank you for joining us this morning as well. It is, as always, a distinct privilege for us to be able to represent the fine work of the Unity team from around the world. Two years ago on this call, we told you that a rededication to our customers' needs, more disciplined execution, and sharply accelerated product velocity would transform our company. Although we were in a difficult moment, we believed we had everything we needed to bring Unity all the way back, and we did. One year ago, we posited that Unity had hit an inflection point in that transformation, and that our efforts would translate to a markedly improved and sustainable series of business results, and they did. Today, after what was arguably the best quarter in Unity's history as a public company, we're done looking backwards.

The flywheel we've been constructing is spinning up, and we expect it to power us into the ranks of the most consequential companies of the AI era, and it will. Why? Because AI has already become the most crucial driver of our product velocity and quality, and is also well on its way to becoming our most crucial driver of demand. To remind everyone how this AI-powered flywheel works at Unity, as game creation becomes more efficient, more games are being released. More games drive more usage of our integrated authoring platform and also make new game discovery more challenging, accelerating our ad business. More games, more platform usage, more discovery, all driven by the unique understanding that we derive from the approximately 3 billion people each month playing a game on the Unity runtime.

An understanding which we use in turn to help creators build better games, to help them acquire new users, and to help them operate successful live services. With that as an introduction, let's turn to this quarter's results, beginning with Unity Vector. In performance marketing, we only win when our customers win. Advertisers are laser-focused on the direct return of their ad spend, and our technology must empower them to hit and exceed their return targets at maximum scale. Through continuous product enhancement, higher quality data, and compounding model improvements, we are now driving significant gains for our customers across every campaign type, genre, geography, and platform, and it's having an exceptionally positive impact on our business results. Our expectations for growth in Unity Vector in Q2 were a robust 12%-13% growth quarter-over-quarter.

Instead, our team delivered nearly double that, racking up 23% quarter-over-quarter growth and establishing an accelerated momentum that has carried over to elevated results in Q3. Keep in mind, 6 quarters ago, the Unity Vector product didn't exist. It is now at substantially over $1 billion in annual run rate, 2 quarters earlier than expected, and yet we still consider ourselves to be in the very early stages of product development. Our astounding performance is fueling a 63% year-over-year increase in our strategic growth business, with our third quarter outlook pointing to an even stronger 70% growth rate. Overall company EBITDA margins are approaching 30% for the first time ever. We don't know of many companies at our scale growing revenue at this velocity while simultaneously expanding margins 800 basis points year-over-year.

In the second quarter alone, the Vector team successfully executed over 20 major updates, advancing the capabilities and intelligence of our AI prediction platform, bringing new runtime data online, and transforming how we identify, understand, and value gamer attention. This incredible rate of change enabled Unity to optimize real-time bidding precision for our advertisers to a degree that was formerly impossible. One of the most impactful updates in Q2 has been our day 28 return on advertising spend capability for both in-app advertising and hybrid campaigns, a companion to the in-app purchase product that was released in the first quarter. As the name suggests, day 28 ROAS enables our partners to measure their return over a longer period than our standard 7-day ROAS product. Initially released at the end of Q1, the full rollout has now seen day 28 campaign spend growing nearly 3X from the first quarter.

Over 25% of our advertising base has adopted this new campaign strategy, and the demand is scaling rapidly as a result of our delivering extremely strong performance. Q2 also contained another transformational milestone. We are speaking, of course, about the first incorporation of runtime data into the Vector platform. As we have emphasized many times, there are currently over 3 billion consumers each month playing a made with Unity game, and the connection with those billions of players through our runtime has been an untapped capability that we have long believed should deliver unique value across our platform. Towards the end of the second quarter, we began for the first time in our history to unlock this advantage by incorporating signals from our runtime directly into our Vector AI models.

While this effort remains very early, the results are extremely encouraging, and we gain more and more confidence each day that runtime represents a deep and sustainable competitive advantage for Unity. Let's transition now to the Create business. The future of game creation no longer belongs only to those who can marshal the most resources, but rather to those who can best use the technology to amplify the resources they have. Two weeks ago, at our Unite conference in Seoul, we announced the release of Unity 7, a new generation of our software designed for this future. An open, collaborative platform where developers, artists, producers, and coding agents work together across the full development life cycle. We've made our MCP free and opened our API, which enables developers to use the command line and coding agents to control Unity directly from inside their own workflows.

What this all means is that you no longer have to know all the intricacies of our application to access the power of our full authoring platform. What's even more exciting is that this platform, including the downstream revenue-enabling services, Vector, our commerce solutions, and our live game operation services, are all now configured automatically on day one. There are no instructions. There are no SDKs. There is no engineering time required. Remember what I referenced slightly earlier. Remember our flywheel. More games, more platform usage, more discovery, all driven by runtime and Vector AI.

We believe Unity 7, which will launch in beta in Q4 of 2026, and with a full release in Q1 of 2027, holds the potential to be the most exciting and impactful release in our history, in that it points the way to a fundamentally different future, one where the top of the funnel gets bigger and bigger to accommodate the increased interest in the creation of interactive entertainment. Before leaving Create, I did want to highlight a new partnership Unity consummated in Q2 with Netflix. We're so thrilled about it, and I want to highlight it because it exemplifies the kind of innovation we live to help support. The partnership calls for us to comprehensively support the Netflix multi-platform games ecosystem with the Unity engine in the years ahead.

Netflix has launched something potentially revolutionary, presenting a social game experience for consumers on the biggest screen in the house instantly, without asking them to download, register, or buy anything, with the potential to add an entirely new engagement path for their customers. This is the kind of advancement that Unity exists to support. Consumer habits are changing. Distribution platforms are evolving and will continue to evolve, but Unity's role remains straightforward and constant. Make it easier for studios to build great games and get them in the hands of players wherever they are. We're proud that Netflix has chosen to do that work with us. Thank you again very much for taking the time to be with us this morning. We are incredibly proud of Unity's performance in Q2.

The continued acceleration of Vector, coupled with our robust product roadmap in Create, has us more excited than we've ever been about our future. I'll now pass the call over to Jarrod for a deeper discussion of our financials.