Unity Software Posts First GAAP Profit Since 2020 IPO as Q3 Revenue Surges 32% and Stock Jumps 23%

Unity Software delivered its strongest quarter on record in Q3 2026, reporting revenue of $622 million, up 32% year over year and well ahead of the $567 million analyst consensus. Diluted EPS came in at $0.25 against an estimate of just $0.05, and net income reached $122 million, marking the company's first GAAP-profitable quarter since its 2020 IPO. Adjusted EBITDA hit $257 million, representing a 41% margin, while free cash flow reached $220 million, up 46% year over year.

The standout driver was Vector, Unity's AI-powered advertising platform, which grew 126% year over year and 40% sequentially in the quarter. Grow Solutions revenue, which houses the advertising business, jumped 44% year over year to $457 million, while Create Solutions revenue rose 8% to $165 million. Unity also cut sales and marketing spending by 38% even as revenue surged, and added $587 million in cash over the year, underscoring a sharp improvement in operating efficiency.

For Q4, Unity guided Strategic Revenue of $683 million to $691 million, with the Grow segment expected to contribute $515 million to $520 million, implying the ad business could more than double sequentially. Adjusted EBITDA guidance of $290 million to $295 million points to continued margin expansion. Analysts at BTIG and Raymond James both raised their price targets on the results. Unity shares surged roughly 23% in premarket trading, gapping up nearly 20% at the open, with the stock trading around $47, and unusual options activity in December $55 calls was flagged into the close.