Unity Software swings to $121M profit in Q3 2026
Of $597 million in commitments for contracts with original terms exceeding one year, Unity expects to recognize approximately $292 million during the next 12 months.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
Unity Software Inc. (U) reported third-quarter revenue of $622.1 million, versus $470.6 million a year earlier, and net income attributable to Unity of $121.2 million, versus a $126.4 million loss. Revenue growth was primarily driven by Grow Solutions, including growth in the Unity Ads Network. For the first nine months, revenue was $1,676.8 million and Unity reported a $250.0 million net loss, versus $1,346.6 million revenue and a $312.8 million net loss a year earlier.
Operating cash flow for the nine months was $500.9 million, compared with $301.5 million. Unity recorded $279 million of impairment charges in the first quarter associated with decisions to sunset the ironSource Ads Network and exit Supersonic. Unity completed the Supersonic sale on August 4, 2026, for $38.0 million in net proceeds, subject to certain post-close adjustments, and recorded a $4.5 million gain. In October 2026, Unity completed a $100 million purchase of a minority equity interest in a private company.
As of September 30, 2026, cash and cash equivalents were $2.6 billion, with $2.2 billion of unsecured convertible notes outstanding. Unity said it believed existing liquidity would be sufficient for working capital and capital expenditures for at least the next 12 months, including cash repayment of the 2026 Notes at maturity in November 2026.
3 points · 0 major0 major · 1 point
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter revenue was $622.1 million, versus $470.6 million a year earlier.
- Moderate pointThird-quarter attributable earnings were $121.2 million, versus a $126.4 million loss.
- Moderate pointNine-month operating cash flow was $500.9 million, versus $301.5 million.
Negative
- Moderate pointFirst-quarter 2026 impairment charges totaled $279 million. 1.5% of market cap
Filing Explained
Unity's outstanding common shares increased from 432,859,941 at
Key Figures
Third-quarter revenue: $622.1 million
Net income attributable to Unity: $121.2 million
Nine-month revenue: $1,676.8 million
+5 more
8 metrics
Third-quarter revenue
$622.1 million
Three months ended September 30, 2026; $470.6 million in 2025
Net income attributable to Unity
$121.2 million
Three months ended September 30, 2026; $126.4 million net loss in 2025
Nine-month revenue
$1,676.8 million
Nine months ended September 30, 2026; $1,346.6 million in 2025
Net loss attributable to Unity
$250.0 million
Nine months ended September 30, 2026; $312.8 million net loss in 2025
Net cash provided by operating activities
$500.9 million
Nine months ended September 30, 2026; $301.5 million in 2025
Impairment charges
$279 million
Recorded in the first quarter of 2026
Cash and cash equivalents
$2.6 billion
As of September 30, 2026
Unsecured convertible notes outstanding
$2.2 billion
As of September 30, 2026
Key Terms
non-strategic portfolio revenue, adjusted EBITDA, free cash flow, capped call transactions, +1 more
5 terms
non-strategic portfolio revenue financial
"approximately $161 million and $299 million, respectively, of non-strategic portfolio revenue"
adjusted EBITDA financial
"We define adjusted EBITDA as net income or loss excluding stock-based compensation expense"
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
free cash flow financial
"We define free cash flow as net cash provided by operating activities less cash used"
Free cash flow is the amount of money a company has left over after paying all its expenses and investing in its business, like buying equipment or updating facilities. It shows how much cash is available to reward shareholders, pay down debt, or save for future growth. This helps investors understand if a company is financially healthy and able to grow.
capped call transactions financial
"We entered into capped call transactions, to reduce the potential dilutive effect"
Capped call transactions are agreements where investors buy options that give them the chance to benefit if a stock's price goes up, but with a limit on how much they can gain. This helps protect them from paying too much if the stock's price rises a lot, similar to having a maximum limit on a reward. They matter because they help investors manage risk while still allowing some upside potential.
redeemable noncontrolling interests financial
"The redeemable noncontrolling interests in Unity China are recorded as temporary equity"
A redeemable noncontrolling interest is a minority ownership stake in a company that the holder can force the company to buy back at a set price or under certain conditions. For investors this matters because it creates a future cash obligation and can be treated more like a liability than permanent equity, affecting a company’s reported debt, net income and valuation — think of it as a part-owner who can cash out, forcing the business to pay them.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much revenue did Unity (U) report in Q3 2026?
Unity (U) reported $622.1 million in revenue for the three months ended September 30, 2026, versus $470.6 million in the prior-year quarter. Grow Solutions revenue was $457.0 million, compared with $318.3 million, while Create Solutions revenue was $165.1 million, compared with $152.4 million.
Did Unity (U) make a profit in Q3 2026?
Yes. Unity reported $121.2 million of net income attributable to Unity for the third quarter, versus a $126.4 million attributable net loss in 2025. Operating income was $100.6 million, compared with an operating loss of $125.9 million in the prior-year quarter.
How much of Unity's unrecognized customer-contract revenue is expected in the next year?
Unity had $597 million in unrecognized commitments for contracts with original terms exceeding one year, primarily related to Create Solutions subscriptions, Enterprise Support, and Strategic Partnerships. It expects to recognize approximately $292 million, or 49% of this revenue, during the next 12 months.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended | |||||
| OR | |||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
| For the transition period from _______ to _______ | ||||||||
Commission File Number: | ||||||||
| (Exact name of registrant as specified in its charter) | ||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address, including zip code, of principal executive offices) | ||||||||
( | ||||||||
(Registrant's telephone number, including area code) | ||||||||
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | ||||||||||||||
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). | ||||||||||||||
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act. | ||||||||||||||
| ☒ | Accelerated filer | ☐ | ||||||||||||
Non‑accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | |||||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes | ||||||||||||||
As of October 28, 2026, there were 443,828,709 shares of the registrant's common stock outstanding.
UNITY SOFTWARE INC.
FORM 10‑Q
For the Quarter Ended September 30, 2026
TABLE OF CONTENTS
| Page | ||||||||
PART I—FINANCIAL INFORMATION | ||||||||
| Item 1. | Financial Statements (Unaudited) | 1 | ||||||
Condensed Consolidated Balance Sheets | 1 | |||||||
Condensed Consolidated Statements of Operations | 2 | |||||||
Condensed Consolidated Statements of Comprehensive Income (Loss) | 3 | |||||||
Condensed Consolidated Statements of Stockholders' Equity | 4 | |||||||
Condensed Consolidated Statements of Cash Flows | 6 | |||||||
Notes to Condensed Consolidated Financial Statements | 8 | |||||||
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 22 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 31 | ||||||
| Item 4. | Controls and Procedures | 32 | ||||||
PART II—OTHER INFORMATION | ||||||||
| Item 1. | Legal Proceedings | 33 | ||||||
| Item 1A. | Risk Factors | 33 | ||||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 34 | ||||||
| Item 3. | Defaults Upon Senior Securities | 35 | ||||||
| Item 4. | Mine Safety Disclosures | 35 | ||||||
| Item 5. | Other Information | 35 | ||||||
| Item 6. | Exhibits | 36 | ||||||
SIGNATURES | 37 | |||||||
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10‑Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical fact, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as "aim," "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "toward," "will," "would," or the negative of these words or other similar terms or expressions.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10‑Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. Readers are cautioned that these forward‑looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified and discussed in greater detail in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K filed with the SEC on February 11, 2026, “Part II, Item 1A. Risk Factors” of our Quarterly Reports on Form 10-Q filed with the SEC on May 7, 2026 and August 6, 2026, and below, under "Part II, Item 1A. Risk Factors."
The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10‑Q. While we believe such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report on Form 10‑Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10‑Q or to reflect new information, actual results, revised expectations, or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.
Additional Information
Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to "we," "us," "our," "our company," "Unity," and "Unity Technologies" refer to Unity Software Inc. and its consolidated subsidiaries. The Unity design logos, "Unity" and our other registered or common law trademarks, service marks, or trade names appearing in this Quarterly Report on Form 10-Q are the property of Unity Software Inc. or its affiliates.
Investors and others should note that we may announce material business and financial information using our investor relations website (www.investors.unity.com), our blog, social media, our filings with the Securities and Exchange Commission, press releases, public conference calls, and public webcasts as means of complying with our disclosure obligations under Regulation FD. We encourage investors and others interested in our company to review the information that we make available.
Table of Contents | Unity Software Inc. | |||||||
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
UNITY SOFTWARE INC. | |||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
(In thousands, except share par value) | |||||||||||
(Unaudited) | |||||||||||
| As of | |||||||||||
| September 30, 2026 | December 31, 2025 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Prepaid expenses and other | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and stockholders' equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other | |||||||||||
| Publisher payables | |||||||||||
| Deferred revenue | |||||||||||
| Current portion of convertible notes | |||||||||||
| Total current liabilities | |||||||||||
| Convertible notes | |||||||||||
| Long-term deferred revenue | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and Contingencies (Note 7) | |||||||||||
| Redeemable noncontrolling interests | |||||||||||
| Stockholders' equity: | |||||||||||
Common stock, $ | |||||||||||
Authorized shares - | |||||||||||
Issued and outstanding shares - | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive income (loss) | ( | ||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total Unity Software Inc. stockholders' equity | |||||||||||
| Noncontrolling interest | |||||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders' equity | $ | $ | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
1
Table of Contents | Unity Software Inc. | |||||||
UNITY SOFTWARE INC. | |||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Operating income (loss) | ( | ( | ( | ||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Interest income and other income (expense), net | |||||||||||||||||||||||
| Income (loss) before income taxes | ( | ( | ( | ||||||||||||||||||||
| Provision for (benefit from) income taxes | ( | ( | |||||||||||||||||||||
| Net income (loss) | ( | ( | ( | ||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interest and redeemable noncontrolling interests | ( | ||||||||||||||||||||||
| Net income (loss) attributable to Unity Software Inc. | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Basic net income (loss) per share attributable to common stockholders of Unity Software Inc. (Note 10) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Diluted net income (loss) per share attributable to common stockholders of Unity Software Inc. (Note 10) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
2
Table of Contents | Unity Software Inc. | |||||||
UNITY SOFTWARE INC. | |||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive income, net of taxes: | |||||||||||||||||||||||
| Change in foreign currency translation adjustment | |||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||
| Comprehensive income (loss) | ( | ( | ( | ||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interest and redeemable noncontrolling interests | ( | ||||||||||||||||||||||
| Foreign currency translation attributable to noncontrolling interest and redeemable noncontrolling interests | |||||||||||||||||||||||
| Comprehensive income (loss) attributable to noncontrolling interest and redeemable noncontrolling interests | ( | ||||||||||||||||||||||
| Comprehensive income (loss) attributable to Unity Software Inc. | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
3
Table of Contents | Unity Software Inc. | |||||||
UNITY SOFTWARE INC. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | Unity Software Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In | Comprehensive | Accumulated | Stockholders' | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Income | Deficit | Equity | Interest (1) | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock from employee equity plans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for settlement of RSUs | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock‑based compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redeemable noncontrolling interest | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | Unity Software Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid‑In | Comprehensive | Accumulated | Stockholders’ | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Loss | Deficit | Equity | Interest (1) | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock from employee equity plans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for settlement of RSUs | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock‑based compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redeemable noncontrolling interest | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Excludes redeemable noncontrolling interests.
See accompanying Notes to Condensed Consolidated Financial Statements.
4
Table of Contents | Unity Software Inc. | |||||||
UNITY SOFTWARE INC. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY—CONTINUED | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | Unity Software Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid‑In | Comprehensive | Accumulated | Stockholders’ | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Income (Loss) | Deficit | Equity | Interest (1) | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock from employee equity plans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for settlement of RSUs | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock‑based compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redeemable noncontrolling interest | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | Unity Software Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid‑In | Comprehensive | Accumulated | Stockholders’ | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Loss | Deficit | Equity | Interest (1) | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock from employee equity plans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for settlement of RSUs | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of capped calls | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock‑based compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redeemable noncontrolling interest | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Excludes redeemable noncontrolling interests.
See accompanying Notes to Condensed Consolidated Financial Statements.
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UNITY SOFTWARE INC. | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
(In thousands) | |||||||||||
(Unaudited) | |||||||||||
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating activities | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation expense | |||||||||||
| Gain on repayment of convertible note | ( | ||||||||||
| Impairment of intangible assets | |||||||||||
| Impairment of property and equipment | |||||||||||
| Impairment of investments | |||||||||||
| Other | ( | ( | |||||||||
| Changes in assets and liabilities, net of effects of acquisitions: | |||||||||||
| Accounts receivable, net | ( | ( | |||||||||
| Prepaid expenses and other | |||||||||||
| Other assets | |||||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other | |||||||||||
| Publisher payables | |||||||||||
| Other long-term liabilities | ( | ( | |||||||||
| Deferred revenue | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Investing activities | |||||||||||
| Purchases of non-marketable investments | ( | ||||||||||
| Proceeds from sale of business | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| Financing activities | |||||||||||
| Proceeds from issuance of convertible notes | |||||||||||
| Purchase of capped calls | ( | ||||||||||
| Payment of debt issuance costs | ( | ||||||||||
| Repayments of convertible note | ( | ||||||||||
| Proceeds from issuance of common stock upon exercise of stock options and purchase of ESPP shares | |||||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash | |||||||||||
| Increase in cash, cash equivalents, and restricted cash | |||||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | |||||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | $ | |||||||||
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UNITY SOFTWARE INC. | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
(In thousands) | |||||||||||
(Unaudited) | |||||||||||
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes, net of refunds | $ | $ | |||||||||
| Cash paid for operating leases | $ | $ | |||||||||
| Supplemental disclosures of non‑cash investing and financing activities: | |||||||||||
| Assets acquired under operating lease | $ | $ | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
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UNITY SOFTWARE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Policies
Basis of Presentation and Consolidation
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. For us, these estimates are used for, but not limited to, revenue recognition, contingent liabilities, the measurement of liabilities for uncertain tax positions and deferred tax assets and liabilities, the measurement of liabilities for future payments related to employee separation, the fair value of stock-based compensation, the fair value of redeemable noncontrolling interests, the fair value and useful lives of long-lived assets, and the fair value of equity investments where we use the measurement alternative. Actual results could differ from those estimates, and such differences could be material to our financial position and results of operations.
We evaluate intangible assets and other long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. In March 2026, we announced we would sunset the ironSource Ads Network, one of our monetization networks, effective April 30, 2026, and we began the process of exiting our Supersonic game publishing business. Due to this event, we evaluated the long-lived assets associated with those businesses and determined that the undiscounted cash flows were less than the carrying value of the asset group.
As a result, during the first quarter of 2026 we recorded $279 million of impairment charges, including $227 million within cost of revenue, and $47 million within sales and marketing expense. These impairment charges reduced our Intangible assets, net by $271 million, including $225 million in "Developed technology" and $46 million in "Customer relationships". The fair values of these assets were determined using a combined discounted cash flow analysis and market approach.
Furthermore, as a result of this evaluation, we revised our estimates of the remaining useful lives for certain assets within the asset group, from two to three years down to one to two years , effective April 1, 2026. These assets are primarily included in “Intangible assets, net” on our consolidated balance sheets, and are “developed technology” within intangible assets. The shortened useful lives are due to the shortened remaining time that Unity intends to operate these related businesses, as discussed in the above announcement. The effect of this change in estimate for the three months ended September 30, 2026, was an increase in amortization expense and decrease in operating income of approximately $3 2 million, a decrease in our basic net income per
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share of approximately $0.01 per share, and no change to the diluted net income per share. The effect of this change in estimate for the nine months ended September 30, 2026, was an increase in amortization expense and decrease in operating income of approximately $6 4 million, and an increase in our basic and diluted net loss per share of approximately $0.01
Sale of Supersonic Business
As of June 30, 2026, we classified certain assets and liabilities associated with our Supersonic business as held-for-sale in connection with our strategic decision to exit the Supersonic business. We subsequently completed the sale of our Supersonic business on August 4, 2026. Proceeds from the sale were $38.0 million net of direct expenses incurred as part of the sale, and subject to certain post-close adjustments. This resulted in a gain on sale of business of $4.5
The assets sold consisted primarily of developed technology and customer relationship intangible assets, accounts receivable, and an allocated portion of goodwill associated with the Supersonic business. Upon classification as held-for-sale, the related long-lived assets ceased being depreciated or amortized. The liabilities sold primarily included publisher payables, accrued expenses, and other operating liabilities directly associated with Supersonic.
In connection with the held-for-sale classification, we evaluated the recoverability of long-lived assets within the Supersonic disposal group and subsequently measured the disposal group at the lower of its carrying amount and fair value less cost to sell. As a result of this evaluation, we recognized no impairment charges during the three and nine months ended September 30, 2026.
The following table summarizes the major classes of assets and liabilities which were classified as held-for-sale, and sold on August 4, 2026 (in thousands):
| As of | |||||
| August 4, 2026 | |||||
| Accounts receivable, net | $ | ||||
| Prepaid expenses and other | |||||
| Property and equipment, net | |||||
| Goodwill | |||||
| Intangible assets, net | |||||
| Assets held-for-sale | $ | ||||
| Accounts payable | $ | ||||
| Accrued expenses and other | |||||
| Publisher payables | |||||
| Other long-term liabilities | |||||
| Liabilities held-for-sale | $ | ||||
Employee Separation and Restructuring Costs
In connection with our ongoing restructuring efforts, we incurred incremental employee separation costs and other non-employee charges of approximately $51 million in the nine months ended September 30, 2026, mainly related to the planned closure of Unity France. The majority of these incremental charges were recorded within research and development. As of September 30, 2026, we have accrued $24 million of these incremental employee separation costs, primarily in "Accrued expenses and other" on our condensed consolidated balance sheets.
In the nine months ended September 30, 2025, we incurred incremental employee separation costs of approximately $23 million, primarily within sales and marketing and research and development.
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Additionally, for the nine months ended September 30, 2025 we incurred $16 million of other restructuring costs, primarily related to office closures.
Recent Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued a new Accounting Standards Update ("ASU 2024-03") amending the existing disclosure requirement for expenses within Statement of Operations, primarily requiring more disaggregated disclosure for certain costs and expenses on an annual and interim basis. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted, and can be applied on either a prospective or retroactive basis. We are currently evaluating ASU 2024-03 to determine its impact on our expense disclosures.
In September 2025, the FASB issued a new Accounting Standards Update ("ASU 2025-06") amending existing internal-use software guidance, changing the timing and thresholds for capitalizing these software costs. ASU 2025-06 is effective for annual and interim reporting periods beginning after December 15, 2027, with early adoption permitted and can be applied on either a prospective, modified, or retrospective basis. We are currently evaluating ASU 2025-06 to determine its impact on our financial statements.
2. Revenue
The following table presents our revenue disaggregated by source, which also have similar economic characteristics (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Create Solutions | $ | $ | $ | $ | |||||||||||||||||||
| Grow Solutions | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
The following table presents our revenue disaggregated by geography, based on the invoice address of our customers (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| United States | $ | $ | $ | $ | |||||||||||||||||||
Greater China (1) | |||||||||||||||||||||||
EMEA (2) | |||||||||||||||||||||||
APAC (3) | |||||||||||||||||||||||
Other Americas (4) | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
(1) Greater China includes China, Hong Kong, and Taiwan.
(2) Europe, the Middle East, and Africa ("EMEA")
(3) Asia-Pacific, excluding Greater China ("APAC")
(4) Canada and Latin America ("Other Americas")
Accounts Receivable, Net
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September 30, 2026 and December 31, 2025, the allowance for uncollectible amounts was $9.3 million and $10.9 million, respectively.
Sales Commissions
During the three and nine months ended September 30, 2026, we recorded amortization costs of $1.5 million and $4.7 million, respectively, in sales and marketing expenses, as compared to $1.7 million and $5.5 million during the three and nine months ended September 30, 2025, respectively. We did not
Contract Balances and Remaining Performance Obligations
3. Financial Instruments
Cash, Cash Equivalents, and Restricted Cash
Cash, cash equivalents, and restricted cash are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
•Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities.
•Level 2—Valuations based on quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration.
•Level 3—Valuations based on unobservable inputs reflecting our own assumptions used to measure assets and liabilities at fair value. These valuations require significant judgment.
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The following table summarizes, by major security type, our cash, cash equivalents, and restricted cash that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||
Fair Value (1) | |||||||||||||||||||||||||||||
| Cash | $ | $ | |||||||||||||||||||||||||||
| Level 1: | |||||||||||||||||||||||||||||
| Restricted cash and cash equivalents: | |||||||||||||||||||||||||||||
| Restricted cash | $ | $ | |||||||||||||||||||||||||||
| Money market funds | |||||||||||||||||||||||||||||
| Time deposits | |||||||||||||||||||||||||||||
| Total restricted cash and cash equivalents | $ | $ | |||||||||||||||||||||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | |||||||||||||||||||||||||||
(1) Due to the highly liquid nature of our investments, amortized cost approximates fair value.
Nonrecurring Fair Value Measurements
We hold equity investments in certain unconsolidated entities without a readily determinable fair value. These investments represent less than a 20 % voting interest in each of the entities, and we do not have significant influence over or control of the entities. We use the measurement alternative to account for adjustments to these investments for observable transactions for the same or similar investments of the same issuer in any given quarter. If we determine an impairment has occurred, the investment is written down to the estimated fair value. As of September 30, 2026 and December 31, 2025, such equity investments totaled $20.0 million and $35.0 million, respectively. We recorded a $15.0 million impairment charge related to the wind down of a single investment, during the nine months ended September 30, 2026. No other adjustments to the carrying value of these equity investments were recorded during the three and nine months ended September 30, 2026, and 2025.
4. Investment in Unity China
The results of Unity China, of which third-party investors hold a 20.5 % ownership interest, are included in our condensed consolidated financial statements. Under certain conditions we may be required to repurchase the third-party interest in Unity China. The redeemable noncontrolling interests in Unity China are recorded as temporary equity on our condensed consolidated balance sheet.
The following table presents the changes in redeemable noncontrolling interests (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Net income (loss) attributable to redeemable noncontrolling interests | ( | ||||||||||||||||||||||
| Accretion for redeemable noncontrolling interests | |||||||||||||||||||||||
| Foreign currency translation and foreign exchange adjustments for redeemable noncontrolling interests | |||||||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | |||||||||||||||||||
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5. Leases
We have operating leases for offices, which have remaining lease terms of up to eleven years .
Components of lease expense were as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operating lease expense | $ | $ | $ | $ | |||||||||||||||||||
| Variable lease expense | |||||||||||||||||||||||
| Sublease income | ( | ( | ( | ( | |||||||||||||||||||
| Total lease expense | $ | $ | $ | $ | |||||||||||||||||||
Supplemental balance sheet information related to leases was as follows (in thousands, except weighted-average figures):
| As of | |||||||||||||||||
| Classification | September 30, 2026 | December 31, 2025 | |||||||||||||||
| Operating lease assets | Other assets | $ | $ | ||||||||||||||
| Current operating lease liabilities | Accrued expenses and other | $ | $ | ||||||||||||||
| Long-term operating lease liabilities | Other long-term liabilities | ||||||||||||||||
| Total operating lease liabilities | $ | $ | |||||||||||||||
As of September 30, 2026 and December 31, 2025, our operating leases had a weighted-average remaining lease term of 4.2 years and 3.8 years, respectively, and a weighted-average discount rate of 5.7 % and 5.0 %, respectively.
As of September 30, 2026, our lease liabilities were as follows (in thousands):
| Operating Leases | |||||||||||
| Gross lease liabilities | $ | ||||||||||
| Less: imputed interest | |||||||||||
| Present value of lease liabilities | $ | ||||||||||
6. Borrowings
Convertible Notes
In February 2025, we issued an aggregate of $690 million principal amount of 0 % convertible senior notes due 2030 (the "2030 Notes"). Proceeds from the issuance of the 2030 Notes were $677 million, net of debt issuance costs and the cash was used to purchase capped call transactions, and repurchase convertible notes as discussed below. The debt issuance costs are amortized to interest expense using the straight-line method, which approximates the effective interest method.
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As of September 30, 2026, we had $2.2 billion of unsecured convertible notes outstanding including $690 million of the 2030 Notes, $1.0 billion issued in November 2022 (the "2027 Notes"), $558 million issued in November 2021 (the "2026 Notes", together with the 2027 Notes and 2030 Notes, the "Notes"), in “Current portion of convertible notes” and "Convertible notes" on our consolidated balance sheets. The table below summarizes the principal and unamortized debt issuance costs and other material features of the Notes (in thousands):
Carrying Amount as of | |||||||||||||||||||||||||||||||||||
| Conversion Rate per $1,000 Principal | Initial Conversion Price | Maturities | Stated Interest Rates | September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||
| Convertible notes: | |||||||||||||||||||||||||||||||||||
Principal – 2026 Notes | 3.2392 | $ | 2026 | $ | $ | ||||||||||||||||||||||||||||||
Principal – 2027 Notes | 20.4526 | $ | 2027 | ||||||||||||||||||||||||||||||||
Principal – 2030 Notes | 27.6656 | $ | 2030 | ||||||||||||||||||||||||||||||||
| Unamortized debt issuance costs, net | ( | ( | |||||||||||||||||||||||||||||||||
| Net carrying amount | $ | $ | |||||||||||||||||||||||||||||||||
1) We entered into capped call transactions in connection with the 2026 and 2030 Notes. The cap price of the capped call transactions relating to the 2026 Notes and 2030 Notes was initially $343.02 and $47.74 , respectively, subject to certain adjustments under the terms of the capped call transactions. See below "--Capped Call Transactions."
Interest on the Notes is payable semi-annually in arrears. The combined interest expense on the Notes related to regular interest and the amortization of debt issuance cost was $6.0 million and $18.1 million for the three and nine months ended September 30, 2026, respectively, and $6.1 million and $18.0 million for the three and nine months ended September 30, 2025, respectively.
As of September 30, 2026 and December 31, 2025, the estimated fair value of the 2030 Notes was approximately $931 million and $1.0 billion, respectively, the estimated fair value of the 2027 Notes was approximately $1.1 billion and $1.2 billion, respectively, and the estimated fair value of the 2026 Notes was approximately $555 million and $540 million, respectively. The fair value of the 2027 Notes was based on a combination of a discounted cash flow and Black-Scholes option-pricing model. The fair value of the 2030 Notes and 2026 Notes was based on quoted prices as of that date.
The 2027 Notes may be converted at the election of the holders thereof at any time prior to maturity. On August 15, 2026, the 2026 Notes became convertible at the election of the holders thereof and remain convertible until the second scheduled trading day immediately preceding the maturity thereof. The 2030 Notes are convertible at the option of the respective holders thereof if a conversion condition applicable to such series of Notes is triggered. During the three and nine months ended September 30, 2026, none of the conversion conditions of the 2030 Notes were triggered, and the 2030 Notes were not convertible as of September 30, 2026.
Any conversion of the 2026 Notes on or after August 15, 2026, will be satisfied in cash up to the principal amount of the 2026 Notes plus shares of our common stock for any premium above par. Any such conversion of the 2027 Notes and 2030 Notes described above may be satisfied at our election with either cash, shares of our common stock, or a combination of cash and shares of our common stock. The conversion rates for the Notes are subject to customary adjustments for certain events as described in the relevant indenture governing the Notes.
The Notes are subject to additional terms. In connection with certain corporate events, as described in the indentures governing the Notes, we will increase the conversion rate for a holder of the applicable series of Notes who elects to convert those Notes in connection with the event. Additionally, upon the occurrence of certain corporate events and subject to certain exceptions, as described in the indenture governing the applicable series of Notes, holders of those Notes may require us to repurchase all or a portion of those Notes at a price equal to 100 % of the principal amount to be repurchased, plus any accrued and unpaid interest to date. The 2026 Notes and 2030 Notes are also redeemable at our option if
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certain conditions are met, as described in the indentures governing the 2026 Notes and 2030 Notes respectively.
As of September 30, 2026, no holders of the Notes have exercised the conversion rights.
Convertible Note Repurchase
During the first quarter of 2025, and the first quarter of 2024, the Company repurchased in privately negotiated transactions and extinguished a portion of the 2026 Notes, with a total principal balance of $688 million and $480 million, respectively. The aggregate repurchase price for these notes was $642 million and $415 million, respectively, resulting in pre-tax gains of $42.7 million and $61.4 million, respectively, net of the write-off of unamortized issuance costs. These gains were included in Interest income and other income (expense), net, in the condensed consolidated statement of operations.
Capped Call Transactions
We entered into capped call transactions, to reduce the potential dilutive effect of the 2026 Notes (the "2026 Capped Call Transactions"), and 2030 Notes (the "2030 Capped Call Transactions", together with the 2026 Capped Call Transactions, the "Capped Call Transactions"), in connection with their pricing. The 2026 Capped Call Transactions, and the 2030 Capped Call Transactions, had net costs of $48.1 million and $44.4 million, respectively, with call options totaling approximately 5.6 million and 19.1 million shares of our common stock, and with expiration dates ranging from September 18, 2026 to November 12, 2026, and January 15, 2030 to March 13, 2030, respectively. The strike price of the 2026 Capped Call Transactions and the 2030 Capped Call Transactions are $308.72 and $36.15 , respectively, and the cap prices are initially $343.02 and $47.74 per share, respectively, subject to adjustments in certain circumstances. The Capped Call Transactions are freestanding, are considered separately exercisable from the 2026 Notes and 2030 Notes, and meet the conditions for equity classification.
7. Commitments and Contingencies
The following table summarizes our non-cancelable contractual commitments as of September 30, 2026 (in thousands):
| Total | Remainder of 2026 | 2027‑2028 | 2029‑2030 | Thereafter | |||||||||||||||||||||||||
Operating leases (1) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Purchase commitments (2) | |||||||||||||||||||||||||||||
Convertible note principal and interest (3) | |||||||||||||||||||||||||||||
Equity investments (4) | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(1) Operating leases consist of obligations for real estate, including leases that are not yet commenced or reflected on our consolidated balance sheet with future minimum lease payments of $13.5 million. These leases will commence in 2026 and 2027, with lease terms of approximately two to eleven years .
(2) Consists of purchase commitments with original terms greater than one year. The substantial majority of these commitments are related to agreements with our data center hosting providers.
(3) Convertible notes due 2026, 2027, and 2030. See Note 6, "Borrowings," above for further discussion.
(4) Consists of a binding obligation to acquire $100 million of shares in AppsFlyer, subject to certain closing conditions and adjustments. We expect to complete this purchase by the end of 2027.
Legal Matters
In the normal course of business, we are party to various legal disputes that we believe are of the type common to companies engaged in our lines of business, including but not limited to commercial disputes, employment issues, tax disputes and disputes involving claims by third parties that our activities infringe their Intellectual Property ("IP") rights, as well as regulatory investigations or inquiries. Legal proceedings and regulatory investigations or inquiries are often complex, may require the expenditure of
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significant funds and other resources, and the outcomes of such proceedings are inherently uncertain, with material adverse outcomes possible. IP claims generally involve the demand by a third-party that we cease the use or sale of the allegedly infringing products, processes or technologies and/or pay damages or royalties for past, present and future use of the allegedly infringing IP. These disputes may involve highly complex and technical issues, the outcome of which is inherently uncertain. Moreover, from time to time, we pursue litigation to assert our IP rights. Regardless of the merit or resolution of any such litigation, complex IP litigation is generally costly and diverts the efforts and attention of our management and technical personnel.
Contingency Assessment
We are currently engaged in a number of legal actions in the ordinary course of our business; however, we do not believe, based on currently available facts and circumstances, that the final outcome of any pending legal proceedings, ongoing regulatory investigations or tax disputes, taken individually or as a whole, will have a material adverse effect on our condensed consolidated financial statements. However, lawsuits may involve complex questions of fact and law and may require the expenditure of significant funds and other resources to defend. The results of litigation, regulatory investigations or tax disputes are inherently uncertain, and material adverse outcomes are possible. From time to time, we may enter into confidential discussions regarding the potential settlement of such lawsuits. Any settlement of pending litigation could require us to incur substantial costs and other ongoing expenses.
We accrue a liability when management believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. We also disclose material contingencies when we believe a loss is not probable but reasonably possible. Legal costs related to such potential losses are expensed as incurred. In addition, recoveries are shown as a reduction in legal costs in the period in which they are realized. With respect to our outstanding matters, based on current knowledge, we believe that the resolution of such matters will not, either individually or in the aggregate, have a material adverse effect on our business or our condensed consolidated financial statements.
Indemnifications
In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, investors, directors, officers, employees, and other parties with respect to certain matters. Indemnification may include losses from our breach of such agreements, services we provide, or third-party intellectual property infringement claims. These indemnifications may survive termination of the underlying agreement, and the maximum potential amount of future indemnification payments may not be subject to a cap. As of September 30, 2026, we have not incurred any material costs as a result of such obligations and we have not accrued any material liabilities related to such obligations in the accompanying condensed consolidated financial statements.
Letters of Credit
We had $5.0 million and $8.5 million of secured letters of credit outstanding as of September 30, 2026 and December 31, 2025, respectively. These primarily relate to our office space leases and are fully collateralized by certificates of deposit which we record in restricted cash as "Other assets" and "Prepaid expenses and other" on our condensed consolidated balance sheets.
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8. Stock‑Based Compensation
Stock-based compensation expense is as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Cost of revenue | $ | $ | $ | $ | |||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
Stock Options
A summary of our stock option, including price-vested options ("PVO"), activity is as follows:
| Options Outstanding | |||||||||||||||||
| Stock Options Outstanding | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (In Years) | |||||||||||||||
| Balance as of December 31, 2025 | $ | ||||||||||||||||
| Exercised | ( | $ | |||||||||||||||
| Forfeited, cancelled, or expired | ( | $ | |||||||||||||||
| Balance as of September 30, 2026 | $ | ||||||||||||||||
Restricted Stock Units
A summary of our restricted stock units ("RSU"), including price-vested units ("PVU"), and performance-based restricted stock units ("PSU"), activity is as follows:
| Unvested RSUs | |||||||||||
| Number of Shares | Weighted-Average Grant-Date Fair Value | ||||||||||
| Unvested as of December 31, 2025 | $ | ||||||||||
| Granted | $ | ||||||||||
| Vested | ( | $ | |||||||||
| Forfeited | ( | $ | |||||||||
| Unvested as of September 30, 2026 | $ | ||||||||||
Price-Vested Options and Price-Vested Units
The vesting for each of the PVOs and PVUs is subject to the fulfillment of both a service period that extends up to four and three years , respectively, and the achievement of a stock price hurdle during the relevant performance period that extends up to six and five years , respectively. The fair value of each PVO and PVU award is estimated using a Monte Carlo simulation that uses assumptions determined on the date of grant. No outstanding options or units, which had not already met their price hurdle in a prior period, attained their price hurdle in 2026.
Performance-Based Restricted Stock Units
Starting in the first quarter of 2025, we have periodically issued PSUs to certain executives as part of their compensation. The vesting for each PSU is subject to the fulfillment of both a service period of
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Fair Value Assumptions
The calculated grant-date fair value of stock options, PVUs, and PVOs granted, were estimated using the Black-Scholes option-pricing model for stock options, and a Monte Carlo simulation for the PVUs and PVOs, with the following assumptions:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||
| 2026 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||
| Expected dividend yield | ||||||||||||||||||||||||||||||||||||||
| Risk-free interest rate | ||||||||||||||||||||||||||||||||||||||
| Expected volatility | ||||||||||||||||||||||||||||||||||||||
| Expected term (in years) | ||||||||||||||||||||||||||||||||||||||
| Fair value of underlying common stock | $ | $ | $ | |||||||||||||||||||||||||||||||||||
Employee Stock Purchase Plan
The fair value of shares offered under our Employee Stock Purchase Plan ("ESPP") was determined on the grant date using the Black-Scholes option pricing model. The following table summarizes the assumptions used and the resulting grant-date fair values of our ESPP:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2025 | ||||||||||||||||||||||||||||||||||
| Expected dividend yield | |||||||||||||||||||||||||||||||||||
| Risk-free interest rate | |||||||||||||||||||||||||||||||||||
| Expected volatility | |||||||||||||||||||||||||||||||||||
| Expected term (in years) | |||||||||||||||||||||||||||||||||||
| Grant-date fair value per share | $ | $ | |||||||||||||||||||||||||||||||||
Additional information related to the ESPP is provided below (in thousands, except per share amounts):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2026 | 2025 | |||||||||||||||||||||
| Shares issued under the ESPP | |||||||||||||||||||||||
| Weighted-average price per share issued | $ | $ | $ | ||||||||||||||||||||
During 2025, we suspended the ESPP program, effective in the first quarter of 2026. As a result of the suspension, no new offering periods have commenced after March 2, 2026.
9. Income Taxes
Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, we update the estimated annual
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effective tax rate and make a year-to-date adjustment to the provision. The estimated annual effective tax rate is subject to volatility due to several factors, including variability in accurately predicting our pre-tax income or loss and the mix of jurisdictions to which they relate, intercompany transactions, changes in how we do business, and tax law developments.
Our effective tax rate for the three and nine months ended September 30, 2026 and 2025 differs from the U.S. federal statutory tax rate of 21% primarily due to the need to record a valuation allowance on U.S. losses and tax expense on foreign earnings and losses taxed at different rates.
The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We regularly assess the ability to realize our deferred tax assets and establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. In performing this assessment with respect to each jurisdiction, we review all available positive and negative evidence. Primarily due to our history of losses, we believe that it is more likely than not that the deferred tax assets of our U.S. federal, U.S. state, and certain foreign jurisdictions will not be realized and we have maintained a full valuation allowance against such deferred tax assets.
As of September 30, 2026, we had $187.8 million of gross unrecognized tax benefits, of which $36.2 million would impact the effective tax rate, if recognized. It is reasonably possible that the amount of unrecognized tax benefits as of September 30, 2026 could increase or decrease significantly as the timing of the resolution, settlement, and closure of audits is highly uncertain. We believe that we have adequately provided for any reasonably foreseeable outcome related to our tax audits and that any settlement will not have a material impact on our financial condition and operating results at this time.
10. Net Income (Loss) per Share of Common Stock
Basic net income (loss) per share is calculated using our weighted-average outstanding shares of common stock, including the impact of the redeemable noncontrolling interest from our China JV. Diluted net income (loss) per share is calculated using our weighted-average outstanding common stock including the dilutive effect of convertible notes using the if-converted method, and the dilutive effect of stock awards as determined under the treasury stock method. Stock awards include outstanding stock options, PVOs, RSUs, PVUs, PSUs, and ESPP units. Potential dilutive shares of common stock are excluded from the computation of diluted net income (loss) per share, if the impact of including them would have been antidilutive.
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The following table shows the calculation of basic and diluted net income (loss) per share (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income (loss) attributable to Unity Software Inc. | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Accretion for redeemable noncontrolling interests | ( | ( | |||||||||||||||||||||
| Net income (loss) attributable to common stockholders of Unity Software Inc. | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Weighted-average shares used in computation of basic net income (loss) per share | |||||||||||||||||||||||
| Basic net income (loss) per share attributable to common stockholders of Unity Software Inc. | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Net income (loss) attributable to common stockholders of Unity Software Inc. | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Increase from forgone financing costs on dilutive convertible notes, net of tax | |||||||||||||||||||||||
| Diluted net income (loss) attributable to common stockholders of Unity Software Inc. | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Weighted-average shares used in computation of basic net income (loss) per share | |||||||||||||||||||||||
| Convertible notes | |||||||||||||||||||||||
| Stock options and PVOs | |||||||||||||||||||||||
| Unvested RSUs, PVUs, and PSUs | |||||||||||||||||||||||
| Weighted-average shares used in computation of diluted net income (loss) per share | |||||||||||||||||||||||
| Diluted net income (loss) per share attributable to common stockholders of Unity Software Inc. | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
The following table presents the total number of potentially dilutive common stock, which were excluded from the computation of diluted net income (loss) per share since their effect would have been antidilutive, outstanding as of the end of each period (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Convertible notes | |||||||||||||||||||||||
| Stock options and PVOs | |||||||||||||||||||||||
| Unvested RSUs, PVUs, and PSUs | |||||||||||||||||||||||
11. Segment Information
We have one reportable segment, software solutions. See "Revenue Recognition" in Note 1 of our 2025 Annual Report on Form 10-K, for detailed information regarding our products and services.
Our chief operating decision maker is the chief executive officer, who on a consolidated basis, assesses the performance of, drives improvements in, and decides how to allocate resources in the reportable segment, based on multiple measures of performance including consolidated net income, adjusted EBITDA, adjusted gross margin, and adjusted EPS. As such, consolidated net income, which is
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reported and reconciled with all significant segment expenses on our consolidated statement of operations, is the measure that is most consistent with GAAP, while adjusted EBITDA, adjusted gross margin, and adjusted EPS are additional measures of our segment profitability.
The measure of segment assets is reported on the balance sheet as total consolidated assets. We do not have material intra-entity sales or transfers.
12. Subsequent Event
In October 2026, we entered into an agreement to purchase, and completed the purchase of, a minority, equity interest in a private company for $100 million. We are still evaluating the accounting for this transaction.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Please read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition, or results of operations. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in "Part I, Item 1A. Risk Factors" of our Annual Report on Form 10-K filed with the SEC on February 11, 2026, "Part II, Item 1A. Risk Factors" of our Quarterly Reports on Form 10-Q filed with the SEC on May 7, 2026, and August 6, 2026, and "Part II, Item 1A. Risk Factors" included elsewhere in this report. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments. See the section titled "Note Regarding Forward-Looking Statements" in this report.
Overview
Unity offers a suite of tools to develop, deploy, and grow games and interactive experiences across all major platforms from mobile, PC, and console, to extended reality (XR).
Our platform consists of two complementary sets of solutions: Create Solutions and Grow Solutions.
Recent Developments in Our Business
In the first quarter of 2026, we announced we would sunset the ironSource Ads Network, one of our monetization networks, and we began the process of exiting our Supersonic game publishing business. Revenue from these businesses is now included in non-strategic revenue for all periods presented. The sunset of the ironSource Ads Network was substantially completed in the second quarter of 2026, and on August 4, 2026, we completed the sale of our Supersonic business for net proceeds of $38.0 million, resulting in a gain on sale of business of $4.5 million, recorded primarily within general and administrative expense.
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Results of Operations
The following table summarizes our condensed consolidated statements of operations data for the periods indicated (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue | $ | 622,092 | $ | 470,615 | $ | 1,676,798 | $ | 1,346,559 | |||||||||||||||
| Cost of revenue | 112,505 | 120,332 | 575,851 | 348,500 | |||||||||||||||||||
| Gross profit | 509,587 | 350,283 | 1,100,947 | 998,059 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Research and development | 251,148 | 244,357 | 783,848 | 679,789 | |||||||||||||||||||
| Sales and marketing | 103,471 | 165,869 | 431,216 | 489,395 | |||||||||||||||||||
| General and administrative | 54,321 | 65,913 | 168,868 | 201,418 | |||||||||||||||||||
| Total operating expenses | 408,940 | 476,139 | 1,383,932 | 1,370,602 | |||||||||||||||||||
| Operating income (loss) | 100,647 | (125,856) | (282,985) | (372,543) | |||||||||||||||||||
| Interest expense | (6,043) | (6,043) | (18,095) | (17,964) | |||||||||||||||||||
| Interest income and other income (expense), net | 24,325 | 14,448 | 45,730 | 92,396 | |||||||||||||||||||
| Income (loss) before income taxes | 118,929 | (117,451) | (255,350) | (298,111) | |||||||||||||||||||
| Provision for (benefit from) income taxes | (2,661) | 9,377 | (7,341) | 13,989 | |||||||||||||||||||
| Net income (loss) | $ | 121,590 | $ | (126,828) | $ | (248,009) | $ | (312,100) | |||||||||||||||
The following table sets forth the components of our condensed consolidated statements of operations data as a percentage of revenue for the periods indicated:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||
| Cost of revenue | 18 | 26 | 34 | 26 | |||||||||||||||||||
| Gross profit | 82 | 74 | 66 | 74 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Research and development | 40 | 52 | 47 | 51 | |||||||||||||||||||
| Sales and marketing | 17 | 35 | 26 | 36 | |||||||||||||||||||
| General and administrative | 9 | 14 | 10 | 15 | |||||||||||||||||||
| Total operating expenses | 66 | 101 | 83 | 102 | |||||||||||||||||||
| Operating income (loss) | 16 | (27) | (17) | (28) | |||||||||||||||||||
| Interest expense | (1) | (1) | (1) | (1) | |||||||||||||||||||
| Interest income and other income (expense), net | 4 | 3 | 3 | 7 | |||||||||||||||||||
| Income (loss) before income taxes | 19 | (25) | (15) | (22) | |||||||||||||||||||
| Provision for (benefit from) income taxes | (1) | 2 | — | 1 | |||||||||||||||||||
| Net income (loss) | 20 | % | (27) | % | (15) | % | (23) | % | |||||||||||||||
Revenue
Create Solutions
We generate Create Solutions revenue primarily through our suite of Create Solutions subscriptions inclusive of enterprise support, professional services, and consumption services. Our subscriptions provide customers access to technologies that allow them to edit, run, and iterate interactive, RT3D and
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2D experiences that can be created once and deployed to a variety of platforms. Enhanced support services are provided to our enterprise customers and are generally sold separately from the Create Solutions subscriptions. Professional services are provided to our customers which are primarily platform integrations, but also include consulting, training, and custom application and workflow development. Consumption services consist of cloud and hosting services provided to our customers to simplify and enhance the way our users access and harness our solutions.
Grow Solutions
We generate Grow Solutions revenue primarily through our monetization solutions and game publishing services. Our monetization solutions allow publishers, original equipment manufacturers, and mobile carriers to sell available advertising inventory on their mobile applications or hardware devices to advertisers for in-application or on-device placements. Our revenue represents the amount we retain from the transaction we are facilitating through our auction and mediation platform. Our game publishing services provide game developers with the infrastructure and expertise to launch their mobile games and manage their growth; this is achieved through marketability testing tools, live games management tools and game design support, and optimizing the implementation of the customer's commercial model. Through these publishing services, we generate revenue from in-app advertising and related purchases in published games.
As a result of the sunsetting of the ironSource Ads Network (one of our monetization networks), and divestiture of our Supersonic game publishing services, we expect Grow Solutions revenue to consist primarily of our "Unity Ads Network" (our principal monetization network) by the end of 2026.
Our total revenue is summarized as follows (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Create Solutions | $ | 165,070 | $ | 152,359 | $ | 479,335 | $ | 456,519 | |||||||||||||||
| Grow Solutions | 457,022 | 318,256 | 1,197,463 | 890,040 | |||||||||||||||||||
| Total revenue | $ | 622,092 | $ | 470,615 | $ | 1,676,798 | $ | 1,346,559 | |||||||||||||||
Total revenue increased in the three and nine months ended September 30, 2026 from the prior year periods, primarily due to an increase in Grow Solutions revenue from growth in the Unity Ads Network, driven by Unity Vector, partially offset by decreases in revenue from the ironSource Ads Network.
Total revenue also increased due to an increase in Create Solutions revenue, driven by higher subscription revenue, partially offset by lower cloud and hosting services revenue, resulting from our 2025 portfolio reset. Create Solutions subscription revenue in 2025 included approximately $12 million from the sale of a term license in the second quarter of 2025.
Included in revenue in the nine months ended September 30, 2026 and 2025, are approximately $161 million and $299 million, respectively, of non-strategic portfolio revenue, primarily in Grow Solutions.
Cost of Revenue, Gross Profit, and Gross Margin
Cost of revenue consists primarily of the amortization and impairment of intangible assets, hosting expenses, personnel costs (including salaries, benefits, and stock-based compensation) for employees and subcontractors associated with our product support and professional services organizations, and direct costs associated with our advertising offerings.
Gross profit, or revenue less cost of revenue, has been and will continue to be affected by various factors, including our product mix, the costs associated with third-party hosting services and the extent to which we expand and drive efficiencies in our hosting costs, professional services, and customer support organizations. We expect our gross profit to increase in absolute dollars in the long term, but to fluctuate from period to period as a percentage of revenue.
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Cost of revenue for the three months ended September 30, 2026 decreased from the prior year period, primarily due to a decrease in amortization of intangible assets, resulting from the impairment charge recognized in the first quarter of 2026, partially offset by increases in direct costs associated with our advertising offerings, and in hosting expenses.
Cost of revenue for the nine months ended September 30, 2026 increased from the prior year period, primarily due to the impairment of long-lived intangible assets recognized in the first quarter of 2026, partially offset by a decrease in the amortization of intangible assets resulting from the reduced asset base following that impairment. To a lesser extent, the increase also reflected higher direct costs associated with our advertising offerings and higher hosting expenses, both driven by growth in related revenue streams.
Operating Expenses
Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. The most significant component of our operating expenses is personnel-related costs, including salaries and wages, sales commissions, bonuses, benefits, stock-based compensation, and payroll taxes.
During 2025 we had workforce reductions from our ongoing restructuring efforts. In the nine months ended September 30, 2025, we incurred incremental employee separation costs related to these actions of approximately $23 million, primarily within research and development, and sales and marketing. In addition, we incurred approximately $16 million of non-employee charges associated with this restructuring in 2025.
In the first quarter of 2026, we announced we would sunset the ironSource Ads Network and would sell our Supersonic game publishing business. Following these announcements, we incurred incremental impairment charges of $279 million, in the nine months ended September 30, 2026, associated with these decisions. The impairment charges include $227 million within cost of revenue, and $47 million within sales and marketing expense. Furthermore, in the nine months ended September 30, 2026, we incurred employee separation costs and other non-employee charges of approximately $51 million from our ongoing global restructuring efforts, primarily related to the planned closure of Unity France. These incremental charges are primarily in research and development. Finally upon the sale of Supersonic on August 4, 2026, we recorded a gain on sale of business of $4.5 million, primarily within general and administrative expense.
Research and Development
Research and development expenses primarily consist of personnel-related costs (including salaries, benefits, and stock-based compensation) for the design and development of our platform, hosting expenses, and amortization expenses related to intangible assets. We expect our research and development expenses to increase in absolute dollars in the long term, as we invest in new solutions, expand features and functionality with existing solutions, support our artificial intelligence ("AI") and machine learning initiatives, and enter new markets. We expect research and development expenses to fluctuate as a percentage of revenue from period to period.
Research and development expense for the three months ended September 30, 2026 increased from the prior year period, primarily due to an increase in hosting expenses, driven by our increased investments in Unity Vector, partially offset by decreases in personnel costs.
Research and development expense for the nine months ended September 30, 2026 increased from the prior year period, primarily due to an increase in amortization costs from the change in useful lives of certain intangible assets in 2025, and an increase in hosting expenses.
Sales and Marketing
Our sales and marketing expenses consist primarily of personnel-related costs (including salaries, benefits, and stock-based compensation), the amortization and impairment of intangible assets, and advertising and marketing programs, including user acquisition costs and digital account-based
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marketing, user events such as developer-centric conferences and our Unite user conferences. Our user acquisition costs have decreased as a result of the divestiture of the Supersonic business noted above. While we expect sales and marketing costs to remain below historical levels, they may fluctuate in future periods as we continue to invest in our business.
Sales and marketing expense for the three months ended September 30, 2026 decreased from the prior year period, primarily due to a decrease in amortization of intangible assets resulting from the impairment recognized in the first quarter of 2026, and a decrease in our user acquisition costs following the sale of the Supersonic business in the third quarter of 2026.
Sales and marketing expense for the nine months ended September 30, 2026 decreased from the prior year period, primarily due to decreases in amortization of intangible assets, driven by the impairment we recognized in the first quarter of 2026, and decreases in our user acquisition costs and personnel costs. These were partially offset by an impairment of long-lived intangible assets recognized in the first quarter of 2026.
General and Administrative
Our general and administrative expenses primarily consist of personnel-related costs (including salaries, benefits, and stock-based compensation) for finance, legal, human resources, IT and administrative employees; professional fees for external legal, accounting, and other professional services; and allocated overhead.
General and administrative expense for the three and nine months ended September 30, 2026 decreased from the prior year periods, primarily due to decreases in allocated overhead and personnel-related costs, both driven by reductions in our real estate footprint and in headcount, due to restructuring in 2025. The decrease was further driven by the gain from the sale of our Supersonic business in the third quarter of 2026.
Interest Expense
Interest expense consists primarily of interest expense associated with our convertible debt and amortization of debt issuance costs.
Interest expense for the three and nine months ended September 30, 2026 was substantially unchanged from the prior year periods.
Interest Income and Other Income (Expense), Net
Interest income and other income (expense), net, consists primarily of interest income earned on our cash and cash equivalents, impairments of equity investments, and foreign currency gains and losses. Our exposure to fluctuations in foreign currencies results primarily from our global operations, and related personnel expense.
Interest income and other income (expense), net, for the three months ended September 30, 2026 increased from the prior year period, primarily due to increases in interest income and foreign currency gains.
Interest income and other income (expense), net, for the nine months ended September 30, 2026 decreased from the prior year period, primarily due to gains on the repurchase of convertible debt of $42.7 million in the first quarter of 2025, and an impairment of an equity investment of $15.0 million in the first quarter of 2026.
Provision for (benefit from) Income Taxes
Provision for (benefit from) income taxes consists primarily of income taxes in certain foreign jurisdictions where we conduct business. We have a valuation allowance against certain of our deferred tax assets, including net operating loss carryforwards and tax credits related primarily to research and development. Our overall effective income tax rate in future periods may be affected by the geographic mix of earnings in the countries in which we operate. Our future effective tax rate may also be affected by changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, or
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accounting principles in the jurisdictions in which we conduct business. See Note 9, "Income Taxes," of the Notes to Condensed Consolidated Financial Statements.
Provision for (benefit from) income taxes for the three months ended September 30, 2026 decreased from the prior year period, primarily due to lower U.S. tax expense resulting from a change in our estimated annual effective tax rate, partially offset by higher earnings in foreign jurisdictions, including the gain on the sale of the Supersonic business.
Provision for (benefit from) income taxes for the nine months ended September 30, 2026 decreased from the prior year period, primarily due to a larger current-year tax benefit in foreign jurisdictions resulting from restructuring activities initiated in the first quarter of 2026 and lower U.S. tax expense resulting from a change in our estimated annual effective tax rate.
Non-GAAP Financial Measures
To supplement our consolidated financial statements prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe the following non-GAAP measures are useful in evaluating our operating performance. We are presenting these non-GAAP financial measures because we believe, when taken collectively, they may be helpful to investors because they provide consistency and comparability with past financial performance.
However, non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As a result, our non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered in isolation or as a substitute for our consolidated financial statements presented in accordance with GAAP.
Adjusted Gross Profit, Adjusted EBITDA, and Adjusted EPS
We define adjusted gross profit as GAAP gross profit excluding stock-based compensation expense, amortization and impairment of intangible assets, depreciation expense, and restructuring and reorganization costs. We define adjusted gross margin as adjusted gross profit as a percentage of revenue. We define adjusted EBITDA as net income or loss excluding stock-based compensation expense, amortization and impairment of intangible assets, depreciation expense, gain on sale of business, restructuring and reorganization costs, interest expense, interest income and other income (expense), net and the provision for income taxes.
We define adjusted EPS as GAAP net income or loss excluding stock-based compensation expense, amortization and impairment of intangible assets, depreciation expense, gain on sale of business, restructuring and reorganization costs, and the income tax impact of the preceding adjustments (cumulatively "adjusted net income"), increased by the tax effected impacts from any relevant dilutive securities, divided by the diluted weighted-average outstanding shares. The effective tax rate used in calculating adjusted EPS is estimated for each period, based on the net income or loss adjusted for the items noted above, and may differ from the effective rate used in our financial statements. Shares of common stock that are excluded in our calculation of GAAP diluted net loss per share due to their antidilutive impact on such calculations, are included in the diluted weighted average outstanding shares used in our calculation of adjusted EPS, to the extent they have a dilutive impact on adjusted EPS given the adjusted net income in each period.
We use adjusted gross profit, adjusted EBITDA, and adjusted EPS, in conjunction with traditional GAAP measures to evaluate our financial performance. We believe that adjusted gross profit, adjusted EBITDA, and adjusted EPS provide our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as these metrics exclude expenses that we do not consider to be indicative of our overall operating performance.
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The following table presents a reconciliation of our adjusted gross profit to our GAAP gross profit, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| GAAP gross profit | $ | 509,587 | $ | 350,283 | $ | 1,100,947 | $ | 998,059 | |||||||||||||||
| Add: | |||||||||||||||||||||||
| Stock-based compensation expense | 4,811 | 9,111 | 18,905 | 28,084 | |||||||||||||||||||
| Amortization of intangible assets | 5,695 | 27,293 | 39,314 | 80,990 | |||||||||||||||||||
| Impairment of intangible assets | — | — | 226,516 | — | |||||||||||||||||||
| Depreciation expense | 1,314 | 1,734 | 4,254 | 5,214 | |||||||||||||||||||
| Restructuring and reorganization costs | 4,766 | (23) | 8,628 | 786 | |||||||||||||||||||
| Adjusted gross profit | $ | 526,173 | $ | 388,398 | $ | 1,398,564 | $ | 1,113,133 | |||||||||||||||
| GAAP gross margin | 82 | % | 74 | % | 66 | % | 74 | % | |||||||||||||||
| Adjusted gross margin | 85 | % | 82 | % | 83 | % | 83 | % | |||||||||||||||
The following table presents a reconciliation of our adjusted EBITDA to net loss, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| GAAP net income (loss) | $ | 121,590 | $ | (126,828) | $ | (248,009) | $ | (312,100) | |||||||||||||||
| Stock-based compensation expense | 63,076 | 91,561 | 215,521 | 288,312 | |||||||||||||||||||
| Amortization of intangible assets | 76,738 | 125,345 | 271,642 | 297,213 | |||||||||||||||||||
| Impairment of intangible assets | — | — | 278,666 | — | |||||||||||||||||||
| Depreciation expense | 8,148 | 10,548 | 25,974 | 31,825 | |||||||||||||||||||
| Restructuring and reorganization costs | 12,510 | 7,899 | 50,772 | 39,130 | |||||||||||||||||||
| Gain on sale of business | (4,521) | — | (4,521) | — | |||||||||||||||||||
| Interest expense | 6,043 | 6,043 | 18,095 | 17,964 | |||||||||||||||||||
| Interest income and other income (expense), net | (24,325) | (14,448) | (45,730) | (92,396) | |||||||||||||||||||
| Provision for (benefit from) income taxes | (2,661) | 9,377 | (7,341) | 13,989 | |||||||||||||||||||
| Adjusted EBITDA | $ | 256,598 | $ | 109,497 | $ | 555,069 | $ | 283,937 | |||||||||||||||
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The following table presents a reconciliation of adjusted EPS to diluted net income (loss) per share attributable to Unity Software Inc., the most directly comparable measures as determined in accordance with GAAP, for the periods presented (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| GAAP net income (loss) | $ | 121,590 | $ | (126,828) | $ | (248,009) | $ | (312,100) | |||||||||||||||
| Stock-based compensation expense | 63,076 | 91,561 | 215,521 | 288,312 | |||||||||||||||||||
| Amortization of intangible assets | 76,738 | 125,345 | 271,642 | 297,213 | |||||||||||||||||||
| Impairment of intangible assets | — | — | 278,666 | — | |||||||||||||||||||
| Depreciation expense | 8,148 | 10,548 | 25,974 | 31,825 | |||||||||||||||||||
| Restructuring and reorganization costs | 12,510 | 7,899 | 50,772 | 39,130 | |||||||||||||||||||
| Gain on sale of business | (4,521) | — | (4,521) | — | |||||||||||||||||||
| Income tax impact of adjusting items | (64,417) | (16,561) | (138,253) | (64,852) | |||||||||||||||||||
| Adjusted net income used for calculation of adjusted EPS, before impact of dilutive instruments | $ | 213,124 | $ | 91,964 | $ | 451,792 | $ | 279,528 | |||||||||||||||
| Increase from forgone financing costs on dilutive convertible notes, net of tax | 4,686 | 4,714 | 14,030 | 14,014 | |||||||||||||||||||
| Adjusted net income used for calculation of adjusted EPS, including impact of dilutive instruments | $ | 217,810 | $ | 96,678 | $ | 465,822 | $ | 293,542 | |||||||||||||||
| Weighted-average common shares used in GAAP basic net income (loss) per share attributable to common stockholders of Unity Software Inc. | 441,557 | 424,296 | 437,930 | 417,919 | |||||||||||||||||||
| Convertible notes | 41,348 | 41,348 | 41,348 | 37,770 | |||||||||||||||||||
| Stock options and PVOs | 3,780 | 6,510 | 3,007 | 6,253 | |||||||||||||||||||
| Unvested RSUs, PVUs, and PSUs | 11,480 | 13,055 | 8,624 | 7,598 | |||||||||||||||||||
| ESPP | — | 130 | 42 | 261 | |||||||||||||||||||
| Non-GAAP weighted-average common shares used in adjusted EPS | 498,165 | 485,339 | 490,951 | 469,801 | |||||||||||||||||||
| GAAP diluted net income (loss) per share attributable to common stockholders of Unity Software Inc. | $ | 0.25 | $ | (0.30) | $ | (0.59) | $ | (0.75) | |||||||||||||||
| Total impact on diluted net income (loss) per share attributable to common stockholders of Unity Software Inc. from non-GAAP adjustments and noncontrolling interests | $ | 0.21 | $ | 0.52 | $ | 1.62 | $ | 1.42 | |||||||||||||||
| Total impact on diluted net income (loss) per share attributable to common stockholders of Unity Software Inc. from antidilutive common stock now included | $ | (0.02) | $ | (0.02) | $ | (0.08) | $ | (0.05) | |||||||||||||||
| Adjusted EPS | $ | 0.44 | $ | 0.20 | $ | 0.95 | $ | 0.62 | |||||||||||||||
Free Cash Flow
We define free cash flow as net cash provided by operating activities less cash used for purchases of property and equipment. We believe that free cash flow is a useful indicator of liquidity as it measures our ability to generate cash, or our need to access additional sources of cash, to fund operations and investments.
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The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash provided by operating activities | $ | 500,869 | $ | 301,520 | |||||||
| Less: | |||||||||||
| Purchases of property and equipment | (12,746) | (16,271) | |||||||||
| Free cash flow | $ | 488,123 | $ | 285,249 | |||||||
| Net cash provided by (used in) investing activities | $ | 24,406 | $ | (18,271) | |||||||
| Net cash provided by financing activities | $ | 50,349 | $ | 76,113 | |||||||
Liquidity and Capital Resources
As of September 30, 2026, our principal sources of liquidity were cash and cash equivalents totaling $2.6 billion, which were primarily held for working capital purposes. Our cash equivalents are invested primarily in time deposits and in government money market funds.
Our material cash requirements from known contractual and other obligations consist of our convertible notes, obligations under operating leases for office space, contractual obligations for hosting services to support our business operations, and our commitment to acquire shares of AppsFlyer. See Part I, Item 1, Note 7 — "Commitments and Contingencies" for additional discussion of our principal contractual commitments.
In the first quarter of 2025 we issued $690 million in aggregate principal amount of the 2030 Notes, the proceeds of which were used to fund repurchases of outstanding 2026 Notes. We previously issued $1.7 billion in aggregate principal amount of the 2026 Notes in November 2021, of which $688 million in aggregate principal amount was repurchased in first quarter 2025 for $642 million, and $480 million in aggregate principal amount was repurchased in March 2024 for $415 million. We also previously issued $1.0 billion in aggregate principal amount of the 2027 Notes. See Part I, Item 1, Note 6, "Borrowings" for additional discussion of the Notes.
Since our inception, we have generated losses from our operations as reflected in our accumulated deficit of $4.4 billion as of September 30, 2026. As a result, we may require additional capital to execute our strategic initiatives to grow our business.
We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditures for at least the next 12 months, including the repayment of the 2026 Notes in cash upon their maturity in November 2026. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and potential future equity or debt transactions. Our future capital requirements, however, will depend on many factors, including our growth rate; the timing and extent of spending to support our research and development efforts; capital expenditures to build out new facilities and purchase hardware and software; the expansion of sales and marketing activities; and our continued need to invest in our IT infrastructure to support our growth. In addition, we have in the past entered into, and may in the future enter into, additional strategic partnerships as well as agreements to acquire or invest in complementary offerings, teams and technologies, including intellectual property rights, which could increase our cash requirements. As a result of these and other factors, we may choose or be required to seek additional equity or debt financing sooner than we currently anticipate. In addition, depending on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors, we may also from time to time seek to retire or purchase our outstanding debt, including the Notes, through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable
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to us, or at all, including as a result of macroeconomic conditions such as high interest rates, volatility in the capital markets and liquidity concerns at, or failures of, banks and other financial institutions. If we are unable to raise additional capital when required, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, and financial condition would be adversely affected.
Our changes in cash flows were as follows (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash provided by operating activities | $ | 500,869 | $ | 301,520 | |||||||
| Net cash provided by (used in) investing activities | 24,406 | (18,271) | |||||||||
| Net cash provided by financing activities | 50,349 | 76,113 | |||||||||
| Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash | 11,544 | 21,845 | |||||||||
| Net change in cash, cash equivalents, and restricted cash | $ | 587,168 | $ | 381,207 | |||||||
Cash Provided by Operating Activities
During the nine months ended September 30, 2026, net cash provided by operating activities was primarily due to our net loss, adjusted for certain non-cash items, which include impairments, depreciation and amortization, stock-based compensation, and other, and to a lesser extent, an increase in operating assets and liabilities. Our cash flows can fluctuate from period to period due to revenue seasonality, timing of billings, collections, and publisher payments, and historical cash flows are not necessarily indicative of our results in any future period.
Cash Provided by Investing Activities
During the nine months ended September 30, 2026, net cash provided by investing activities consisted of proceeds from the sale of assets held for sale, partially offset by purchases of property and equipment.
Cash Provided by Financing Activities
During the nine months ended September 30, 2026, net cash provided by financing activities consisted of proceeds from the issuance of common stock under our employee equity plans.
Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. These principles require us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. Our estimates are based on our historical experience and on various other assumptions that we believe are reasonable under the circumstances. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.
There have been no material changes to our critical accounting policies and estimates from those disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 11, 2026.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our assessment of our exposures to market risk has not changed materially since the presentation set forth in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 11, 2026.
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Item 4. Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the period covered by this report.
(a) Evaluation of Disclosure Controls and Procedures
Based on management's evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were designed to, and were effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
(b) Changes in Internal Control Over Financial Reporting
Based on management's evaluation, our principal executive officer and principal financial officer concluded that there has not been any material change in our internal control over financial reporting during the quarter ended September 30, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
The information set forth under Note 7. “Commitments and Contingencies” included in Part I, Item 1 of this Form 10-Q, is incorporated herein by reference. For additional discussion of certain risks associated with legal proceedings, see “Risk Factors” immediately below.
Item 1A. Risk Factors
Other than the risk factors listed below, there have been no material changes from the risk factors previously described under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 and Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarters ended March 31, 2026 and June 30, 2026.
Purchasing or owning Unity common stock involves investment risks including, but not limited to, the risks described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, and Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarters ended March 31, 2026 and June 30, 2026. Any one of those risks could harm our business, financial condition and results of operations or reputation, which could cause our stock price to decline. Additional risks, trends and uncertainties not presently known to us or that we currently believe are immaterial may also harm our business, financial condition, results of operations or reputation.
If we fail to timely release updates and new features to our platform, develop successful new products, or adapt and respond effectively to rapidly changing technology and customer needs, requirements, or preferences, our platform may become less competitive.
The markets in which we operate are subject to rapid technological change, changing customer needs, requirements and preferences, and are highly competitive. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes and competitive pressures on a timely basis. Emerging technologies like AI are likely to impact the way that customers utilize our solutions, as well as enhance the functionality of our solutions. If we do not continue to improve our AI capabilities and data infrastructure on a timely basis or at all, our business could be harmed.
Our ability to retain and expand within our existing customers and attract new ones, and increase our revenue, depends in large part on our ability to maintain, improve and differentiate our existing platform and introduce new functionality promptly and effectively, as well as developing successful new product offerings. Revenue growth from our offerings also depends on our ability to continue to respond to advancements in competing technologies, and end-user demands and expectations, which will require us to incur additional costs to implement. If we do not continue to improve our platform with additional products, features and functionality in a timely fashion, or if new products or improvements to our platform are ineffective or otherwise not well received by customers, our revenue could be adversely affected.
For example, in October 2026, we announced Unity Spark, a browser-based, AI-powered game creation tool for creators, and plans to integrate it with Google's Playground platform. We expect to launch Unity Spark in closed beta later in 2026, but we may not do as anticipated or at all, and its features and availability may differ from what we have announced. There can be no assurance that Unity Spark will be successful, will generate significant revenue or become profitable.
If we fail to deliver timely releases of our solutions that are ready for commercial use, we release a version, service, tool or update with a material vulnerability, or other error, or we are unable to enhance our platform to keep pace with rapid technological changes or respond to new offerings by our competitors, or if new technologies emerge that are able to deliver competitive solutions at lower prices, more efficiently, more conveniently or more securely than our solutions, or if new operating systems, gaming platforms or devices are developed and we are unable to support our customers' deployment of games and other applications onto those systems, platforms or devices, our business, financial condition and results of operations could be adversely affected.
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The actions of third parties with whom we do business may put our business and results of operations at risk.
We rely on third parties, including our strategic partners, for various aspects of our business, including deep technology collaborations, co-marketing, advertising partners, ad mediation services, ad attribution partners, development services agreements, and revenue share arrangements. Their actions may put our business, reputation, and brand at risk. In many cases, third parties may be given access to sensitive and proprietary information or personal information in order to provide services and support to our teams or customers, and they may misappropriate and engage in unauthorized use of our information, technology or customers' data. In addition, the failure of these third parties to provide adequate services and technologies, or the failure of the third parties to adequately maintain or update their services and technologies, could result in a disruption to our business operations. For example, we rely on ad attribution partners to accurately and reliably perform mobile measurement and attribute ad impressions. Any failure of those services may result in a reduction in the number of ads attributed to our ad platform and a resulting reduction in our revenue and the revenue realized by our ad publishers. Further, disruptions in the mobile application industry, financial markets, economic downturns, poor business decisions, or reputational harm may adversely affect our partners and may increase their propensity to engage in fraud or otherwise illegal or improper activity which could harm our business reputation, and they may not be able to continue honoring their obligations to us, or we may cease our arrangements with them. Similarly, we rely on third-party mediation platforms, some of which, including the MAX mediation platform ("MAX"), are operated by, or affiliated, with competing advertising networks. The majority of our Grow Solutions revenue is mediated through MAX. Our access to MAX is governed by a header bidding agreement (the "HBA") with AppLovin Corporation ("AppLovin"), which, if terminated, would prevent us accessing MAX. Interruption or loss of access to MAX would significantly harm our business and financial results. Alternative arrangements and services may not be available to us on commercially reasonable terms or at all and we may experience business interruptions upon a transition to an alternative partner or vendor. If we lose one or more business relationships, or experience a degradation of services, our business could be harmed and our financial results could be adversely affected.
On September 27, 2026, AppLovin filed an arbitration claim against us with JAMS alleging, among other things, breach of the HBA and unlawful and unfair business acts or practices related to our Ad Quality SDK (the "Arbitration Claim"), and sought provisional injunctive relief in San Francisco Superior Court to enjoin us from collecting or using what AppLovin claims to be its confidential and proprietary data, to disable that collection and to modify Ad Quality so that it no longer collects or uses that data. The court denied AppLovin's request on October 1, 2026. We have denied all of the allegations of wrongdoing in the Arbitration Claim and filed counterclaims against AppLovin with JAMS, including unfair competition on AppLovin's part. Although we cannot predict the ultimate outcome of the Arbitration Claim, we believe AppLovin's claims are without merit and intend to vigorously defend against them and pursue our counterclaims. An adverse ruling, or a deterioration in our relationship with AppLovin arising from the dispute, or otherwise, could result in changes to the terms on which we participate in MAX, restrictions on our use of data or technology relevant to our advertising business, a suspension or degradation of our access to MAX, and significant costs and expenses, any of which could materially and adversely affect our revenue and results of operations. In addition, disputes of this nature can be time-consuming and expensive to resolve and they divert management's time and attention and may harm our reputation and business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
None.
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
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Item 6. Exhibits
EXHIBIT INDEX
| Incorporated by Reference | ||||||||||||||||||||||||||||||||||||||
| Exhibit Number | Description of Exhibit | Form | File Number | Exhibit | Filing Date | |||||||||||||||||||||||||||||||||
| 3.1 | Amended and Restated Certificate of Incorporation of the Registrant | 8-K | 001-39497 | 3.1 | September 22, 2020 | |||||||||||||||||||||||||||||||||
| 3.2 | Amended and Restated Bylaws of the Registrant | 8-K | 001-39497 | 3.2 | September 8, 2023 | |||||||||||||||||||||||||||||||||
| 10.1† | CEO PPSU Grant Notice and Award Agreement | 8-K | 001-39497 | 10.1 | August 19, 2026 | |||||||||||||||||||||||||||||||||
| 31.1* | Section 302 Certification of Principal Executive Officer | |||||||||||||||||||||||||||||||||||||
| 31.2* | Section 302 Certification of Principal Financial Officer | |||||||||||||||||||||||||||||||||||||
| 32.1# | Section 906 Certification of Principal Executive Officer and Principal Financial Officer | |||||||||||||||||||||||||||||||||||||
| 101.INS | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||||||||||||||||||||||||||||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||||||||||||||||||||||||||||||||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||||||||||||||||||||||||||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||||||||||||||||||||||||||||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||||||||||||||||||||||||||||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | |||||||||||||||||||||||||||||||||||||
| * | Filed herewith. | |||||||||||||||||||||||||||||||||||||
| † | Indicates management contract or compensatory plan. | |||||||||||||||||||||||||||||||||||||
| # | The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any of the Registrant's filings under the Securities Act of 1933, as amended, irrespective of any general incorporation language contained in any such filing. | |||||||||||||||||||||||||||||||||||||
| The agreements and other documents filed as exhibits to this Quarterly Report on Form 10-Q are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time. | ||||||||||||||||||||||||||||||||||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| UNITY SOFTWARE INC. | |||||||||||
| Date: November 5, 2026 | By: | /s/ Michael Lieb | |||||||||
| Michael Lieb | |||||||||||
| Chief Accounting Officer | |||||||||||
| (Principal Accounting Officer and Duly Authorized Officer) | |||||||||||
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