U

In recent days, Unity Software has attracted upbeat analyst sentiment, with an average brokerage recommendation in the Strong Buy to Buy range and a Zacks Rank of Buy, supported by higher earnings estimate revisions. This alignment of improved recommendations and rising earnings forecasts highlights how analyst expectations are increasingly focused on Unity’s near-term operational execution and profitability trajectory. Next, we’ll examine how this wave of upward earnings estimate revisions could influence Unity’s existing investment narrative around AI-led growth. Invest in the nuclear renaissance through our list of 92 elite nuclear energy infrastructure plays powering the global AI revolution. To own Unity, you need to believe its engine and ad stack can translate heavy AI investment into improving profitability while it diversifies beyond gaming. The recent wave of upbeat analyst sentiment and higher earnings estimates supports that near term profitability is a key catalyst, but also underlines the main risk: Unity’s ability to execute its ongoing restructuring without disrupting growth in its ads and non gaming businesses. Among Unity’s recent updates, the decision to sunset the ironSource Ads Network and seek a buyer for the Supersonic publishing unit stands out here. That move reshapes Unity’s ads footprint at the same time analysts are revising earnings higher, linking the near term catalyst of margin improvement directly to execution risk around its retooled advertising platform and competitive position against peers in mobile advertising. Yet behind the upbeat analyst revisions and AI story, there is a key execution risk investors should be aware of around Unity’s restructuring and competitive ad tech position... Read the full narrative on Unity Software (it's free!) Unity Software's narrative projects $3.0 billion revenue and $513.7 million earnings by 2029. This requires 16.2% yearly revenue growth and an earnings increase of about $1.19 billion from -$672.7 million today. Uncover how Unity Software's forecasts yield a $35.72 fair value, a 23% downside to its current price. While consensus now leans optimistic, some of the highest target analysts were already assuming Unity could reach about US$3.7 billion in revenue and US$1.6 billion in earnings by 2029, which is a far more aggressive path than the baseline view and could look either more achievable or more stretched once the recent analyst upgrades and ad platform changes are fully reflected. Explore 5 other fair value estimates on Unity Software - why the stock might be worth as much as 27% more than the current price! Don't just follow the ticker - dig into the data and build a conviction that's truly your own. A great starting point for your Unity Software research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision. Our free Unity Software research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Unity Software's overall financial health at a glance. Every day counts. These free picks are already gaining attention. See them before the crowd does: Capitalize on the AI infrastructure supercycle with our selection of the 55 best 'picks and shovels' of the AI gold rush converting record-breaking demand into massive cash flow. This technology could replace computers: discover 24 stocks that are working to make quantum computing a reality. Find 49 companies with promising cash flow potential yet trading below their fair value. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include U. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Tyler Crowe, Travis Hoium, and Jon Quast discuss: MercadoLibre's rapid revenue growth and contracting margins. Has Unity Software finally turned the corner? The changing strategy for Celsius Holdings. Applovin's revenue continues to decelerate. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » A full transcript is below. Before you buy stock in MercadoLibre, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and MercadoLibre wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $432,189!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,330,956!* Now, it’s worth noting Stock Advisor’s total average return is 967% — a market-crushing outperformance compared to 212% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 21, 2026. This podcast was recorded on Aug. 6, 2026. Tyler Crowe: Big earnings moves today on Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe. Today, I'm joined by longtime Fool contributors, Travis Hoium and Jon Quast. Travis is doing the full gamut this week with hosting and analyst duties. Travis Hoium: A lot of Travis time. Tyler Crowe: Burning the candle on both ends this week. I think today might be the busiest day when it comes to earnings out there. I think it's something like 530 companies. Obviously, we can't get to all of them. What we did before the show was look at No. 1, companies that are moving or their stocks are moving big time after earnings releases, and also, we want to pick companies that are either Motley Fool favorites of our members, or some of our analysts, and some of our personal favorites as well. We're going to start today with MercadoLibre. Shares are down about 7% after the company reported earnings. Across the board, they beat expectations, but one of the things that was noticeable was that earnings have declined for a couple of quarters. Jon Quast: Well, let's start with the top line there, Tyler. This is its fastest growth in the last four years. That's really saying something because this is a company that has averaged 50% quarterly growth over the last 10 years. Growth is so important when it comes to the stocks that we're investing in. It's not the only factor, but it is a very crucial factor when it comes to market-beating investments. Mercado Libre, as you look at what it has done over the long-term, this has to be near the top of investors' minds when it comes to creating a list of long-term compounders. Travis Hoium: That growth rate was 50% for this quarter, just to be clear. I think this is just the place that the market is in today. This was a phenomenal quarter from a growth perspective, but the downside is margins are down, and this is an explicit trade-off that management is making, saying, you know what? We're going to give people more perks. We're going to give sellers more perks to try to drive more revenue to the business. In theory, you're playing something like an Amazon game where once people get used to both shopping on your platform and also building a business on your platform from a seller side, that should be a phenomenal place to be. But they're giving up that profitability short-term. That's what investors are saying, there's a yin and a yang here going, revenue growth is great, but I'm not seeing the profitability. How much do I really want to pay for this stock? I think that's the reaction today, and it's not just MercadoLibre. This is happening across the market. You look at a company like Duolingo, also down big today, same trade-off that they're making, we're going for user growth. We're not going for profitability today, and shares are selling off. This is the challenge when you get to a relatively highly valued market is when you're starting to make those tradeoffs, you never know which one the market wants to see. Jon Quast: Well, Travis, if I could jump in there on that trade-off, you look at the lower threshold for free shipping that it chose to do in Brazil a while back. That is actually working when it comes to the Amazon game that you referenced. User growth is up over 20% when you look at that. Then also, I think really key, the ratio of daily users to monthly users is at its highest level ever. This is becoming more of a daily habit for MercadoLibre users in its key markets, and then also items per buyer in Brazil are up 19%. I think that is a really crucial data point because this is basically saying that MercadoLibre is becoming more of a go-to platform on a daily basis for more things. I think that's a habit-forming trend, and I think that it's directly a result of that free shipping decision. Travis Hoium: This is where you want to know what investor you are. If you are a Foolish investor with a capital F, you're looking at this, going, we want this company to be bigger long-term. This is a great discount if I have been looking at this stock, because you know what? That profitability, that's not the short-term answer that I want as an investor. I want that long-term growth. But if you're trying to guess what's going to happen quarter to quarter, you maybe got this wrong. That's where I think, stepping back and going, what do I really want from this company, and knowing that going into earnings is really important. Tyler Crowe: We brought up the Amazon conversation because comparisons are pretty easy. You look at this. It's a digital fintech, e-commerce platform as well. But one of the things I do think about because we're talking about profitability margins and things like that, and the comparison is always Amazon, I think it's fair to say that Amazon had a very long leash with the market in its growth phase, willing to overlook profitability for a very long time because it was like, it's growing. It's doing all these new things. It seems to be worth it. It was generating enough cash that could make those investments in other things. Then it found AWS, and that's when profitability really took off here. With MercadoLibre, we're at a point where it's making similar moves, where it's like, we're going to forgo profitability now, credit card perks, lowering the threshold for order value for free shipping, and things like that. It is running the playbook. One thing I'm curious, though, is, to have that much growth and then still see earnings declining, that's a pretty aggressive choice in that cost versus revenue growth paradigm. I do wonder is revenue growth almost too prioritize here? 50% growth is amazing. It's incredibly hard to sustain, and you're doing it in a declining earnings environment. I can't help but think that management is too focused on revenue growth here and maybe not growth with economic scale. Jon Quast: Well, Tyler, I push back on the wording here that you chose with foregoing profitability because I'd be inclined to agree with you here, but MercadoLibre is not in the red. In fact, it invested 2 billion in its credit portfolio. This is one area the business that the market is a little bit concerned about the riskiness of the portfolio, investing $2 billion into that credit portfolio and still free cash flow positive. I think that's a huge thing. It had nearly a 7% margin for income from operations. These are the free cash flow and the income from operations. These are two really important profitability metrics and still solidly in the black. Think about this. This is 50% growth, and this isn't tech, for the most part, this is actually people buying things on the platform. It is tech, but not in the same way that we're accustomed to with the strong growth rates in the market right now. This is a retail play, and that is so interesting to think about in the reverse. You pull back on some of this growth investment right now. What's the alternative? Better profitability to what end? Are we going to pay a dividend? Are we going to buy back stock? I'm not really sure where the money is used for the benefit of shareholders if we pull back on the growth. I think that it needs to keep the pedal to the metal. Tyler Crowe: Always a fascinating conversation, I'm sure that we're going to be having this next quarter when MercadoLibre reports earnings because this is always that push and pull that always happens. Coming up after the break, we're going to hit a stock that is doing much better, at least in the market reaction today, and it's Unity Software. ADVERTISEMENT: You just found out that your sales team is at risk of missing quota. Don't panic. Just ask Rippling AI. Since it's built on your real-time people and business data, Rippling AI can pull metrics from Rippling and Salesforce into a meeting-ready dashboard showing quota attainment, headcount plan, and monthly revenue to quota by region. In seconds, you'll see exactly what's behind your quota risk and fix it before it's missed. Question answered, action taken, crisis averted. When you have critical business questions that need answers, don't just file a ticket and wait weeks for an outdated report. Describe what you need and have Rippling AI build it instantly from your live people and business data, whether it's a dashboard with detailed charts or automated workflows with the right triggers, conditions, and approvals. 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If you're a long-term shareholder, this still has not worked out particularly well. It almost seems to me like they're just figuring out this business and, in particular, figuring out how to monetize the software that they've been making and the ad platform that they've been trying to build. Just as a point, where the mobile business in general is getting old and dodgy, it reminds me a little bit of the console business a decade ago. Consoles have just been in a steady decline over that period of time. I don't know. Are we still going to be excited about apps on an iPhone app store in 10 years from now, and that's really where Unity really dominates things. It's just so interesting to see that they have started to increase their revenue. The market is starting to react a little bit positively because they've gotten their stuff together. But it still trades for almost 10 times sales, and I just can't get my head around why I should be excited about this company long term. Jon Quast: Tyler, you pointed out four straight quarters of accelerating revenue growth. I just have to ask, is that good? Because MercadoLibre has four straight quarters of revenue growth, too. Really [inaudible] here today. Sorry, I just had to get that point in. But it is interesting to Travis' point, this is actually growing now with ads. There are two parts of the business, we have the create side of things, and I feel like what Unity is more known for. That game creation, that video creation software, and that's really plateaued here, only 5% growth in this quarter, all of this revenue growth coming from the Ads network, 63% growth in the revenue segment, and expecting an accelerating growth rate yet again in the upcoming quarter of roughly 70% growth. This is very interesting, a business shift is taking place. If you recall a few years ago when Unity really had problems, it was because the ads were suffering, and now it does seem like it's getting its act together there in that segment, but the create segment, is not really showing anything. Tyler Crowe: Management did put out a plan last quarter. They're going to shed some of those mobile publishing divisions, things like that. Some of its ad networks. They're like, This isn't working for us, there have been some deliberate changes. It does appear to be working. Guidance for the next quarter is actually even faster revenue growth than we saw this most recent quarter. Things are working, but to your point, Travis, this is a company that's been wandering the woods. They're starting to figure some stuff out, but there are also some macro challenges related to what the environment is for its users, the mobile game space. How can this company grapple with these challenges going forward and perhaps get back to not being down 80% for its long-term shareholders? Travis Hoium: I don't know that I have a great answer for this. I think this has been the frustrating thing watching Unity as a business. This is a piece of software that I started to learn a little bit, a handful of years ago when I was in the world of VR. This was the go-to thing. You had to use Unity. It was the best thing to use. That paradigm obviously didn't work out the way I think they hoped. But a lot of the changes that they made to the business and that are showing up now in the income statement are not really businesses that I want to be in as an investor. It's those slimy ads that you see when you're playing a game, or you maybe see your kids see. I know my son will come in and go, "Dad, can I download this game?" I'm like, This looks like a terrible game. It's just built to be able to serve you even more ads to try to get you to download more things. Guess what? Most of those things are coming from Unity. They're touting these developments, they're not the things that I want to invest in. The problem is the core problem for them is that they had a phenomenal platform game engine to be able to create these games, but they had no great way to monetize it. When you don't know how to make money on the thing that you do really well, that's just a really challenging place to be in as a business. Jon Quast: I wonder if that great platform that it did have is really the edge that it is being whittled away at by all the AI tooling that's out there. I know that it's implementing its own AI into its product, but at the same time, you just wonder, and then it does become an ads business, and to your point, is that where you want to be as an investor? You have to make that decision. Tyler, I think one of the challenging things here going forward is stock-based compensation, one thing that's near and dear to your heart, I know, but management here, clinking their champagne glasses, saying it was down at its lowest level at 14% of revenue for the quarter. That's still really high. If you look over the last five years, revenue trailing 12 months is up 89%, but revenue per share is only up 24%. A big part of that is the ongoing dilution. It's going to have to continue to deliver some incredible growth if it's going to continue to provide stock-based compensation at these levels. Right now, it is growing really well with the ads, but is that sustainable? We'll find out. Tyler Crowe: While we're on the topic of mobile gaming, coming up in the next segment, we're going to talk about AppLovin and Celsius Holdings, who are maybe not having the best day today. ADVERTISEMENT: This episode is brought to you by Accenture. 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Tyler Crowe: Two groups of shareholders that probably aren't having as good a time today as Unity Technologies or Celsius Holdings, and AppLovin. Two stocks are both down double digits today, and, while both of them posted relatively decent revenue growth, some of them didn't exactly meet expectations. I gave you assignments for each of them. Travis, you did Celsius, Jon, you did AppLovin. Travis, what did you see in the Celsius report? Travis Hoium: Celsius isn't in such an interesting spot right now because the results were fine, but that's not really what the market was looking for. Revenue was up 11% in the quarter, but you dig underneath that, 21% growth at Alani Nu. That's the company that they bought. I completed that acquisition about a year ago. Now, you're lapping those easier comps. Might remember a couple of quarters ago, you'd see, oh my gosh, 100% growth. That was actually because of that Alani Nu acquisition, and then the Celsius brand is actually down 12% in this quarter. This is showing sure, that the portfolio is doing OK. But the entire space, this energy space, maybe it's like alternatives to traditional soda drinks, is just getting really, really competitive. I know that a handful of years ago, Jon talked about Celsius before we even had it here in Minnesota. Once we started getting it, now suddenly Celsius is everywhere. Well, now I go down those same aisles, and there are a dozen other brands. It's not just Celsius. This isn't a world where Monster and Red Bull dominated everything for what? Two decades. Now, you're getting it's easier and easier to bring up these brands, these co-packers that Celsius was actually grown up on. Remember, they did not own their own manufacturing facilities. They had other companies manufacture their products, and they were just a brand in a sales business. Well, everybody else can just copy that. That's something that we've seen more and more in this space. That's a real challenge. Now, you're going from, is it a growth stock, or is it a value stock, 16 times forward earnings? It's maybe getting close to that value territory, but I don't know, investors just don't seem to know what to think about the company's future. Tyler Crowe: Anecdotally speaking. I live overseas. I've mentioned a couple of times on the show, and when I go to the aisle, I see Red Bull, but other than that, there is no other American comparable. At the same time, there are still 20 different brands. Again, this is an intensely competitive industry where the barriers to entry aren't exactly the hardest in the world. As I mentioned too, Jon, I assigned you to AppLovin. I would say the growth numbers were similar to Unity, but the market did not react nearly as well. Jon Quast: Yes, and it's interesting that you bring up Unity, because at this point, they are more directly competitive than maybe they've been in the past because Unity is growing with the ad network. Really, that's what AppLovin is, same business here. Mobile gaming is the main focus, and that's where they display their ads. That's where they generate their revenue. Up 53% this quarter. That's really good growth, but it is behind what Unity posted. That is worth noting. Also, revenue growth is accelerating, to be fair. It had over 70% growth this time last year. It's also guiding for 47% growth in the upcoming third quarter, so 53% to 47%. It's still really great growth. One of the things I want to point out here is that existing customers' their spend has gone up 28% since the end of last year. That's actually a really meaningful data point, I think, is that the customers who are using them are now spending more than they were to me, that signals that they're getting a return here and are willing to increase that spend. I think that is good. But to be fair, the growth rate is slowing down, so I get it. Trading at 20 times forward earnings, growing at over 40%, profits are growing faster than revenue. You're looking at a 66% net profit margin. I think this is getting a little bit interesting here. Travis Hoium: I also thought it was hilarious that it came up on the conference call that they should change their name. This is one of the most strangely named companies in the market. It does sound like from the movie McLovin I can't get that out of my head every time I hear the company. Sometimes name changes are positive, and interestingly, it's actually being brought up by investors. Jon Quast: The analysts there are mentioning maybe we should change it to MAX, and that is the name of its ad product. To point out, I think another thing investors are responding to negatively today is that it updates its MAX models, its AI models, from time to time. Each time it has done that in the past, it has seen a jump in its revenue growth rate, and this time, releasing the new model still means great growth, but not seeing that uplift right away. I think that's a little bit concerning for investors, especially in light of Unity's results, it's like man, did they not make the right changes that they need to make? I think it just puts a question mark on it. CEO is saying, "We're not changing from AppLovin. We are AppLovin." Tyler Crowe: Stick to your guns. But hey, look, I think the biggest takeaway that we have from this quarter, it wasn't just today's earnings. We've seen this across pretty much the entire earnings season so far. The market seems very demanding right now. We have companies that are posting incredible growth and still getting double-digit declines. Whether that continues, who knows? We seem to be in a very volatile individual stock time. But you know what? That's just how it is with long-term investing. Try to stay the course and plow through when we have all these volatile earnings times, even when the business is doing pretty good. Always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provide for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks to producer Dan Boyd and the rest of The Motley team, were Jon, Travis, and myself. Thanks for listening, and we'll chat again soon. Jon Quast has positions in Celsius Holdings, Duolingo, and MercadoLibre. Travis Hoium has positions in Duolingo, MercadoLibre, and Unity Software. Tyler Crowe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Duolingo, MercadoLibre, Monster Beverage, Salesforce, and Unity Software. The Motley Fool recommends Celsius Holdings. The Motley Fool has a disclosure policy. The Wild Swings of Earnings Season Continue was originally published by The Motley Fool

Unity Software Inc. (U) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving. The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this company, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core. The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008. Consensus earnings estimates for the next quarter and full year have moved considerably higher for Unity Software Inc., as there has been strong agreement among the covering analysts in raising estimates. The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate: The company is expected to earn $0.29 per share for the current quarter, which represents a year-over-year change of +45.0%. Over the last 30 days, the Zacks Consensus Estimate for Unity Software has increased 11.48% because one estimate has moved higher compared to no negative revisions. For the full year, the earnings estimate of $1.09 per share represents a change of +26.7% from the year-ago number. The revisions trend for the current year also appears quite promising for Unity Software, with two estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 10.4%. Thanks to promising estimate revisions, Unity Software currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500. While strong estimate revisions for Unity Software have attracted decent investments and pushed the stock 52.5% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Unity Software Inc. (U) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

It is not surprising that before an earnings season, every investor looks for stocks that can beat market expectations. This is because investors always try to position themselves ahead of time and look to tap stocks that are high-quality in nature. In this regard, we ran a screener that yielded stocks Centene CNC, Tenet Healthcare THC, Fortinet FTNT, Unity Software U and The Goldman Sachs Group GS as the likely winners on the earnings beat potential. Historically, stocks of companies with solid quarterly earnings (on a nominal basis) tank if they miss or merely meet market expectations. After all, a 20% earnings rise (though apparently looks good) doesn’t tell you if earnings growth has been exhibiting a decelerating trend. Also, seasonal fluctuations sometimes come into play. If a company’s Q1 is seasonally weak and Q4 strong, then it is likely to report a sequential earnings decline. In such cases, growth rates are misleading while judging the true health of a company. On the other hand, after much brainstorming and analysis of companies’ financials and initiatives, Wall Street analysts project earnings of companies. They in fact club their insights and a company’s guidance when deriving an earnings estimate. Thus, outperforming that estimate is almost equivalent to beating the company’s own expectation as well as the market perception. And if the margin of earnings surprise is big, it typically drives the stock higher right after the release. Thus, more than anything else, an earnings surprise can push a stock higher. Now, finding stocks that have the potential to beat on the bottom line may be investors’ dream but not an easy job. One way to do this is to look at the earnings surprise history of the company. An impressive track record in this regard generally acts as a catalyst in sending a stock higher. It indicates the company’s ability to surpass estimates. And investors generally believe that the company will apply the same secret sauce to execute yet another earnings beat in its next release. In order to shortlist stocks that are likely to come up with an earnings surprise, we chose the following as our primary screening parameters. Last EPS Surprise greater than or equal to 10%: Stocks delivering positive surprise in the last quarter tend to surprise again. Average EPS Surprise in the last four quarters greater than 20%: We lifted the bar for outperformance slightly higher by setting the average earnings surprise for the last four quarters at 20%. Average EPS Surprise in the last two quarters greater than 20%: This points to a more consistent surprise history and makes the case for another surprise even stronger. In addition, we place a few other criteria that push up the chance of a positive surprise. Zacks Rank less than or equal to 2: Only companies with a Zacks Rank #1 (Strong Buy) or 2 (Buy) rating can get through. Earnings ESP greater than zero: A stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for an earnings beat to happen, as per our proven model. In order to zero in on those that have long-term growth potential and high trading liquidity, we have added the following parameters too: Next 3–5 Years Estimated EPS Growth (Per Year) greater than 10%: Solid expected earnings growth exhibits the stock’s long-term growth prospects. Average 20-day Volume greater than 100,000: High trading volume implies that the stocks have adequate liquidity. A handful of criteria has narrowed down the universe from over 7,700 stocks to only 16. Here are five out of 16 stocks: Centene: The Zacks Rank #1 company has established itself as a national leader in healthcare services. You can see the complete list of today’s Zacks #1 Rank stocks here. The average earnings surprise of CNC for the past four quarters is 151.28%. Tenet Healthcare: The Zacks Rank #1 company is an investor-owned healthcare services company, which owns and operates general hospitals and related healthcare facilities for urban and rural communities in numerous states, and has offices in California and Florida. The average earnings surprise of THC for the past four quarters is 22.70%. Fortinet:The Zacks Rank #1 company is a leader in cybersecurity, driving the convergence of networking and security. The average earnings surprise of FTNT for the past four quarters is 20.34%. Unity Software: The company provides a platform to develop, deploy and grow games and interactive 3D experiences across mobile, PC, console and extended reality. The stock has a Zacks Rank #2. The average earnings surprise of U for the past four quarters is 12.54%. The Goldman Sachs Group: It is a leading global financial holding company providing investment banking, securities, investment management, and consumer banking services to a diversified client base. The stock has a Zacks Rank #1. The average earnings surprise of GS for the past four quarters is 20.42%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report Tenet Healthcare Corporation (THC) : Free Stock Analysis Report Fortinet, Inc. (FTNT) : Free Stock Analysis Report Centene Corporation (CNC) : Free Stock Analysis Report Unity Software Inc. (U) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Unity’s second quarter results were marked by robust revenue growth and significant margin improvement, triggering a notable positive market response. Management cited the rapid adoption of its Vector AI-powered ad platform and a suite of product enhancements as primary drivers of performance. CEO Matthew Bromberg emphasized the impact of integrating runtime data and noted, “Our astounding performance is fueling a 63% year-over-year increase in our Strategic Grow business.” The company’s renewed focus on customer needs, disciplined execution, and accelerated product development also contributed to the strong quarter, particularly through innovations that improved efficiency for game developers and advertisers. Is now the time to buy U? Find out in our full research report (it’s free). Revenue: $546.5 million vs analyst estimates of $515.1 million (23.9% year-on-year growth, 6.1% beat) Adjusted EPS: $0.28 vs analyst estimates of $0.25 (12.4% beat) Adjusted EBITDA: $160.2 million vs analyst estimates of $136.6 million (29.3% margin, 17.2% beat) EBITDA guidance for Q3 CY2026 is $187.5 million at the midpoint, above analyst estimates of $152.2 million Operating Margin: -5.9%, up from -26.9% in the same quarter last year Billings: $557.8 million at quarter end, up 18% year on year Market Capitalization: $19.6 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Matthew Cost (Morgan Stanley) asked about the feedback loop between Vector and Create, especially with Unity AI integration. CEO Matthew Bromberg explained the strategic value of runtime data and how increased game creation fuels both segments’ growth. Alec Brondolo (Wells Fargo) inquired about balancing AI feature value and margin protection, and the addressable market for Unity Commerce. Bromberg noted that Unity AI aims to maximize platform usage, while Commerce remains a long-term growth opportunity. William Lampen (BTIG) questioned whether step-function model improvements in Vector could continue driving momentum. Bromberg confirmed ongoing rapid product enhancement, higher data quality, and model improvements as core to future gains. Vasily Karasyov (Cannonball) asked for clarity on Unity 7’s differentiation and impact. Bromberg emphasized the shift to collaborative development, seamless upgrades, and faster iteration as key changes supporting segment growth. Eric Sheridan (Goldman Sachs) pressed for a framework on incremental margins and investment balance. Bromberg and CFO Jarrod Yahes described Unity’s high contribution margins, self-reinforcing investment cycle, and ongoing focus on high-ROI growth opportunities. The StockStory analyst team will be monitoring (1) the adoption rate and user feedback for Unity 7 as it enters beta, (2) sustained growth and margin gains in the Vector AI platform as more runtime data is integrated, and (3) execution on key partnerships, such as the Netflix collaboration and new direct-to-consumer commerce offerings. The ongoing ramp-up of AI-powered features and Unity’s expansion into new customer segments will also be critical to track. Unity currently trades at $44.43, up from $35.47 just before the earnings. Is there an opportunity in the stock? Find out in our full research report (it’s free for active Edge members). WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses. But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.

As the Q2 earnings season wraps, let’s dig into this quarter’s best and worst performers in the design software industry, including Unity (NYSE:U) and its peers. The demand for rich, interactive 2D, 3D, VR and AR experiences is growing, and while the ubiquitous metaverse might still be more of a buzzword than a real thing, what is real is the demand for the tools to create these experiences, whether they are games, 3D tours or interactive movies. The 6 design software stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 1.4% while next quarter’s revenue guidance was 2.9% above. Luckily, design software stocks have performed well with share prices up 15.6% on average since the latest earnings results. Powering over half of the world's mobile games and expanding into industries from automotive to architecture, Unity (NYSE:U) provides software tools and services that allow developers to create, run, and monetize interactive 2D and 3D content across multiple platforms. Unity reported revenues of $546.5 million, up 23.9% year on year. This print exceeded analysts’ expectations by 6.1%. Overall, it was a stunning quarter for the company with an impressive beat of analysts’ billings estimates and EBITDA guidance for next quarter exceeding analysts’ expectations. Unity achieved the biggest analyst estimate beat of the whole group. Unsurprisingly, the stock is up 21.4% since reporting and currently trades at $43.05. Is now the time to buy Unity? Access our full analysis of the earnings results here, it’s free. Originally named after Adobe Creek that ran behind co-founder John Warnock's house, Adobe (NASDAQ:ADBE) develops software products used for digital content creation, document management, and marketing solutions across desktop, mobile, and cloud platforms. Adobe reported revenues of $6.62 billion, up 12.7% year on year, outperforming analysts’ expectations by 2.6%. The business had a very strong quarter with a solid beat of analysts’ billings estimates and EPS guidance for next quarter exceeding analysts’ expectations. Adobe pulled off the highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 24.4% since reporting. It currently trades at $272.09. Is now the time to buy Adobe? Access our full analysis of the earnings results here, it’s free. Originally known as Parametric Technology Corporation until its 2013 rebranding, PTC (NASDAQ:PTC) provides software that helps manufacturers design, develop, and service physical products through digital solutions for CAD, PLM, ALM, and SLM. PTC reported revenues of $600 million, down 6.8% year on year, falling short of analysts’ expectations by 1.3%. It was a slower quarter as it posted a significant miss of analysts’ billings estimates and a miss of analysts’ annual recurring revenue estimates. PTC delivered the slowest revenue growth and weakest full-year guidance update of the whole group. Interestingly, the stock is up 14% since the results and currently trades at $150.99. Read our full analysis of PTC’s results here. Known for its iconic "D" logo that appears before countless movies and TV shows, Dolby Laboratories (NYSE:DLB) designs and licenses audio and video technologies that enhance entertainment experiences in movies, TV shows, music, and other media. Dolby Laboratories reported revenues of $305 million, down 3.3% year on year. This number missed analysts’ expectations by 2%. Aside from that, it was a mixed quarter as it also recorded revenue guidance for next quarter exceeding analysts’ expectations but EPS guidance for next quarter meeting analysts’ expectations. Dolby Laboratories pulled off the highest guidance raise but had the weakest performance against analyst estimates in the group. The stock is up 20% since reporting and currently trades at $62.12. Read our full, actionable report on Dolby Laboratories here, it’s free. With a mission to build software for the people that build the world, Procore Technologies (NYSE:PCOR) provides cloud-based software that enables owners, contractors, and other stakeholders to collaborate and manage construction projects from any device. Procore Technologies reported revenues of $375.2 million, up 15.8% year on year. This result beat analysts’ expectations by 2.6%. Overall, it was a very strong quarter as it also produced a solid beat of analysts’ billings estimates and an impressive beat of analysts’ adjusted operating income estimates. Procore Technologies had the weakest guidance update among its peers. The stock is up 16% since reporting and currently trades at $58.20. Read our full, actionable report on Procore Technologies here, it’s free. Over the past year, investors have been forced to repeatedly answer the same question: what is the market’s biggest risk? The answer has changed several times, and each shift has reshaped market leadership. Late in 2025 and early 2026, artificial intelligence became the market’s primary uncertainty. Investors questioned whether AI would erode software pricing power and weaken competitive moats as AI made it easier to replicate once-differentiated products. By the spring, technology took a back seat to geopolitics. The U.S. conflict with Iran briefly became the market’s dominant narrative, raising concerns about oil prices, inflation, and global growth. But as energy markets remained orderly and fears of a prolonged supply disruption faded, investors quickly turned their focus back to fundamentals. Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Quality Compounder Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 8:30 a.m. ET President and Chief Executive Officer - Matthew Bromberg Chief Financial Officer - Jarrod Yahes Head of Investor Relations - Alex Giaimo Need a quote from a Motley Fool analyst? Email [email protected] Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Unity Technologies Q2 Earnings Call. [Operator Instructions] I will now hand the conference over to Alex Giaimo, Head of Investor Relations. Alex, please go ahead. Alex Giaimo: Thank you. Good morning, everyone. Welcome to Unity's Second Quarter 2026 Earnings Call. Today, I'm joined by our CEO, Matt Bromberg; and our CFO, Jarrod Yahes. Before we begin, I want to note that today's discussion contains forward-looking statements, including statements about goals, business outlook, industry trends and expectations for future financial performance, all of which are subject to risks, uncertainties and assumptions. You can find more information in the Risk Factors section of our filings at sec.gov. Actual results may differ, and we take no obligation to revise or update any forward-looking statements. Finally, during today's meeting, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A full reconciliation of GAAP to non-GAAP is available in our press release and on the sec.gov website. And with that, I will turn it over to Matt. Matthew Bromberg: Thank you, Alex. Good morning. And for everyone on the phone, thank you for joining us this morning as well. It is, as always, a distinct privilege for us to be able to represent the fine work of the Unity team from around the world. Two years ago on this call, we told you that a rededication to our customers' needs, more disciplined execution and sharply accelerated product velocity would transform our company. Although we were in a difficult moment, we believed we had everything we needed to bring Unity all the way back, and we did. One year ago, we posited that Unity had hit an inflection point in that transformation and that our efforts would translate to a markedly improved and sustainable series of business results, and they did. Today, after what was arguably the best quarter in Unity's history as a public company, we're done looking backwards. The flywheel we've been constructing is spinning up, and we expect it to power us into the ranks of the most consequential companies of the AI era, and it will. Why? Because AI has already become the most crucial driver of our product velocity and quality and is also well on its way to becoming our most crucial driver of demand. To remind everyone how this AI-powered flywheel works at Unity, as game creation becomes more efficient, more games are being released. More games drive more usage of our integrated authoring platform and also make new game discovery more challenging, accelerating our ad business, more games, more platform usage, more discovery, all driven by the unique understanding that we derive from the approximately 3 billion people each month playing a game on the Unity runtime, an understanding which we use in turn to help creators build better games, to help them acquire new users and to help them operate successful live services. With that as an introduction, let's turn to this quarter's results, beginning with Unity Vector. In performance marketing, we only win when our customers win. Advertisers are laser-focused on the direct return of their ad spend, and our technology must empower them to hit and exceed their return targets at maximum scale. Through continuous product enhancement, higher quality data and compounding model improvements, we are now driving significant gains for our customers across every campaign type, genre, geography and platform, and it's having an exceptionally positive impact on our business results. Our expectations for growth in Vector in Q2 were a robust 12% to 13% growth quarter-over-quarter. Instead, our team delivered nearly double that, racking up 23% quarter-over-quarter growth and establishing an accelerated momentum that has carried over to elevated results in Q3. Keep in mind, 6 quarters ago, the Unity Vector product didn't exist. It is now at substantially over $1 billion in annual run rate, 2 quarters earlier than expected. And yet, we still consider ourselves to be in the very early stages of product development. Our astounding performance is fueling a 63% year-over-year increase in our Strategic Grow business with our third quarter outlook pointing to an even stronger 70% growth rate. Overall company EBITDA margins are approaching 30% for the first time ever. We don't know of many companies at our scale growing revenue at this velocity, while simultaneously expanding margins 800 basis points year-over-year. In the second quarter alone, the Vector team successfully executed over 20 major updates, advancing the capabilities and intelligence of our AI prediction platform, bringing new runtime data online and transforming how we identify, understand and value game retention. This incredible rate of change enabled Unity to optimize real-time bidding precision for our advertisers to a degree that was formerly impossible. One of the most impactful updates in Q2 has been our Day 28 return on advertising spend capability for both in-app advertising and hybrid campaigns, a companion to the in-app purchase product that was released in the first quarter. As the name suggests, Day 28 ROAS enables our partners to measure their return over a longer period than our standard 7-day ROAS product. Initially released at the end of Q1, the full rollout has now seen Day 28 campaign spend growing nearly 3x from the first quarter. Over 25% of our advertising base has adopted this new campaign strategy and the demand is scaling rapidly as a result of our delivering extremely strong performance. Q2 also contained another transformational milestone. We are speaking, of course, about the first incorporation of runtime data into the Vector platform. As we have emphasized many times, there are currently over 3 billion consumers each month playing a Made with Unity game and the connection with those billions of players through our runtime has been an untapped capability that we have long believed should deliver unique value across our platform. Towards the end of the second quarter, we began for the first time in our history to unlock this advantage by incorporating signals from our runtime directly into our Vector AI models. While this effort remains very early, the results are extremely encouraging, and we gain more and more confidence each day that runtime represents a deep and sustainable competitive advantage for Unity. Let's transition now to the Create business. The future of game creation no longer belongs only to those who can marshal the most resources, but rather to those who can best use the technology to amplify the resources they have. Two weeks ago, at our Unite Conference in Seoul, we announced the release of Unity 7, a new generation of our software designed for this future, an open collaborative platform where developers, artists, producers and coding agents work together across the full development life cycle. We've made our MCP free and opened our API, which enables developers to use the command line and coding agents to control Unity directly from inside their own workflows. What this all means is that you no longer have to know all the intricacies of our application to access the power of our full authoring platform. What's even more exciting is that this platform, including the downstream revenue-enabling services, Vector, our commerce solutions and our live game operation services are all now configured automatically on day 1. There are no instructions. There are no SDKs. There is no engineering time required. Remember what I referenced slightly earlier, remember our flywheel, more games, more platform usage, more discovery, all driven by runtime and Vector AI. We believe Unity 7, which will launch in beta in Q4 of 2026 and a full release in Q1 of '27, holds the potential to be the most exciting and impactful release in our history and that it points the way to a fundamentally different future, one where the top of the funnel gets bigger and bigger to accommodate the increased interest in the creation of interactive entertainment. Before leaving Create, I did want to highlight a new partnership Unity consummated in Q2 with Netflix. We're so thrilled about it. And I want to highlight because it exemplifies the kind of innovation we live to help support. The partnership calls for us to comprehensively support the Netflix multi-platform games ecosystem with the Unity engine in the years ahead. Netflix has launched something potentially revolutionary, presenting a social game experience for consumers on the biggest screen in the house instantly without asking them to download, register or buy anything with the potential to add an entirely new engagement path for their customers. This is the kind of advancement that Unity exists to support. Consumer habits are changing, distribution platforms are evolving and will continue to evolve. But Unity's role remains straightforward and constant, make it easier for studios to build great games and get them in the hands of players wherever they are. We're proud that Netflix has chosen to do that work with us. Thank you again very much for taking the time to be with us this morning. We are incredibly proud of Unity's performance in Q2. The continued acceleration of Vector, coupled with our robust product road map with Create has us more excited than we've ever been about our future. I'll now pass the call over to Jarrod for a deeper discussion of our financials. Jarrod? Jarrod Yahes: Thanks, Matt, and good morning, everyone. Unity delivered a truly exceptional second quarter with strategic revenue growth of 38% and adjusted EBITDA growth of 77%, along with record margins. Strategic Grow revenue was $329 million, up 63% year-over-year. Growth accelerated both quarter-on-quarter and year-over-year based on tremendous momentum at Unity Vector. Of note, the sunsetting of the ironSource Ad Network had a negligible positive impact on Vector growth in the quarter with only $3 million in Q2 Vector revenue growth from ironSource customers as a result of the shutdown. In Create, strategic revenue was $157 million, up 14% year-over-year when excluding the impact of a onetime revenue item in the prior year. Create momentum continues to be driven by ARPU growth, supported by price increases and minimum annual customer commitments as well as strong growth in China. Ultimately, these results are the direct outcome of products that deliver the innovation and performance our customers demand, steadily enhancing Unity's core value proposition. Shifting from revenue to profitability. Adjusted EBITDA in Q2 was $160 million. Adjusted EBITDA margins were 29% with margins expanding 800 basis points year-over-year. Rapid revenue growth, high gross margins and disciplined cost management resulted in significant operating leverage. This operating leverage is the primary reason why adjusted EBITDA grew 77% year-over-year, more than 2x the growth rate of strategic revenues. We experienced operating leverage across all major expense lines in the second quarter. In addition, adjusted sales and marketing and adjusted G&A were down not only in percentage terms, but in dollar terms. We're making strong progress in optimizing our cost structure and simplifying our business and using that freed-up capital to reward high-growth businesses like Vector while aggressively investing in our product road map. Rapid growth in adjusted EBITDA is converting into exceptional free cash flow. Unity had $202 million in free cash flow in the second quarter, an increase of 59% year-over-year. This brings our cash balance to $2.36 billion with Unity flipping from a net debt position to a net cash position this quarter. Our near-term capital plans center around delevering our balance sheet, and we expect to pay off our 2026 convert in November. Longer term, the record cash generation we are experiencing, combined with a delevered balance sheet opens up tremendous flexibility from a capital allocation standpoint. Outside of cash expenses, the disciplined approach we're taking to equity resulted in stock comp expense down 25% year-on-year. Stock comp expense was 14% of revenues for the quarter, its lowest level ever. Before moving on to guidance, I'd like to provide 3 recent strategic updates. Firstly, during the quarter, we made a strategic investment in mobile measurement leader, AppsFlyer, along with investment partners, Meta, Google and Moloco. This was a unique opportunity to invest in a market-leading asset while simultaneously allowing AppsFlyer to preserve competition, choice and innovation in the mobile attribution and measurement ecosystem. Secondly, we're pleased to report that we closed on August 4, the sale of Supersonic to Tripledot Studios. With this transaction, Supersonic finds an outstanding home with Tripledot, one of the largest and most successful mobile game publishers in the world. And lastly, during the quarter, we substantially completed the closure of our ironSource Ad Network effective April 30. The sale of Supersonic and the sunset of the ironSource Ad Network will benefit our margins in the second half of the year. With these actions, Unity becomes a more focused company, positioned for faster revenue growth and dramatically higher levels of profitability. With that, let's now turn to our guidance for the third quarter. For the third quarter, we're guiding to strategic revenue of $540 million to $550 million, implying year-over-year revenue growth of 44% to 47%. This represents a material acceleration from the growth rates we saw in the second quarter. In Strategic Grow, we expect year-over-year revenue growth of 68% to 70%, driven by continued exceptional performance in Unity Vector. Our guidance assumes 19% to 21% sequential growth rates for Unity Vector. In Strategic Create, we expect 7% to 10% year-over-year revenue growth, driven by continued ARPU growth and strength in China. And we expect $20 million in nonstrategic revenue in the third quarter, driven primarily by the July contribution of Supersonic. We're guiding to third quarter adjusted EBITDA of $185 million to $190 million, implying adjusted EBITDA margins of 33% and adjusted EBITDA growth of 69% to 74%. The third quarter is expected to be our sixth straight quarter of adjusted EBITDA margin expansion with margins up 400 basis points from the second quarter alone and up 1,000 basis points year-on-year. Expected margin expansion is a function of additional operating leverage, amplified by cost reductions enabled by our strategic actions, resulting in a structurally more profitable business. Lastly, we're pleased to report that we're pulling forward our expectation for achieving GAAP net income profitability from the fourth quarter of 2026 to the third quarter of 2026. In closing, we are incredibly pleased with Unity's second quarter financial results and outlook for the third quarter. Unity has now entered a new chapter of structurally faster revenue growth, combined with enhanced profitability, powered by a flywheel of more games, more platform usage and more discovery, all driven by runtime and Vector AI. And with that, I'd like to thank you for joining us on Unity's Second Quarter 2026 Conference Call. I'd now like to turn the call over to Alex so that we can take your questions. Alex Giaimo: Thank you, Jarrod. Operator, we're ready for questions. Operator: [Operator Instructions] Your first question comes from the line of Matthew Cost with Morgan Stanley. Matthew Cost: Matt, there were some comments in your prepared remarks that sort of alluded to a positive feedback loop between Vector and the Create business. And it sounds like maybe even more specifically Unity AI. So I was wondering if you could expand a little bit more on exactly how that works and what benefits we could expect the 2 businesses to drive for each other? And then secondly, for Jarrod, it sounds like the runtime fee rollout kind of came towards the end of the quarter. D28 was a big driver of strength for Vector in the quarter. Was runtime fee a material contribution or relatively small? And then based on what you've seen so far, what does it tell you about what you can expect that to contribute in the coming quarters? Matthew Bromberg: Thanks, Matt. Thank you for the question. We were incredibly excited, obviously, about the performance of Vector in the quarter. We've now had 4 straight quarters of 15% growth, which then stepped up to nearly 23% growth in the second quarter, and we're really excited looking forward as well. It's incredibly important that what we've been able to do through continuous product enhancement, improving the quality of our data and compounding our model improvements that we've been able to drive significant gains for customers, which, therefore, drives our business. We're really, really pleased about that. I mentioned one of the product enhancements in the prepared remarks, our Day 28 ROAS product, there were many, many more. And to your point, we did call out runtime, which was, as I mentioned, a historic achievement for us, something that's been long discussed. We have always believed that this will be the primary strategic advantage for us going forward in this business. Every major participant in this world has an approach. If you're Meta, you own your apps. If you're us, you have access to the 3 billion people playing with Unity game, and that's going to put us in a really good spot over the long term. So we began implementing signals from the runtime into Vector towards the end of the second quarter. We're super pleased with what we're seeing. We are having continued success around customers continuing to opt into our data development framework, which sits underneath all these efforts in runtime. That's going to continue. Although it's still very early, we're just -- we're very, very excited about what we're seeing. I don't know there's any analytical value for anyone to single out the impact of runtime data. Our performance, as we've noted, is the sum of the impact of all the product enhancements, the higher quality data and the compounding model improvements. And these impacts are self-perpetuating as our system continues to learn in real time. So we expect it to be a driver of our success over the long term. And as you guys remember, there are many, many times I said that, look, what we're going to see is solid incremental growth followed occasionally by step change functions. And so -- and that's exactly what we experienced and exactly what we expected. Finally, to your point about the flywheel, I did want to spend some time on it in our opening remarks because I do think that historically, folks have thought about our businesses as separate. And of course, we report in separate segments. But in a matter of strategy and at the level of product usage and how we connect with customers, these businesses are not separate. And what we're really excited about is that we can see the fundamental value of our platform really coming into play. So if you think about it this way, as we open up Unity as we have with Unity 7 and as more games are created and more creators come into the market and game creation becomes more efficient, there are a lot more games that get released. We are thrilled about that dynamic. We don't care how people access the Unity UI, the application itself. The application layer is just the surface piece. What's really important is we drive as many people as possible into our full integrated authoring platform, which helps creators deploy and monetize and grow their experiences at scale. As more games enter this platform, we benefit because we're able to deliver Vector, our commerce solutions and our live service solutions. And then finally, as more and more games come on to our platform and become successful and go into the marketplace, the need for discovery becomes ever more important because it's harder and harder for consumers to figure out what is the next game they want to play because there's so many more games in the market. And our ability to help our customers predict which one of those consumers is going to install their game accelerates our ad business. So that's the flywheel. Folks historically are very focused on the Unity application, and it's just not how we think about it. It's not how it works. More folks create interactive entertainment, more folks on the platform, more need for advertising. And this process is one that is still at the relative beginning. As I've noted before on the call, and I think we've discussed before, AI is going to make the creation of interactive entertainment much easier over time. And so you're going to see a massive expansion of TAM for the interactive creation marketplace. And so although we haven't talked about that a lot today, it is very much on the horizon for us and very much something we're thinking about, and we'll probably end up talking about that a lot more in the future. So thanks for your question. Operator: Your next question comes from the line of Alec Brondolo with Wells Fargo. Alec Brondolo: Perhaps I'll ask 2. Unity AI, I would love to get a sense from you as to how you balance the need to kind of preserve margin and unit economics relative to the amount of credits you include in each of the subscription tiers. How do you think about finding that balance, delivering enough value to the customer while protecting the bottom line? That's the first question. I think the second question is on payments. You announced Unity Commerce last October, IAP SDK 5.4 released several weeks ago. It includes most of the functionality you talked about wanting in the product when you announced the initiative. Since that initial announcement last year, how have your thoughts in terms of the addressable customer or needs -- customer needs evolved in payments? Matthew Bromberg: Thank you so much for the question. So let me take Unity AI first. Our Unity AI product went into open beta in May, just so everyone is on the same page. It's an integrated agent that's tuned specifically for Unity game development. It's still very early, just still in beta, but the results have been really encouraging. For many tasks, because the harness we've built, we've been able to build with our unique insight into our software, Unity AI is very often more effective than outside frontier models and virtually always more efficient, which is key than frontier models. So the product really helps our developers leverage the full power of Unity. And our goal and our strategy here is to give developers a choice. You can use our bespoke AI or use your own. We don't care. Our primary goal is to maximize the usage of the authoring platform that I was just describing to Matt. So we're not looking to restrict our customers, and which is why we opened up both our CLI and our API in Unity 7. I also want to let you know that we are really currently just seeing a fraction of the functionality that we have planned in Unity AI. And so we're just really excited about the future of that product. And ultimately, our ambition is to use Unity AI and our runtime data to offer a complete tool set for game developers. And what I mean is recall that Unity AI is useful for developers, not just in coding assistance, but ultimately, it's going to enable real-time personalization of content creation at scale so that customers can change the way they build games to optimize experiences for players at an individual level. There's so much more interesting going on here than just coding and UI assistance, where the product is currently as happy as we are about it, it's really still very much at the beginning. On the commerce product, we're really pleased to announce that the product went to general availability on -- in June 30. This is an amazing opportunity for us, the opening of commerce opportunities and things are moving really fast. A lot of estimates are showing that direct-to-consumer monetization within mobile gaming is already around 15% of the overall market. Just to remind everybody, our product is completely free to developers. We're really pleased with the early feedback. We're actively onboarding new partners. We recently published an example of a new partner, a terrific game publisher in Hutch, who is using the Unity IAP product to add direct-to-consumer purchasing for one of their top games, Top Drives. Like many customers, they're able to achieve this without any added complexity or the need to manage multiple or separate SDKs or stores. It's sort of the perfect example of how our platform can provide more value to the games ecosystem over the long term. There are 3 main benefits of the commerce product. It expedites and simplifies the process for publishers to circumvent high fees. It gives them -- gives us visibility into the rich purchase behavior data, which first further optimizes our ad models. And there is some small economic benefit to us as well, which scales over time. So the product has been really well received. This is a long-term growth opportunity, and we're really pleased to be able to have successfully integrated into our offering. Operator: Your next question comes from the line of Clark Lampen with BTIG. William Lampen: Did I get all 3 unmuted? Can you guys hear me? Matthew Bromberg: Yes, we can hear you. William Lampen: Okay. All right. Perfect. Vector growth, 23% in the quarter, you're guiding 20% in the forward quarter. Maybe I missed this in the past, but I don't think I've heard you guys sort of call out sort of step function model improvements on a quarter-by-quarter basis. Has that been a driver sort of historically or something that we should think about as a potential future opportunity? I'm just thinking about the sort of range of product releases and evolution that you've talked about on this call and on recent ones. I'm wondering if that's something that could drive accelerating or sort of improving momentum from a development standpoint. Matthew Bromberg: Thank you for the question, Clark. The short answer is yes. So when -- in my prepared remarks, when I noted that AI is a real driver of product velocity and quality, this is one of the areas that I was thinking of. As I noted, we delivered more than 20 product enhancements to Vector during the second quarter. It's just an incredible rate of progress. And the way I would think about this business is that progress comes across all 3 of the important elements of our performance model. So you need continuous product enhancement, which we are accelerating the velocity of which is accelerating and which we feel we have lots more to do. Now every quarter won't be as busy as this quarter in terms of product enhancements. We're not going to do 20 product enhancements every quarter, but we are going to continually enhance the product as quickly as we possibly can. But product enhancements are just one leg of that stool. The second leg of the stool is higher quality data, better signal. That's what I'm referencing when we talk about the long-term benefits of runtime as an example, but there's also lots of other routes for us to improve the quality of our signal and the depth of our signal. And then when you have product enhancements and you have high-quality data, you also give your model the opportunity to learn and improve and tune itself as a self-learning model does. And each time you make product improvements and improve data, your model has an opportunity to get more efficient. It's all 3 of those drivers that are driving significant gains for our customers. And we just -- we're very confident that we're going to be able to continue that process over time as we continue to benefit from what we think is a long-term strategic moat we have around runtime. William Lampen: Okay. That makes sense and is really helpful. Maybe as the follow-up here, I wanted to ask a question related to the sort of Netflix partnership. And the very basic question is, to the extent you're sort of comfortable sharing more detail around the scope and potentially even the economics of this, how is, I guess, the initial sort of working relationship taking shape? Or how is it going to affect your customers? Matthew Bromberg: Yes. As I mentioned upfront, what we love about the Netflix relationship is that it's emblematic of the kinds of significant platform relationships we have with virtually all of the major gaming platforms in the world. So it's very rewarding, and we're really pleased that Netflix chose us. It's an important multiyear deal that calls for us to invest in support of their gaming initiatives on their platform and ensure that those games work well, that our developers can easily build games that function on the Netflix platform, which helps us expand the opportunities for our developers. This is what we're all about, and expand access to games for a new set of consumers that might not have played before or that haven't had the opportunity to play on that platform. What's interesting and exciting about Netflix is that it's important to remind folks that there are always new platforms developing and that interactive entertainment is a fundamental human desire. Consumers love and will always love playing games. And platforms rise and fall, they grow and shrink. There's all sorts of cycles, but new platforms and innovation always come to the fore and players will always love playing games. And we are really excited to be in a position to help platforms, any and all platforms be optimized for Unity because Unity is by far the leading platform for game making in the world, and that's what we're so excited about. Operator: Your next question comes from the line of Vasily Karasyov with Cannonball. Vasily Karasyov: Matt, I wanted to ask you to go into more detail, please, if you can, on Unity 7. I know you said in your prepared remarks that it's sort of a new frontier product for you. But can you explain to us in simple terms, please, how it's different from the previous generation and how you see it supporting growth in both of your segments? Matthew Bromberg: Thank you, Vasily. I'm happy to do it. Yes, I could talk about Unity 7 all day. Very, very excited about the product release. I think the most important thing to remember is that this isn't just another engine upgrade for us. It's a complete change in how developers are going to interact with our technology and how they're going to utilize coding agents in concert with Unity and how they're going to collaborate with their teams. So what we did effectively was rearchitect Unity so that a team of both creators and coding agents could work together side by side across every stage of game development together using Unity. Previously, that was not possible. You could not -- it was very difficult to connect your coding agents to Unity, and it was impossible to really collaborate with multiple parties. It's very much a single use experience. So being able to partner with other people and with coding agents in unlimited numbers to make interactive entertainment is a fundamental shift to the way Unity works. At the same time, a big part of Unity 7 was that we accelerated every part of the development process because one of the things we discovered is that when you expose Unity to coding agents, which are working extremely quickly and relentlessly, we saw that sometimes our software was the bottleneck in the speed of development. So we also have to go back into the laboratory to accelerate lots of parts of the development process. So we were never the thing that was making developers wait. Maybe even most importantly, we've done all of this in a way that will not require our customers to do a traditional upgrade. Nothing will break. Everything that works in Unity 6 will work in Unity 7. There is no languages to learn. There is no barrier whatsoever. That is a major change to the way we have built Unity in the past. I would also note that I believe the wait between Unity 5 and Unity 6 was something like 7 years. We were closer to 18 months, and that's going to continue to accelerate. So it is a very different product than it was before. You asked for me to be clear and simple. So I'm not going to talk about each -- in too much depth on each one of the really important technical features that we upgraded. But suffice it to say that we sped the quality and the fundamental nature of the way games are rendered. And as I mentioned, enhanced the collaboration, enhanced the ability for folks to make live changes so that you can be -- you're building a game, you make a change in code and you can literally see it running in the game you're building in real time, make a change, see the change in the game, right? And if you think about how fast that is, especially if you're using coding agents or multiple coding agents and multiple people together, all these advancements are really a fundamental change and kind of opens Unity to folks beyond engineers. Those agentic workflows are going to enable faster iteration, which ultimately -- and this is the most important part, is going to enable people to make deeper and more beautiful games and more of them because none of this technology is designed to replace people. Great interactive entertainment will always have the spark of human creativity. Great interactive entertainment is not going to be built by sort of the average of all the games that have been built before, which is effectively what language models are giving you. But what this does is open up all those tools to accelerate innovation and folks are going to create amazing differentiated new things that we have never seen before with this, and that's going to drive growth in the industry. And we're really excited to be a part of. Operator: Your next question comes from the line of Eric Sheridan with Goldman Sachs. Eric Sheridan: When you guys couple the operating momentum you have now with the completion of all the corporate actions you've been putting in place to align the business for the long term, how would you think about long-term incremental margins in the business from both a business mix perspective, but also the balance you would likely have to strike between maintaining that momentum with growth investments and letting some elements of just the pure incremental margins of this mix flow through to the bottom line? Just if there's a framework you're thinking through. Matthew Bromberg: Yes. Maybe just a minute of history, and then I'll let Jarrod take the rest of that question, Eric, and thank you for the question. It is like exciting for us to take a step back for a moment and think that 2 years ago, Vector wasn't even a thing. 6 quarters ago, it wasn't a thing. It's now by far our biggest and fastest-growing business, significantly more than $1 billion on a run rate. Two years ago, our Create business was in decline. It's now a healthy growth business with a product road map we're incredibly excited about with 5 straight quarters of sequential growth and acceleration. A couple of years ago, our adjusted EBITDA margins were in the low 20s. We're now approaching 30%. And as Jarrod noted, we expect to be GAAP profitable for the first time ever. Our free cash flow on a quarterly basis has more than doubled, as Jarrod mentioned in his remarks. And we're really excited about the mix of businesses we're operating and very excited to your point about having shed slower growing, less profitable businesses. So as I noted, we've been able to grow -- significantly grow revenues while also growing profitability, and we expect to continue to be able to do that. That is our strategy. We expect to have our cake and eat it too. There are continued efficiencies we can find in our business. We will have continued rapid revenue growth, and we continue to look for ways to structure our business so that we continue to invest in high-growth activities by making choices and prioritizing the things that we do, which is the most critical piece of a well-operated business. That's as true in lean times as it is in good times. In fact, it's even more true when things are going well. That's when folks have the inclination to want to start doing everything. We are not going to fall into that trap. We're going to continue to apply capital to our fastest-growing businesses and prioritize those and not get distracted by things that are not creating growth and profitability for us. That's our strategy. Jarrod Yahes: Yes. I think that's well said. I think the only thing I'd add to what Matt reviewed was Unity is blessed with structurally high contribution margins. If you look at our adjusted gross margin, they've been about 82%, up to 83% in the second quarter. As we invest in our business, there are short periods of investment followed by periods of revenue realization that allow for very high levels of ROI on those investments. And we're seeing that repeatedly in our business, investment followed by revenue realization followed by ROI and operating leverage in the business. And so we're very pleased with that. We've experienced 200 basis points of margin expansion each quarter since the first quarter of 2025. And based on the strategic actions we've recently executed, we're looking at 400 basis points of operating margin expansion of EBITDA margin expansion in the third quarter alone. We also believe that there is further opportunity for margin expansion in the business. And so we are doing that all along the while investing in our product road map. That is right now, first and foremost, our job is to continue to make sure that these high ROI opportunities for accelerating our business, for accelerating the value that we provide to our customers are fed through our cash flows and through our P&L. And despite investing in those opportunities, we're still seeing the operating leverage, and we're still seeing the margin expansion. So I think we're in rare air right now and that virtuous cycle has really taken off for us in terms of investment, margin expansion and operating leverage. Operator: Your next question comes from the line of Andrew Boone with Citizens. Andrew Boone: Jarrod, I want to go back to -- or Matt, excuse me, I want to go back to Unity 7 and think about how we should be thinking about the cross-sell in terms of the advertising business and then core Create. You mentioned it earlier, but it's always been this massive opportunity for Unity. Can you really unpack that as we start to think about '27 and the next generation of Unity of bringing those 2 sides closer together? Matthew Bromberg: Yes, absolutely. The most important thing I could deliver as an idea for you all to think about our company is to go back to the framing offered upfront about the flywheel and how we see our platform and the use of that authoring platform, including Vector as the primary driver of our business going forward. As more games get created with our authoring platform, those games -- think about it this way. When you create a game, you've created a thing and it exists in your world, but there are no consumers playing that game. There is no monetization in that game. It is not -- it can't be updated. It's not being offered in live service where billions -- hundreds of millions or billions of people can play it, right? All the deep underlying systems and infrastructure that go into operating a massive live service is done on the Unity platform. The ability to acquire new users, which especially in mobile is literally the lifeblood of the revenue of every mobile game is done using our Vector platform. The ability to build a storefront and take IAP, as we talked about earlier, is something that is that functionality is fully integrated into the Unity platform. When I was asked the question about Unity AI, I talked about the opportunities that we have to deliver added value to our game creators in the form of giving them tools to help build more customized, personalized, more exciting experiences. All those tools that sit on the platform are what we're really excited about. Folks tend to focus just on the application layer, which is the least interesting part of this. We open up the funnel to as many creators as possible. They build games. Those games drive use of our platform. Vector is the very, very big part of that platform. And what I mentioned earlier, remember what I said was that when folks use coding agents rather than going into the Unity application directly and working with our UI, we're also able to configure all these platform elements automatically for them. And it's just built in. So not only the process, the AI that is driving this not only drives more content creation and not -- we think it's not only driving more innovation, but it's driving easier and more use of our platform. As that happens, we will earn money downstream from services, from live operating services, from Vector, from other things. That is the flywheel we are trying to explain and why we're so excited about this. Last thing I'll say about it, we are only just beginning to scratch the surface of the number of people who are building interactive entertainment. AI is going to make it much easier for consumers to do. I am a fond of saying creation is the new consumption. What I mean by that is we believe that tens of millions of new folks will begin creating interactive entertainment just as they today create linear video. So you're making TikTok videos, making YouTube videos, posting on Instagram, whatever you're doing. Every one of those creators ultimately is going to become a creator of some kind of interactive entertainment because the technology and our tools are going to enable them to do that. And because interactivity is the only way to increase engagement over linear video, which is spectacular, but can only ever be so engaging, whereas interactivity can create effectively infinite engagement loops. There are going to be tens of millions of people who are doing that. We are opening our software and opening our platform to welcome those folks. who are now going to be able to use Unity and we're going to be having further announcements about this over time. We are now going to be able to use Unity in a way that they were not able to before. That is distinct from professional users who I was addressing slightly earlier in this answer, right, who are going to -- who are building multibillion-dollar games are using our platform, using Vector. That's going to grow, but the market size is also going to grow with lighter and different forms of interactive entertainment that other folks are going to build. So we're going to see both an expansion of our historical professional customer set ultimately as well as the expansion of a more kind of, call it, a prosumer over time, a creator class. All that's going to be enabled by opening our software to coding agents and collaboration between people and coding agents, which is effectively how modern interactive entertainment is going to be built. I hope that's helpful. Operator: Your next question comes from the line of Dylan Becker with William Blair. Dylan Becker: Matt, Jarrod, I appreciate it. It might be a little late to the party here, Matt, but congrats on the Knicks championship recently. Matthew Bromberg: Thank you very much. It's not as important as the quarter, but it's very... Dylan Becker: It certainly helps, yes. I want to touch on the -- I know we talked about the flywheel pretty extensively here, Matt. But maybe if you could characterize kind of the components of the flywheel or how you're interpreting those between some of the platform advancements, right? We talked about the excitement around the future road map of the business, but how much of that is initiatives that are already ramping and scaling and seeing success that are driving conviction in that and maybe that -- how that kind of fuels incremental stuff that we're not yet seeing today, but opening the aperture on things that you can kind of develop into the future, if you could kind of weight between those 2, if that makes sense. Matthew Bromberg: Yes. Look, the best way to figure out how much value and improvement we're driving is to track revenue growth because as I talked earlier -- talked about earlier, when our customers are seeing return, they're spending more with us and our revenue goes up. So revenue is, in fact, a direct output of the quality of that 3 legs of stool I talked about, the quality of the nature of our product releases, the quality and increases to the quality of the data that drives Vector as well as our ability to improve the efficiency and accuracy and tuning of our models. Those 3 legs of the stool are what drive this forward. As I mentioned, every quarter, we are working as fast as we possibly can to implement as many positive changes to all 3 legs of the stool as we can. We are all -- our self-learning algorithms are always working. We're trying to put as many new product enhancements as we can into the marketplace. And we are always working on enhancing data. The long-term benefits of access to runtime data, which we're now 6, 8 weeks into are going to be substantial. The long-term advantages of this flywheel I described where more and more games are going to be created on our platform, which are going to be automatically integrated with that platform, which includes Vector, is going to drive a lot of growth in the future. We are very, very bullish about continuing to put our heads down and work across all 3 of those main -- those legs of the stool. And we're really very, very bullish about the ability of our platform and that flywheel to keep spinning and in fact, to increase the velocity with which it is spinning. And that is the way we think about this business. Operator: Your final question comes from the line of Omar Dessouky with Bank of America. Omar Dessouky: Can you hear me? Matthew Bromberg: Yes. Omar Dessouky: Great. Could you maybe just give us an update on where you think you are in terms of advertiser penetration as sort of like a percentage of all the advertisers in the market, how that's trended over time and what you're doing to accelerate that adoption or if you need to do anything at all in that advertisers just come to you when they see returns? Matthew Bromberg: Thanks for the question. I would say that, by and large, in the game space, the vast majority of folks already know who we are, and are already spending with us to one degree or another. Now there's a lot of dynamism in this market. There's a tremendous amount of growth in Asia in particular. So new entrants come into the market all the time. But we've been doing this for quite some time. And good news travels fast in our world. So remember, I was saying before, as you know better than anyone, new installs are the lifeblood, especially in the mobile game business. So if folks are seeing return and this is a very competitive business and everybody is tracking everybody else, they could see that something is going on, and they will generally reach out to us. We already know them. As I said, they're already probably spending with us. And so it's not as if the issue for us is we've got to ramp up some big new sales force to ring doorbells to try to get folks to try Vector. It is much more of what I describe as an optimization and account management function in which we test and scale individual games and do the work around data and integration to ensure that we are able to deliver as much scale and as much value as we possibly can for each advertiser. And that is more of the dynamic, and it's playing out in a really positive way for us. Operator: This concludes the question-and-answer session. I will now turn the call back to Alex for closing remarks. Alex Giaimo: Thank you, everyone, for joining this morning. Have a great day. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Unity Software. The Motley Fool has a disclosure policy. Unity (U) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

AppLovin APP reported second-quarter 2026 results on Aug. 5, and a few trading sessions have provided a clearer view of how investors are digesting the report. The stock has declined roughly 17% since the earnings release, suggesting that the market has focused less on the modest earnings beat and more on the revenue shortfall, uneven model-improvement cadence and questions surrounding the pace of consumer-advertiser scaling. Image Source: Zacks Investment Research That reaction is notable because the underlying growth profile remained strong. Moreover, third-quarter guidance points to sequential reacceleration, supported by model improvements deployed after the June quarter ended. The investment debate, therefore, centers on whether the recent weakness represents an attractive entry point or appropriately reflects execution risks that have become more visible. AppLovin reported adjusted earnings of $3.76 per share, surpassing the Zacks Consensus Estimate of $3.72 by 1.08%. Earnings increased 66.4% from $2.26 per share in the year-ago quarter. The company has now exceeded consensus EPS estimates in each of the past four quarters. However, the magnitude of the latest beat narrowed from the preceding quarter, when earnings of $3.56 per share topped expectations by 4.71%. On a sequential basis, second-quarter EPS increased 5.6%. Revenues reached $1.92 billion, up approximately 52.4% from $1.26 billion a year earlier. The top line nevertheless missed the Zacks Consensus Estimate by 0.75%. Revenues increased about 4% sequentially, implying first-quarter revenues of roughly $1.85 billion. Image Source: APP The combination of rapid year-over-year expansion and a sequential slowdown in incremental growth helps explain the mixed interpretation of the quarter. AppLovin continues to expand at an exceptional rate for its scale, but elevated expectations leave relatively little room for execution delays. Adjusted EBITDA climbed 58% year over year to $1.61 billion, implying approximately $1.02 billion in the prior-year quarter. EBITDA growth therefore exceeded revenue growth by roughly six percentage points. More importantly, adjusted EBITDA represented approximately 83.9% of second-quarter revenues. That is an exceptionally high profitability level and demonstrates the operating leverage embedded in AppLovin's technology-driven advertising platform. The quarter also generated $863 million of free cash flow, equivalent to roughly 44.9% of revenues and about 53.6% of adjusted EBITDA. Cash generation was softer than the company's recent earnings profile might suggest, but the weakness primarily reflected timing rather than a deterioration in underlying economics. Costs increased sequentially as AppLovin directed additional resources toward computing capacity for existing and new artificial-intelligence models. This is worth watching because model training and inference requirements could create some quarter-to-quarter margin variability even if the investments ultimately support higher revenues. The 17% post-earnings decline appears more closely connected to execution expectations than to current profitability. Second-quarter revenues came in slightly below consensus, while the company indicated that meaningful improvements to its gaming models arrived later than expected. Since APP's valuation is closely tied to sustained advertising efficiency and rapid model advancement, even a timing-related interruption can prompt investors to reassess near-term growth assumptions. There was also a mismatch between current-quarter expectations and the timing of product improvements. The next meaningful performance enhancement became available shortly after quarter-end rather than contributing materially during the second quarter. At the same time, the report did not indicate a broad deterioration in advertiser demand or competitive positioning. Consumer advertiser spending reached a new record and stood 28% above fourth-quarter 2025 levels. The challenge is that this business has not yet reached sufficient scale to fully offset periods when gaming-model improvements arrive more slowly. That distinction matters. A demand-driven slowdown would represent a more fundamental concern, whereas delayed model improvements are primarily an execution and timing risk. The sharp share-price reaction suggests investors are demanding evidence that the latter explanation translates into stronger subsequent results. Third-quarter guidance provides one of the strongest counterarguments to the post-earnings pessimism. AppLovin expects revenues between $2.055 billion and $2.085 billion. The $2.07 billion midpoint implies approximately 7.8% sequential growth from the second quarter’s $1.92 billion, representing a meaningful acceleration from the second quarter's roughly 4% sequential increase. Adjusted EBITDA is projected between $1.71 billion and $1.74 billion. At the $1.725 billion midpoint, EBITDA would increase approximately 7.1% sequentially from $1.61 billion. The company expects an adjusted EBITDA margin of approximately 83% in the third quarter. That would be modestly below the second quarter's roughly 83.9%, reflecting, in part, higher AI-related infrastructure spending. Still, sustaining a margin above 80% while investing aggressively in model development would underline the strength of APP's operating model. Importantly, the outlook incorporates model enhancements already deployed and does not depend on additional releases that have yet to reach production. That makes the guidance somewhat more tangible than an outlook dependent on future technological breakthroughs. AppLovin ended the quarter with $3.05 billion in cash and $3.7 billion of total debt. The resulting $650 million gap between debt and cash is modest relative to the company's EBITDA generation, with net leverage standing at approximately 0.1 times trailing adjusted EBITDA. During the quarter, the company repurchased or withheld approximately 1.14 million shares for $551 million. Repurchase activity moderated compared with the first quarter as management balanced capital returns against temporarily softer free cash flow. The combination of strong profitability, substantial cash holdings and minimal net leverage gives AppLovin flexibility to fund AI infrastructure, pursue product expansion and continue returning capital without placing meaningful stress on the balance sheet. The consumer opportunity remains one of the biggest variables in APP's longer-term growth story. Advertiser spending continues to expand, but onboarding is being approached gradually, with emphasis on mid-market customers that currently fit the platform's capabilities particularly well. Creative production remains a meaningful bottleneck. Generating consistently high-quality longer-form video advertisements is still developing, which can limit how quickly smaller advertisers are able to scale campaigns. Other opportunities, including lead generation and connected television, remain earlier in development. These initiatives provide potential extensions to AppLovin's addressable market, but investors should avoid assigning full value to them before the company demonstrates repeatable execution. The Trade Desk TTD and Unity Software U offer useful reference points for investors assessing APP's position within digital advertising and app technology. The Trade Desk competes for digital advertising budgets through a technology-led platform, making advertising demand, customer spending and platform efficiency important metrics for both The Trade Desk and AppLovin. However, APP's unusually high adjusted EBITDA margin distinguishes its current earnings profile. Unity Software provides another relevant comparison because of its exposure to the mobile-app and gaming ecosystem. The company has also been navigating the intersection of software, monetization and advertising technology. While Unity Software and APP differ substantially in their business mix, their exposure to developer and mobile ecosystems makes execution around product innovation important for both. For investors comparing growth-oriented technology names, The Trade Desk and Unity Software help frame APP's opportunity, but AppLovin's combination of rapid revenue growth, very high EBITDA margins and expanding consumer advertising exposure gives it a distinctive financial profile. The biggest near-term issue is the unpredictability of model improvements. AI-driven advertising performance does not necessarily advance smoothly every quarter, creating the possibility that periods of extraordinary growth alternate with quarters of more modest gains. Higher compute requirements add another layer of uncertainty. Third-quarter guidance already incorporates increased training and inference expenses, and continued investment could constrain incremental margin expansion. Consumer onboarding also needs to broaden beyond a relatively concentrated group of larger contributors. Partnerships could improve advertiser acquisition, but creative tools and data integration must mature before APP can efficiently capture a much larger long-tail opportunity. Those risks are particularly important because the market's expectations for AppLovin remain elevated. Strong absolute growth may not always be enough if reported results fall short of the trajectory embedded in investor expectations. AppLovin remains an unusually profitable growth company with powerful advertising technology, expanding consumer opportunities and a balance sheet capable of supporting continued investment. The post-earnings selloff improves the risk-reward profile, while management’s outlook suggests the recent slowdown may prove temporary. However, the quarter also exposed greater variability in model-driven growth, rising infrastructure requirements and unresolved onboarding constraints. Investors should therefore resist treating the pullback alone as sufficient reason to become more aggressive. Evidence of sustained reacceleration and broader consumer adoption would strengthen the investment case. Until that confirmation emerges, existing shareholders should retain APP, making the stock a Hold. APP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AppLovin Corporation (APP) : Free Stock Analysis Report The Trade Desk (TTD) : Free Stock Analysis Report Unity Software Inc. (U) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Unity Software Inc.? Here are five stocks we like better. Unity delivered strong Q2 results: Strategic revenue rose 38% year over year, adjusted EBITDA increased 77% to $160 million, and free cash flow climbed 59% to $202 million. The company ended the quarter with $2.36 billion in cash and shifted to a net-cash position. Vector drove advertising growth: Unity’s performance-marketing platform grew 23% sequentially, reaching an annual run rate substantially above $1 billion two quarters ahead of schedule. Strategic Grow revenue rose 63% to $329 million, supported by product updates, improved data and AI model enhancements. Unity raised expectations for continued profitability: The company forecast Q3 strategic revenue of $540 million to $550 million and adjusted EBITDA of $185 million to $190 million, while bringing forward its expected timeline for GAAP net-income profitability to Q3 2026. Growth initiatives include the Unity 7 beta, Commerce expansion and a multiyear partnership with Netflix. Uber Stock Lags in 2026, But Cash Flow and AV Bets Fuel Upside Unity Software (NYSE:U) reported what Chief Executive Officer Matt Bromberg described as “arguably the best quarter in Unity’s history as a public company,” driven by accelerating growth in its Vector advertising platform, expanding profitability and continued product development centered on artificial intelligence. For the second quarter of 2026, Unity reported strategic revenue growth of 38% and adjusted EBITDA growth of 77%, according to Chief Financial Officer Jarrod Yahes. Adjusted EBITDA totaled $160 million, while adjusted EBITDA margin reached 29%, an increase of 800 basis points from a year earlier. → No Hangover: Revisiting Microsoft One Week After Earnings GLP-1 Demand Is Creating a New Dividend Angle in These 4 Logistics Stocks Unity also generated $202 million of free cash flow in the quarter, up 59% year over year, bringing its cash balance to $2.36 billion. Yahes said the company moved from a net-debt position to a net-cash position during the period and plans to repay its 2026 convertible note in November. The company’s performance-marketing product, Unity Vector, was the primary driver of quarterly momentum. Bromberg said Vector grew 23% sequentially in the second quarter, nearly double Unity’s prior expectation for 12% to 13% quarter-over-quarter growth. He said the platform reached an annual run rate of “substantially over $1 billion,” two quarters ahead of the company’s expectations. → MarketBeat Week in Review – 08/03 - 08/07 MarketBeat Week in Review – 07/27- 07/31 Yahes said strategic Grow revenue was $329 million, up 63% from the prior year. The wind-down of the ironSource ad network had only a negligible impact on Vector’s expansion, contributing roughly $3 million of Vector revenue growth from former ironSource customers during the quarter, he said. Unity attributed the advertising business’s performance to product updates, improved data and ongoing model enhancements. The company said it deployed more than 20 major Vector updates in the second quarter, including expanded day-28 return-on-ad-spend capabilities for in-app advertising and hybrid campaigns. → Why the Landlord of the AI Boom Could Outlast the Chipmakers Day-28 ROAS campaigns measure advertiser returns over a longer period than Unity’s standard seven-day product. Bromberg said spending on day-28 campaigns increased nearly threefold from the first quarter, with more than 25% of Unity’s advertiser base adopting the approach. Unity also began incorporating signals from its runtime into Vector’s AI models near the end of the second quarter. Bromberg said Unity’s runtime reaches approximately 3 billion people each month who play games built with Unity. While he characterized the initiative as early, he said the initial results were encouraging and could represent a durable competitive advantage for the company. Unity’s Create business also returned to growth. Yahes said Create strategic revenue was $157 million, up 14% year over year excluding a one-time revenue item in the prior-year period. He cited higher average revenue per user, price increases, minimum annual customer commitments and growth in China as contributing factors. At its Unite conference in Seoul, Unity announced Unity 7, a new version of its game-development software scheduled to enter beta in the fourth quarter of 2026 and launch fully in the first quarter of 2027. Bromberg said Unity 7 is intended to enable developers, artists, producers and coding agents to collaborate across the game-development process. Unity has made its model context protocol free and opened its application programming interface, allowing developers to use command-line tools and coding agents within their own workflows. “This isn’t just another engine upgrade for us,” Bromberg said during the question-and-answer session. He said the product was re-architected to support collaboration among creators and coding agents, while retaining compatibility with Unity 6 projects. The company expects the broader authoring platform to connect game creators with downstream services including Vector, commerce offerings and live-game operations. Bromberg said these services will be configured automatically under the Unity 7 framework, with no additional software development kits or engineering time required. Unity said its Commerce product became generally available June 30. Bromberg said the offering enables game publishers to support direct-to-consumer purchases without managing separate software development kits or storefronts. He said the company sees three main benefits: helping publishers avoid high fees, gaining visibility into purchase-behavior data that can improve advertising models, and generating a smaller economic benefit for Unity over time. The company also announced a multiyear partnership with Netflix to support Netflix’s multiplatform games ecosystem using the Unity engine. Bromberg said Unity will invest in supporting Netflix’s gaming initiatives and helping developers build games for the platform. Separately, Yahes said Unity completed the sale of its Supersonic business to Tripledot Studios on Aug. 4. Unity substantially completed the closure of the ironSource ad network, effective April 30. Yahes said the actions should benefit margins in the second half of 2026 and further focus the company on faster-growing and more profitable businesses. For the third quarter, Unity forecast strategic revenue of $540 million to $550 million, representing year-over-year growth of 44% to 47%. The company expects Grow Solutions revenue growth of 68% to 70%, supported by continued Vector performance, and Create Solutions growth of 7% to 10%. Unity expects Vector to grow 19% to 21% sequentially in the third quarter. It also forecast approximately $20 million in non-strategic revenue, primarily from Supersonic’s contribution in July before the sale closed. The company projected adjusted EBITDA of $185 million to $190 million, implying a 33% margin and year-over-year adjusted EBITDA growth of 69% to 74%. Yahes said Unity now expects to achieve GAAP net-income profitability in the third quarter of 2026, one quarter earlier than its prior expectation for the fourth quarter. Unity Software is a leading provider of a real-time 3D development platform that enables creators across industries to design, build and operate interactive, real-time experiences. Originally focused on the game development market, Unity's technology now extends into sectors such as film, automotive, architecture, engineering and construction, delivering immersive content for mobile, desktop, console, augmented reality and virtual reality devices. The company's core offering comprises a suite of authoring tools, runtime engines and cloud services that streamline the creation and deployment of interactive 3D applications. The Unity Editor serves as the central hub where developers design scenes, script behavior and iterate on assets. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Unity Software Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Find winning stocks in any market cycle. Join 7 million investors using Simply Wall St's investing ideas for FREE. Unity Software (U) is back in focus after its latest quarterly earnings topped analyst expectations, with stronger revenue, better profitability metrics and fresh momentum in its AI powered Vector advertising platform. See our latest analysis for Unity Software. The earnings surprise and Vector momentum have driven a sharp reset in sentiment around Unity Software, with a 35.6% 7 day share price return and 52.7% 90 day share price return. However, the year to date share price return is still slightly negative and the 5 year total shareholder return remains deeply negative. If you are looking beyond Unity Software for AI focused opportunities, this is a useful moment to scan the market using our screener of 29 AI small caps Unity Software now sits between a sharp earnings driven rerating and a long history of losses and weak long term returns. Do the current numbers and valuation lean more toward the bull case or the bear case? Unity Software last closed at $43, while the most widely followed narrative pegs fair value at about $35.72. That gap rests on a specific long term earnings and margin story. Read the complete narrative. Want to see what kind of revenue runway and margin profile support that fair value for Unity Software? The narrative leans on rising recurring revenue, higher profitability and a richer earnings multiple. The detailed story sits behind those assumptions. Result: Fair Value of $35.72 (OVERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, Unity Software still faces meaningful risks if AI product uptake disappoints or if high investment in new markets keeps profitability and margins under pressure for a longer period. Find out about the key risks to this Unity Software narrative. The popular narrative around Unity Software points to a fair value of $35.72 and labels the stock as overvalued at $43. Yet the Simply Wall St DCF model suggests the opposite, with Unity Software trading about 31.8% below an estimated future cash flow value of $63.07. Which story feels more convincing to you? Look into how the SWS DCF model arrives at its fair value. Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Unity Software for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity. With sentiment clearly split on Unity Software, this is a good time to move fast, review the numbers for yourself and weigh both sides. To see how the potential risks and rewards stack up in one place, start with the 2 key rewards and 1 important warning sign. Do not stop with Unity Software. Use this momentum to widen your watchlist and uncover other stocks that could better suit your risk profile and goals. Target potential value opportunities by scanning companies that appear attractively priced with quality fundamentals through the 51 high quality undervalued stocks. Strengthen your portfolio foundation by focusing on companies with resilient finances using the solid balance sheet and fundamentals stocks screener (49 results). Hunt for lesser known opportunities that still meet solid quality checks with the screener containing 19 high quality undiscovered gems. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include U. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Unity Software Inc. U centered its second-quarter 2026 earnings call on accelerating Vector artificial intelligence (AI) performance, tighter links between Create and Grow, and a more profitable operating model. Management also raised near-term profitability expectations while simplifying the portfolio. Revenues of $546.5 million topped the Zacks Consensus Estimate of $511.8 million, while adjusted earnings of $0.28 per share exceeded the $0.24 consensus estimate. Strategic revenues increased 38% year over year. Unity Software Inc. price-consensus-eps-surprise-chart | Unity Software Inc. Quote President and chief executive officer Matt Bromberg said Vector grew 23% sequentially in the second quarter, nearly twice management’s prior expectation of 12% to 13%. The product also moved above a $1 billion annual run rate, two quarters earlier than expected. Strategic Grow revenues reached $329 million, up 63% year over year. Bromberg attributed the acceleration to product enhancements, better data and model improvements that are raising advertising returns for customers. For the third quarter, chief financial officer Jarrod Yahes said Unity expects Vector to grow 19% to 21% sequentially. Strategic Grow revenues are projected at $380 million to $385 million, representing 68% to 70% year-over-year growth. Bromberg said Unity increasingly views Create and Grow as parts of one platform rather than separate businesses. More game creation drives platform usage, while more games increase the need for discovery and advertising. Unity 7 is central to that strategy. Bromberg said the release will let developers and coding agents work together across development while automatically configuring services including Vector, commerce and live operations. The Unity 7 beta is scheduled for the fourth quarter of 2026, with a full release planned for the first quarter of 2027. Bromberg also highlighted a multiyear partnership supporting Netflix’s multiplatform games ecosystem. Yahes said adjusted EBITDA was $160 million in the second quarter, with a 29% margin, as revenue growth and cost discipline produced operating leverage. Adjusted EBITDA increased 77% year over year. Third-quarter adjusted EBITDA is expected at $185 million to $190 million, implying a 33% margin. Yahes said that would mark a sixth consecutive quarter of adjusted EBITDA margin expansion. Unity also pulled forward its target for GAAP net income profitability to the third quarter of 2026 from the fourth quarter. Yahes tied the improvement to operating leverage and lower costs following portfolio actions. Yahes said Unity completed the ironSource Ads Network shutdown and sold Supersonic to Tripledot Studios on Aug. 4. Management expects those actions to support margins in the second half. Free cash flow reached $202 million, up 59% year over year. Cash increased to $2.36 billion, and Yahes said Unity moved from a net debt position to a net cash position. Near-term capital priorities are focused on deleveraging. Yahes said Unity expects to repay its 2026 convertible notes in November, while stronger cash generation should expand capital allocation flexibility. A Morgan Stanley analyst asked how much runtime data contributed to Vector’s improvement. Bromberg said runtime signals were introduced near quarter-end and remain too early to isolate, but management views the data as a long-term advantage. A Cannonball Research analyst asked how Unity 7 differs from prior releases. Bromberg described a broader change than an engine upgrade, emphasizing coding-agent collaboration, faster workflows and compatibility with Unity 6 projects. A Goldman Sachs analyst pressed management on long-term margins. Yahes pointed to adjusted gross margins around 82% to 83% and said Unity sees further margin expansion while funding high-return product investments. Management’s message centered on sustaining Vector’s growth while using Unity 7 and AI tools to deepen engagement across the platform. Bromberg emphasized product velocity, runtime data and tighter integration between creation, monetization and live services. Yahes stressed cost control, portfolio simplification and balance-sheet improvement. Third-quarter strategic revenue guidance of $540 million to $550 million calls for 44% to 47% year-over-year growth. U carries a Zacks Rank #2 (Buy). Its Growth Score of A and VGM Score of B align favorably with Zacks methodology, which emphasizes A or B Style Scores alongside a top Zacks Rank. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The Value Score of F is comparatively weak, while the Momentum Score of C is middle of the range. The current Zacks Rank can change as earnings estimates are revised following the just-reported results. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Unity Software Inc. (U) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Unity Software U reported second-quarter 2026 adjusted earnings per share (EPS) of 28 cents, marking a 55.6% increase year over year. The figure beat the Zacks Consensus Estimate by 16.67%.On a GAAP basis, the company posted a net loss of $23 million, or 5 cents per share, narrower than a net loss of $107 million, or 26 cents per share, in the year-ago quarter. GAAP net loss margin improved to (4)% from (24)% a year earlier.Net revenues of $546.47 million rose 24% year over year. The figure beat the consensus mark by 6.77%.Total Strategic Revenue, which excludes the ironSource Ads Network and Supersonic, grew 38% year over year to $486.41 million and accounted for 89% of total revenues, up from roughly 80% a year earlier. Non-Strategic Revenue fell 33% year over year to $60.06 million as the company continued to wind down its non-core ad and publishing businesses. Unity Software Inc. price-consensus-eps-surprise-chart | Unity Software Inc. Quote Unity Software reported Create Solutions revenues of $158 million, up 2% year over year. The increase was driven by higher subscription revenues, partially offset by declines in cloud and hosting services revenues tied to the company's 2025 portfolio reset. Strategic Create Revenue, which excludes non-strategic items, was $157.46 million, up 5% year over year, or up 14% year over year excluding the impact of a $12 million one-time revenue item recorded in the second quarter of 2025.Grow Solutions revenues were $389 million, up 35% year over year. The growth was driven by the Unity Ads Network, propelled by Unity Vector, partially offset by declines in the ironSource Ads Network. Strategic Grow Revenue was $328.96 million, up 63% year over year, again outpacing total Grow growth and reflecting Vector's continued momentum. In the second quarter, adjusted gross profit increased 24% year over year to $453.25 million. Adjusted gross margin was 83%, flat year over year.Research & development expenses on an adjusted basis grew 17.2% year over year to $161.1 million. Adjusted R&D, as a percentage of revenues, contracted 100 basis points to 30%.Sales and marketing expenses on an adjusted basis declined 2.2% year over year to $94.06 million. Adjusted S&M, as a percentage of revenues, contracted 500 basis points to 17%.General & administrative expenses on an adjusted basis decreased 8.6% year over year to $37.9 million. Adjusted G&A, as a percentage of revenues, contracted 200 basis points to 7%.Unity Software reported adjusted EBITDA of $160.19 million, up 77% year over year. The company's adjusted EBITDA margin of 29% improved 800 basis points compared with the prior year, driven by higher revenues and continued cost control.Net loss for the quarter (before noncontrolling interest allocation) was $22.67 million, narrowing 78.9% year over year from a net loss of $107.37 million in the year-ago quarter. As of June 30, 2026, Unity had cash, cash equivalents and restricted cash of $2.357 billion compared with $2.15 billion as of March 31, 2026.Operating cash flow was $205.62 million in the reported quarter, up 54.5% year over year from $133.1 million in the year-ago quarter. Free cash flow during the quarter was $201.96 million, up 59.5% year over year from $126.65 million in the prior-year quarter. The current portion of convertible notes was $557.17 million as of June 30, 2026. Unity Software completed the sunset of the ironSource Ads Network, effective April 30, 2026, as previously announced. Subsequent to quarter-end, on Aug. 4, 2026, the company completed the sale of its Supersonic mobile game publishing business; second-quarter Non-Strategic Revenue and third-quarter guidance each incorporate roughly one month of residual Supersonic contribution.Management noted that Unity Vector, the company's AI-powered advertising platform, continues to be a primary growth driver behind the sharp acceleration in Strategic Grow Revenue, and that the company has begun incorporating behavioral data from the Unity runtime — which reaches billions of monthly players across games built on the platform — into Vector's models as a further competitive differentiator.The company now expects to reach GAAP profitability in the third quarter of 2026, moved up from its prior target of the fourth quarter of 2026. Management also reiterated plans to repay its 2021 convertible notes in November 2026 as part of continued balance-sheet deleveraging, and indicated that the completed Supersonic divestiture and ironSource Ads Network wind-down are expected to support faster revenue growth and materially higher profitability in the second half of 2026. For the third quarter of 2026, Unity Software anticipates Strategic Revenue between $540 million and $550 million, implying a rise of 44-47% year over year. Within that, Strategic Grow Revenue is expected between $380 million and $385 million, suggesting an increase of 68-70% year over year, and Strategic Create Revenue is guided in the range of $159-$163 million, indicating a rise of 7-10% year over year.Non-Strategic Revenue is expected to be approximately $20 million, reflecting roughly one month of residual revenues from the divested Supersonic business.Adjusted EBITDA is expected in the range of $185-$190 million, indicating year-over-year growth of 69-74%. Unity Software currently carries a Zacks Rank #2 (Buy).Kimball Electronics KE, Quantum QMCO and Lumentum LITE are among the top-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. Currently, Kimball Electronics sports a Zacks Rank #1 (Strong Buy), while Quantum and Lumentum carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here. Kimball Electronics shares have inched up 1.8% in the past six months. KE is scheduled to report its fiscal fourth-quarter 2026 results on Aug. 13. Quantum's shares have surged 96% in the past six months. QMCO is scheduled to report its fiscal first-quarter 2027 results on Aug. 10, 2026. Lumentum shares have gained 48.9% in the past six months. LITE is slated to report its fiscal fourth-quarter 2026 results on Aug. 11. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Unity Software Inc. (U) : Free Stock Analysis Report Lumentum Holdings Inc. (LITE) : Free Stock Analysis Report Kimball Electronics, Inc. (KE) : Free Stock Analysis Report Quantum Corporation (QMCO) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research