Q1 2026 Unity Software Inc Earnings Call

May 7, 2026

Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Unity Technologies Q1 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. I will now hand the conference over to Alex Giaimo, Head of Investor Relations. Alex, please go ahead.

Speaker #1: Ladies and gentlemen, thank you for joining us, and welcome to the Unity Technologies Q1 earnings call. After today's prepared remarks, we will host a question-and-answer session.

Speaker #1: If you would like to ask a question, please raise your hand. If you have dialed into today's call, please press *9 to raise your hand and *6 to unmute.

Speaker #1: I will now hand the conference over to Alex Giamo, Head of Investor Relations. Alex, please go ahead.

Speaker #2: Thank you, good morning everyone. Welcome to Unity's first quarter 2026 earnings call. I'm joined this morning by our CEO, Matt Bromberg, and our CFO, Jarrod Yahes.

Alex Giaimo: Thank you. Good morning, everyone. Welcome to Unity's Q1 2026 earnings call. I'm joined this morning by our CEO, Matthew Bromberg, and our CFO, Jarrod Yahes. Before we begin, I wanna 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 about these risks and uncertainties 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 financials are in addition to, and not substitute for, measures of financial performance prepared in accordance with GAAP. Full reconciliation of GAAP to non-GAAP is available in our press release and on the sec.gov website.

Alex Giaimo: Thank you. Good morning, everyone. Welcome to Unity's Q1 2026 earnings call. I'm joined this morning by our CEO, Matt Bromberg, and our CFO, Jarrod Yahes. Before we begin, I wanna 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 about these risks and uncertainties 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.

Speaker #2: 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.

Speaker #2: You can find more information about these risks and uncertainties and 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.

Speaker #2: Finally, during today's meeting, we will discuss non-GAAP financial measures; these non-GAAP financials are in addition to and not substitute for measures of financial performance.

Alex Giaimo: Finally, during today's meeting, we will discuss non-GAAP financial measures. These non-GAAP financials are in addition to, and not substitute for, measures of financial performance prepared in accordance with GAAP. Full reconciliation of GAAP to non-GAAP is available in our press release and on the sec.gov website. With that, I'll turn it over to Matt.

Speaker #2: Prepared in accordance with GAAP full reconciliation of GAAP to non-GAAP is available in our press release, and on the sec.gov website. With that, I'll turn it over to Matt.

Alex Giaimo: With that, I'll turn it over to Matt.

Speaker #3: Thanks, Alex. And good morning. On behalf of everyone at Unity, from across the globe, I'd like to thank each of you for joining us today.

Matthew Bromberg: Thanks, Alex, and good morning. On behalf of everyone at Unity from across the globe, I'd like to thank each of you for joining us today. It is a privilege to be with you this morning. Unity is on an incredible trajectory, growing rapidly on both the top line and the bottom line while also shipping the most ambitious product roadmap in our history, a product roadmap that we believe will transform both Unity and the future of interactive content creation. Our Q1 results reflect this momentum, with Unity posting strategic revenue growth of 35% year over year and our best adjusted EBITDA margin in over 2 years at 27%, up 65% year over year.

Matt Bromberg: Thanks, Alex, and good morning. On behalf of everyone at Unity from across the globe, I'd like to thank each of you for joining us today. It is a privilege to be with you this morning. Unity is on an incredible trajectory, growing rapidly on both the top line and the bottom line while also shipping the most ambitious product roadmap in our history, a product roadmap that we believe will transform both Unity and the future of interactive content creation. Our Q1 results reflect this momentum, with Unity posting strategic revenue growth of 35% year over year and our best adjusted EBITDA margin in over 2 years at 27%, up 65% year over year.

Speaker #3: It is a privilege to be with you this morning. Unity is on an incredible trajectory. Growing rapidly on both the top line and the bottom line, while also shipping the most ambitious product roadmap in our history.

Speaker #3: A product roadmap that we believe will transform both Unity and the future of interactive content creation. Our first quarter results reflect this momentum. With Unity posting strategic revenue growth of 35% year over year, and our best adjusted EBITDA margin in over two years, at 27%, up 65% year over year.

Speaker #3: As Jarrod will share in more detail later, we expect the second quarter to bring more of the same. With guidance for strategic ad revenue to grow 50% year over year, including robust vector revenue growth, as well as year-over-year margin expansion.

Matthew Bromberg: As Jarrod will share in more detail later, we expect Q2 to bring more of the same, with guidance for strategic ad revenue to grow 50% year-over-year, including robust Vector revenue growth as well as year-over-year margin expansion. This organic growth trend, combined with operating discipline, means that we now expect our business to become GAAP profitable by Q4 2026, an important financial milestone and a reflection of the kind of company we wanna run over the long term. This is another topic that Jarrod will address in more detail in just a bit. Unity's tremendous financial performance, a passion for execution, and a deep commitment to our customers have also positioned us well to take advantage of the massively positive forces we're seeing in the marketplace, driven by the adoption of AI across our industry.

Matt Bromberg: As Jarrod will share in more detail later, we expect Q2 to bring more of the same, with guidance for strategic ad revenue to grow 50% year-over-year, including robust Vector revenue growth as well as year-over-year margin expansion. This organic growth trend, combined with operating discipline, means that we now expect our business to become GAAP profitable by Q4 2026, an important financial milestone and a reflection of the kind of company we wanna run over the long term. This is another topic that Jarrod will address in more detail in just a bit. Unity's tremendous financial performance, a passion for execution, and a deep commitment to our customers have also positioned us well to take advantage of the massively positive forces we're seeing in the marketplace, driven by the adoption of AI across our industry.

Speaker #3: This organic growth trend, combined with operating discipline, means that we now expect our business to become GAAP profitable by the fourth quarter of 2026, an important financial milestone and a reflection of the kind of company we want to run over the long term.

Speaker #3: This is another topic that Jarrod will address in more detail in just a bit. Unity's tremendous financial performance, a passion for execution, and a deep commitment to our customers have also positioned us well to take advantage of the massively positive forces we're seeing in the marketplace.

Speaker #3: Driven by the adoption of AI across our industry, our research is telling us that 90% of game developers are already using AI in their workflows.

Matthew Bromberg: Our research is telling us that 90% of game developers are already using AI in their workflows, and these tools are accelerating the production of new games. We're also seeing this up close every day in our work with studio partners, both large and small. Newly released mobile apps are up 60% year over year across both iOS and Android, with a particularly noticeable uptick in more recent months. Remember, mobile games continue to account for the majority of all new app releases worldwide. These are the trends propelling our business forward. Newly published Made With Unity games were up 12% over the prior quarter in Q1, with new Unity signups showing 20% quarter over quarter growth, the fastest growth we've seen since 2020. More games are being made. That's great for Unity.

Matt Bromberg: Our research is telling us that 90% of game developers are already using AI in their workflows, and these tools are accelerating the production of new games. We're also seeing this up close every day in our work with studio partners, both large and small. Newly released mobile apps are up 60% year over year across both iOS and Android, with a particularly noticeable uptick in more recent months. Remember, mobile games continue to account for the majority of all new app releases worldwide. These are the trends propelling our business forward. Newly published Made With Unity games were up 12% over the prior quarter in Q1, with new Unity signups showing 20% quarter over quarter growth, the fastest growth we've seen since 2020. More games are being made. That's great for Unity.

Speaker #3: And these tools are accelerating the production of new games. We're also seeing this up close every day in our work with studio partners, both large and small.

Speaker #3: Newly released mobile apps are up 60% year over year across both iOS and Android, with a particularly noticeable uptick in more recent months. And remember, mobile games continue to account for the majority of all new app releases worldwide.

Speaker #3: These are the trends propelling our business forward. Newly published Made With Unity games were up 12% over the prior quarter in Q1. With new Unity sign-ups showing 20% quarter over quarter growth, the fastest growth we've seen since 2020.

Speaker #3: So more games are being made. That's great for Unity. And because AI is making game creation more approachable, there are also more creators. That's great for Unity.

Matthew Bromberg: Because AI is making game creation more approachable, there are also more creators. That's great for Unity. With more creators and more games, the need for game discovery becomes ever more acute as many more titles compete for consumer attention. Helping match consumers with the next game they wanna play becomes even more critical than it is today, and that's great for Unity as well. Crucially, while these developments are driving significant change for many developers and publishers, we expect they will also be strong drivers of growth for the entire industry for many years to come. AI is not just accelerating adoption of Unity's platform in the marketplace. It's also propelling the pace of our own product development. Unity is truly meeting the moment by building new products that we believe will form the foundation of the next generation of interactive content creation and marketing.

Matt Bromberg: Because AI is making game creation more approachable, there are also more creators. That's great for Unity. With more creators and more games, the need for game discovery becomes ever more acute as many more titles compete for consumer attention. Helping match consumers with the next game they wanna play becomes even more critical than it is today, and that's great for Unity as well. Crucially, while these developments are driving significant change for many developers and publishers, we expect they will also be strong drivers of growth for the entire industry for many years to come. AI is not just accelerating adoption of Unity's platform in the marketplace. It's also propelling the pace of our own product development. Unity is truly meeting the moment by building new products that we believe will form the foundation of the next generation of interactive content creation and marketing.

Speaker #3: And with more creators and more games, the need for game discovery becomes ever more acute as many more titles compete for consumer attention. So helping match consumers with the next game they want to play becomes even more critical than it is today.

Speaker #3: And that's great for Unity as well. Crucially, while these developments are driving significant change for many developers and publishers, we expect they will also be strong drivers of growth for the entire industry for many years to come.

Speaker #3: But AI is not just accelerating adoption of Unity's platform in the marketplace. It's also propelling the pace of our own product development. Unity is truly meeting the moment by form the foundation of the next generation of interactive content creation and marketing.

Speaker #3: Let's start with vector. The AI system that sits at the heart of Unity. Improved performance and enhanced returns for our advertising customers drove another quarter of 15% sequential growth, the fourth in a row, exceeding our own already ambitious expectations.

Matthew Bromberg: Let's start with Vector, the AI system that sits at the heart of Unity. Improved performance and enhanced returns for our advertising customers drove another quarter of 15% sequential growth, the fourth in a row, exceeding our own already ambitious expectations. Our Vector revenue in Q1 2026 is 80% larger than 1 year ago, an astonishing result. What we're really excited about is just how young Vector still is. We believe we've just begun to see the impact it will have for our customers and our business. Most notably, later this quarter, we'll see Unity's runtime data graduate to our live production models for the first time. Our conviction remains high that real-time, sequential, behavioral data will provide a significant future catalyst for growth. We're now ingesting this data inside Vector, and we are very encouraged with the results we're seeing in testing.

Matt Bromberg: Let's start with Vector, the AI system that sits at the heart of Unity. Improved performance and enhanced returns for our advertising customers drove another quarter of 15% sequential growth, the fourth in a row, exceeding our own already ambitious expectations. Our Vector revenue in Q1 2026 is 80% larger than 1 year ago, an astonishing result. What we're really excited about is just how young Vector still is. We believe we've just begun to see the impact it will have for our customers and our business. Most notably, later this quarter, we'll see Unity's runtime data graduate to our live production models for the first time. Our conviction remains high that real-time, sequential, behavioral data will provide a significant future catalyst for growth. We're now ingesting this data inside Vector, and we are very encouraged with the results we're seeing in testing.

Speaker #3: Our vector revenue in the first quarter of 2026 is 80% larger than one year ago. An astonishing result. But what we're really excited about is just how young vector still is.

Speaker #3: We believe we've just begun to see the impact it will have for our customers and our business. Most notably, later this quarter, we'll see Unity's runtime data graduate to our live production models for the first time.

Speaker #3: Our conviction remains high that real-time, sequential, behavioral data will provide a significant future catalyst for growth. We're now ingesting this data inside vector, and we are very encouraged with the results we're seeing in testing.

Speaker #3: And with opt-in rates to our developer data framework remaining at over 90%, adoption rates continue to scale each day, enhancing our unique competitive position.

Matthew Bromberg: With opt-in rates to our developer data framework remaining at over 90%, adoption rates continue to scale each day, enhancing our unique competitive position. Vector is about much more than just advertising. At its heart, Vector is personalization AI, designed to understand how and why games appeal to players. It's trained on 20 years of game making on the one side and interaction with billions of consumers on the other. Our vision is for these two domains to interoperate so that we can better understand both what appeals to players as well as how those appealing experiences are designed, constructed, and delivered. Vector is where these two domains come together, and it's now at the center of our product development across both Create and Grow.

Matt Bromberg: With opt-in rates to our developer data framework remaining at over 90%, adoption rates continue to scale each day, enhancing our unique competitive position. Vector is about much more than just advertising. At its heart, Vector is personalization AI, designed to understand how and why games appeal to players. It's trained on 20 years of game making on the one side and interaction with billions of consumers on the other. Our vision is for these two domains to interoperate so that we can better understand both what appeals to players as well as how those appealing experiences are designed, constructed, and delivered. Vector is where these two domains come together, and it's now at the center of our product development across both Create and Grow.

Speaker #3: But vector is about much more than just advertising. At its heart, vector is personalization AI. Designed to understand how and why games appeal to players.

Speaker #3: It's trained on 20 years of game making on the one side and interaction with billions of consumers on the other. Our vision is for these two domains to interoperate.

Speaker #3: So that we can better understand both what appeals to players as well as how those appealing experiences are designed, constructed, and delivered. Vector is where these two domains come together.

Speaker #3: And it's now at the center of our product development across both create and grow. Our first vector-driven enhancement for the Unity engine Unity AI went into public beta earlier this week.

Matthew Bromberg: Our first Vector-driven enhancement for the Unity engine, Unity AI, went into public beta earlier this week. The response from creators has been really gratifying. Unity AI is an integrated agent tuned specifically for Unity. It has full context for your project and is custom-made for Unity workflows. It knows both your game and our software better than anyone else. It writes code directly in a Unity project, from scene hierarchies, packages, code, assets, all the way down to performance controls we have never made available before. It knows not just how to make a game, but how to make a game that runs well across every platform, fully in service of the individual creator's vision. The Unity AI interface also offers extreme flexibility. Our customers can work not just faster and more efficiently, but more creatively.

Matt Bromberg: Our first Vector-driven enhancement for the Unity engine, Unity AI, went into public beta earlier this week. The response from creators has been really gratifying. Unity AI is an integrated agent tuned specifically for Unity. It has full context for your project and is custom-made for Unity workflows. It knows both your game and our software better than anyone else. It writes code directly in a Unity project, from scene hierarchies, packages, code, assets, all the way down to performance controls we have never made available before. It knows not just how to make a game, but how to make a game that runs well across every platform, fully in service of the individual creator's vision. The Unity AI interface also offers extreme flexibility. Our customers can work not just faster and more efficiently, but more creatively.

Speaker #3: And the response from creators has been really gratifying. Unity AI is an integrated agent tuned specifically for Unity. It has full context for your project.

Speaker #3: And it's custom-made for Unity workflows. So it knows both your game and our software better than anyone else. And it writes code directly into Unity project.

Speaker #3: From seeing hierarchies packages, code, assets, all the way down to performance controls, we've never made available before it knows not just how to make a game, but how to make a game that runs well across every platform, fully in service of the individual creator's vision.

Speaker #3: The Unity AI interface also offers extreme flexibility. So that our customers can work not just faster and more efficiently, but more creatively. For example, we've remarked on many occasions that generic world models would be a great source of prototyping material.

Matthew Bromberg: For example, we've remarked on many occasions that generic world models would be a great source of prototyping material, and that game engines like Unity could ingest those pixels, transform them into a Unity scene, and enable developers to build deep interactive content and systems around them. Well, that's just what Unity AI now does. It ingests image pixels, outputs primitives, and does mesh upscaling and textures, constructing the entire content pipeline almost instantly. Image data is thus transformed into production-ready format, massively accelerating the process of game development. You can check it all out, including a cool video introduction, at unity.com/features/ai. The conversation about world models and game engines has been framed as a contest, but I think that framing misses what's actually happening.

Matt Bromberg: For example, we've remarked on many occasions that generic world models would be a great source of prototyping material, and that game engines like Unity could ingest those pixels, transform them into a Unity scene, and enable developers to build deep interactive content and systems around them. Well, that's just what Unity AI now does. It ingests image pixels, outputs primitives, and does mesh upscaling and textures, constructing the entire content pipeline almost instantly. Image data is thus transformed into production-ready format, massively accelerating the process of game development. You can check it all out, including a cool video introduction, at unity.com/features/ai. The conversation about world models and game engines has been framed as a contest, but I think that framing misses what's actually happening.

Speaker #3: And that game engines like Unity could ingest those pixels, transform them into Unity's scene, and enable developers to build deep interactive content and systems around them.

Speaker #3: Well, that's just what Unity AI now does. It ingests image pixels, outputs primitives, and does mesh upscaling and textures, constructing the entire content pipeline almost instantly.

Speaker #3: Image data is thus transformed into production-ready format. Massively accelerating the process of game development. You can check it all out, including a cool video introduction at unity.com/features/AI.

Speaker #3: The conversation about world models and game engines has been framed as a contest. But I think that framing misses what's actually happening. Today, the most ambitious interactive experiences will combine what generative systems do best: speed, personalization, and the ability to produce variation at a scale humans can't, with what engines do best: which is determinism, persistence, and the consistency players and developers depend on.

Matthew Bromberg: Today, the most ambitious interactive experiences will combine what generative systems do best, speed, personalization, and the ability to produce variation at a scale humans can't, with what engines do best, which is determinism, persistence, and the consistency players and developers depend on. As neural capabilities continue to advance, new forms of interactive entertainment will emerge, and they will look quite different from the games we play today. Different modalities, different form factors, things we haven't yet imagined. We don't think the future is a threat to what Unity does. We think it's the reason Unity exists. In fact, Unity has a pipeline of new products scheduled for release before the end of 2026 that we believe have the potential to accelerate this future massively and redefine our industry.

Matt Bromberg: Today, the most ambitious interactive experiences will combine what generative systems do best, speed, personalization, and the ability to produce variation at a scale humans can't, with what engines do best, which is determinism, persistence, and the consistency players and developers depend on. As neural capabilities continue to advance, new forms of interactive entertainment will emerge, and they will look quite different from the games we play today. Different modalities, different form factors, things we haven't yet imagined. We don't think the future is a threat to what Unity does. We think it's the reason Unity exists. In fact, Unity has a pipeline of new products scheduled for release before the end of 2026 that we believe have the potential to accelerate this future massively and redefine our industry.

Speaker #3: As neural capabilities continue to advance, new forms of interactive entertainment will emerge. And they will look quite different from the games we play today.

Speaker #3: Different modalities, different form factors, things we haven't yet imagined. We don't think the future is a threat to what Unity does. We think it's the reason Unity exists.

Speaker #3: In fact, Unity has a pipeline of new products scheduled for release before the end of 2026 that we believe have the potential to accelerate the future massively.

Speaker #3: And redefine our industry. These new launches are AI-native, yet integrated with authoring tools, robust enough to produce professional results. Not just for today's professionals, but for the motivated and talented millions of new creators who will be inspired by all these new capabilities.

Matthew Bromberg: These new launches are AI-native, yet integrated with authoring tools robust enough to produce professional results, not just for today's professionals, but for the motivated and talented millions of new creators who will be inspired by all these new capabilities. These creators, both professional and otherwise, need tools and technologies that will enable their inspiration to become more than just an experience, to enable them to become a real system, a real game, distributed everywhere, rendered in high fidelity, even on mobile devices, tied to our advertising and monetization capabilities, driven by data and AI, but not defined by them. Empowering this new creative class and realizing the next era of the democratization of gaming is very much in Unity's DNA. Here's what's crucial to understand about the future of interactive entertainment. Great experiences will still come from human creative vision.

Matt Bromberg: These new launches are AI-native, yet integrated with authoring tools robust enough to produce professional results, not just for today's professionals, but for the motivated and talented millions of new creators who will be inspired by all these new capabilities. These creators, both professional and otherwise, need tools and technologies that will enable their inspiration to become more than just an experience, to enable them to become a real system, a real game, distributed everywhere, rendered in high fidelity, even on mobile devices, tied to our advertising and monetization capabilities, driven by data and AI, but not defined by them. Empowering this new creative class and realizing the next era of the democratization of gaming is very much in Unity's DNA. Here's what's crucial to understand about the future of interactive entertainment. Great experiences will still come from human creative vision.

Speaker #3: These creators, both professional and otherwise, need tools and technologies that will enable their inspiration to become more than just an experience. To enable them to become a real system a real game distributed everywhere, rendered in high fidelity, even on mobile devices, tied to our advertising and monetization capabilities, driven by data and AI, but not defined by them.

Speaker #3: Empowering this new creative class and realizing the next era of the democratization of gaming is very much in Unity's DNA. Here's what's crucial to understand about the future of interactive entertainment.

Speaker #3: Great experiences will still come from human creative vision. AI models are powerful precisely because they're trained on what human creators have made. The bottleneck in the future isn't generation.

Matthew Bromberg: AI models are powerful precisely because they're trained on what human creators have made. The bottleneck in the future isn't generation. That will become a commodity if it hasn't already. The bottleneck is effective direction and realization. It's how a creator takes a spark of an idea and transforms it into a deep, engaging commercial system that is distinctive rather than generic, that can be distributed and enjoyed at high fidelity on any device, that has a business model to sustain its creator. That's a tools problem, and it's a creator meets technology problem, and those are exactly the problems Unity has spent 20 years solving and will continue to solve. Our role in this future is to build the tools that let human creativity shape what AI can do so that the results reflect the creator, not the average of the training data.

Matt Bromberg: AI models are powerful precisely because they're trained on what human creators have made. The bottleneck in the future isn't generation. That will become a commodity if it hasn't already. The bottleneck is effective direction and realization. It's how a creator takes a spark of an idea and transforms it into a deep, engaging commercial system that is distinctive rather than generic, that can be distributed and enjoyed at high fidelity on any device, that has a business model to sustain its creator. That's a tools problem, and it's a creator meets technology problem, and those are exactly the problems Unity has spent 20 years solving and will continue to solve. Our role in this future is to build the tools that let human creativity shape what AI can do so that the results reflect the creator, not the average of the training data.

Speaker #3: That will become a commodity if it hasn't already. The bottleneck is effective direction and realization. It's how a creator takes a spark of an idea and transforms it into a deep, engaging commercial system.

Speaker #3: That is distinctive rather than generic. That can be distributed and enjoyed at high fidelity on any device. That has a business model to sustain its creator.

Speaker #3: That's a tools problem. And it's a creator-meets-technology problem. And those are exactly the problems Unity has spent 20 years solving and will continue to solve.

Speaker #3: Our role in this future is to build the tools that let human creativity shape what AI can do, so that the results reflect the creator, not the average of the training data.

Speaker #3: So you can see what an incredible opportunity we have. All of us around the world feel so privileged to be delivering the kind of extraordinary business results we are today.

Matthew Bromberg: You can see what an incredible opportunity we have. All of us around the world feel so privileged to be delivering the kind of extraordinary business results we are today and are also on the precipice of so many incredible advancements in the near future. There is no company in the world better positioned to win in this marketplace than we are. With that, I will thank you once again for your time, and I'll pass it over to Jarrod for a deeper dive on our business results. Jarrod?

Matt Bromberg: You can see what an incredible opportunity we have. All of us around the world feel so privileged to be delivering the kind of extraordinary business results we are today and are also on the precipice of so many incredible advancements in the near future. There is no company in the world better positioned to win in this marketplace than we are. With that, I will thank you once again for your time, and I'll pass it over to Jarrod for a deeper dive on our business results. Jarrod?

Speaker #3: And are also on the precipice of so many incredible advancements in the near future. There is no company in the world better positioned to win in this marketplace than we are.

Speaker #3: With that, I will thank you once again for your time. And I'll pass it over to Jared for a deeper dive on our business results.

Speaker #3: Jared? Thanks, Matt. And good morning, everyone. Unity had an exceptional first quarter of 2026, with strategic revenue growth accelerating, and adjusted EBITDA margins expanding rapidly.

Jarrod Yahes: Thanks, Matthew Bromberg. Good morning, everyone. Unity had an exceptional Q1 of 2026, with strategic revenue growth accelerating and adjusted EBITDA margins expanding rapidly. We are in our best financial position in years with a portfolio that is driving faster revenue growth alongside robust margin expansion. We are in the enviable position of posting these impressive results while simultaneously investing heavily in AI to drive further growth and create new revenue streams for Unity in the future. Q1 results were driven by strong performance above our expectations across both create and grow. Strategic grow revenue in Q1 was $279 million, representing 49% year-over-year growth. Revenue upside compared to our guidance and our expectations was once again driven by the exceptional performance of Vector.

Jarrod Yahes: Thanks, Matt. Good morning, everyone. Unity had an exceptional Q1 of 2026, with strategic revenue growth accelerating and adjusted EBITDA margins expanding rapidly. We are in our best financial position in years with a portfolio that is driving faster revenue growth alongside robust margin expansion. We are in the enviable position of posting these impressive results while simultaneously investing heavily in AI to drive further growth and create new revenue streams for Unity in the future. Q1 results were driven by strong performance above our expectations across both create and grow. Strategic grow revenue in Q1 was $279 million, representing 49% year-over-year growth. Revenue upside compared to our guidance and our expectations was once again driven by the exceptional performance of Vector.

Speaker #3: We are in our best financial position in years, with a portfolio that's driving faster revenue growth, alongside robust margin expansion. We're in the enviable position of posting these impressive results, while simultaneously investing heavily in AI to drive further growth and create new revenue streams for Unity in the future.

Speaker #3: First quarter results were driven by strong performance, above our expectations across both create and grow. Strategic growth revenue in the first quarter was $279 million, representing 49% year-over-year growth.

Speaker #3: Revenue upside compared to our guidance and our expectations was once again driven by the exceptional performance of Vector. While our growth was impressive, it does not yet reflect any impact from runtime data, which we believe will provide us with a sustainable competitive advantage for many years to come.

Jarrod Yahes: While our growth was impressive, it does not yet reflect any impact from a runtime data, which we believe will provide us with a sustainable competitive advantage for many years to come. In Create, strategic revenue was $154 million, up 15% year-over-year. The consistency of this business over the last year has been phenomenal, with 4 straight quarters of mid-teens year-over-year growth. Performance is driven by the continued impact of our annual price increases, meaningful strength in China, as well as strength in our non-games industry business. All of this is as a result of dramatically improved products delivering performance and stability to customers, enhancing Unity's core value proposition over time.

Speaker #3: In create, strategic revenue was $154 million, up 15% year-over-year. The consistency of this business over the last year has been phenomenal. With four straight quarters of mid-teens, year-over-year growth.

Speaker #3: Performance is driven by the continued impact of our annual price increases, meaningful strength in China, as well as strength in our non-games industry business.

Speaker #3: All of this is as a result of dramatically improved products, delivering performance and stability to customers. Enhancing Unity's core value proposition over time. Over the past two years, we've made a firm commitment to performance and stability, y, resulting in a 22% decrease in user-reported issues since the launch of Unity 6, and improved satisfaction from our customers.

Jarrod Yahes: Over the past 2 years, we've made a firm commitment to performance and stability, resulting in a 22% decrease in user-reported issues since the launch of Unity 6 and improved satisfaction from our customers. This has allowed us to maintain a robust 70% market share in mobile game creation while passing along moderate price increases and allowing us to invest aggressively in our products. We expect our business model in Create to evolve as we roll out new AI products. The new pricing models we've introduced with Unity AI, which account for the number of first and third-party agent connections in addition to seats, ensures our pricing scales fairly with usage rather than penalizing creators who use AI to be more productive. Over time, we expect this will allow us to scale revenues from both agentic and human consumption.

Speaker #3: This has allowed us to maintain a robust 70% market share in mobile game creation, while passing along moderate price increases and allowing us to invest aggressively in our products.

Speaker #3: We expect our business model in create to evolve as we roll out new AI products. The new pricing models we've introduced with Unity AI, which account for the number of first and third-party agent connections in addition to seats, ensures our pricing scales fairly with usage, rather than penalizing creators who use AI to be more productive.

Speaker #3: Over time, we expect this will allow us to scale revenues from both agentic and human consumption. Ultimately, customers value outputs, not inputs. And we expect the business models will completely adapt to that preference.

Jarrod Yahes: Ultimately, customers value outputs, not inputs, and we expect that business models will completely adapt to that preference. We welcome that, and the minimum commit model we maintain with our enterprise customers and the new consumption elements of our pricing model are very well suited to that evolution. The Unity Commerce platform is also on track to launch this quarter, and we already have a set of committed partners like Voodoo and SciPlay working with us to ensure we do it right. Developers shouldn't have to be fintech experts to run a global business. That's why we think our Unity Commerce platform is so vital. By providing a single native dashboard to manage catalogs and pricing across mobile, web, and PC, we're removing the massive overhead of juggling multiple SDKs and payout systems, providing a turnkey solution for global payments. Now, turning to our profitability in Q1.

Speaker #3: We welcome that. And the minimum commit model we maintain with our enterprise customers, and the new consumption elements of our pricing model, are very well suited to that evolution.

Speaker #3: The Unity Commerce platform is also on track to launch this quarter. And we already have a set of committed partners like Voodoo Games and Saiplay working with us to ensure we do it right.

Speaker #3: Developers shouldn't have to be fintech experts to run a global business. That's why we think our Unity Commerce platform is so vital. By providing a single native dashboard to manage catalogs and pricing, across mobile, web, and PC, we're removing the massive overhead of juggling multiple SDKs and payout systems, providing a turnkey solution for global payments.

Speaker #3: Now, turning to our profitability in the first quarter. Adjusted EBITDA was the best in over two years at $138 million, growing 65% year-over-year. Adjusted EBITDA margin was 27% and improved 800 basis points year-over-year.

Jarrod Yahes: Adjusted EBITDA was the best in over 2 years at $138 million, growing 65% year over year. Adjusted EBITDA margin was 27% and improved 800 basis points year over year. Our margin expansion is primarily driven by operating leverage resulting from accelerating revenue growth with high flow through margins, which enables us to simultaneously reinvest aggressively in our strategic AI initiatives while also expanding margins. Adjusted sales and marketing and G&A have both declined year over year and as a percentage of revenues. We have deliberately redeployed much of that capital into R&D, where our adjusted R&D spend is up 9% year over year.

Speaker #3: Our margin expansion is primarily driven by operating leverage, resulting from accelerating revenue growth with high flow-through margins, which enables us to simultaneously reinvest aggressively in our strategic AI initiatives, while also expanding margins.

Speaker #3: Adjusted sales and marketing and G&A have both declined year-over-year and as a percentage of revenues. And we have deliberately redeployed much of that capital into R&D, where our adjusted R&D spend is up 9% year-over-year in AI-focused R&D, where spend is up 17% year-over-year inclusive of AI-focused hiring and cloud inference training costs.

Jarrod Yahes: In AI-focused R&D, where spend is up 17% year over year, inclusive of AI-focused hiring and cloud inference training costs. We expect AI-focused R&D spend to continue to climb, with any margin impact more than offset by operating leverage and further cost efficiencies. In terms of cash on our balance sheet, our cash balance of $2.15 billion continues to increase each quarter as a result of our robust free cash flow. Our current intention is to reduce leverage and pay it off using cash on the balance sheet. Before diving into our Q2 guidance, I want to spend a moment outlining Unity's path to GAAP profitability, the timeline of which has been substantially pulled forward. There are three factors contributing to this.

Speaker #3: We expect AI-focused R&D spend to continue to climb, with any margin impact more than offset by operating leverage and further cost efficiencies. In terms of cash in our balance sheet, our cash balance of $2.15 billion continues to increase each quarter as a result of our robust free cash flow.

Speaker #3: We also have a $558 million convert coming due in November of this year, and our current intention is to reduce leverage and pay it off using cash on the balance sheet.

Speaker #3: Before diving into our second quarter guidance, I want to spend a moment outlining Unity's path to GAAP profitability, the timeline of which has been substantially pulled forward.

Speaker #3: There are three factors contributing to this. Firstly, adjusted EBITDA margins are up 800 basis points as we have discussed. Secondly, stock comp expense is down 20% in dollar terms and is down markedly as a percentage of revenue to 15% this quarter.

Jarrod Yahes: Firstly, adjusted EBITDA margins are up 800 basis points, as we have discussed. Secondly, stock comp expense is down 20% in dollar terms and is down markedly as a percentage of revenue to 15% this quarter. Lastly, we expect materially lower M&A amortization that runs off almost entirely at the end of Q4 2026. As a result, we now forecast Unity to be GAAP net income profitable by Q4 2026. With that, let's turn to guidance for Q2. For Q2, we're guiding to total strategic revenue of $455 million to $465 million, implying year-over-year growth of 29% to 32%. In strategic growth, we're forecasting year-over-year revenue growth of 50% to 52%, driven by continued robust growth in Unity Vector.

Speaker #3: And lastly, we expect maturely lower M&A amortization that runs off almost entirely at the end of Q4 2026. As a result, we now forecast Unity to be gap net income profitable by the fourth quarter of 2026.

Speaker #3: With that, let's turn to guidance for the second quarter. For the second quarter, we're guiding to total strategic revenue of $455 million, to $465 million, implying year-over-year growth of 29% to 32%.

Speaker #3: In strategic growth, we're forecasting year-over-year revenue growth of 50% to 52%, driven by continued robust growth in Unity Vector. And in strategic create, we're forecasting 11% to 14% year-over-year revenue growth, excluding the impact of a large customer win where comping from 2025.

Jarrod Yahes: In strategic Create, we're forecasting 11% to 14% year-over-year revenue growth, excluding the impact of a large customer win we're comping from 2025. As a result of our recent strategic decision to sunset the ironSource ad network and sell our Supersonic publishing business, our guidance moving forward will be focused on our strategic revenues. Beginning in Q2, there will no longer be any non-strategic revenues in Create. In Grow, we expect $50 million in non-strategic revenues in Q2. As a reminder, Q2 incorporates 1 month of the ironSource ad network revenue, given the closure on 30 April. As we move to Q3, we expect about $45 million in non-strategic revenue until we complete the exit of our Supersonic business.

Speaker #3: As a result of our recent strategic decision to sunset the iron-source ad network and sell our supersonic publishing business, our guidance moving forward will be focused on our strategic revenues.

Speaker #3: Beginning in the second quarter, there will no longer be any non-strategic revenues in Create. In Growth, we expect $50 million in non-strategic revenues in the second quarter.

Speaker #3: As a reminder, the second quarter incorporates one month of the iron-source ad network revenue given the closure on April 30th. As we move to the third quarter, we expect about $45 million in non-strategic revenue until we complete the exit of our supersonic business.

Speaker #3: For the second quarter, we're guiding to adjusted EBITDA of $130 million, to $135 million, implying adjusted EBITDA growth of 44% to 49% year-over-year. We forecast that with continued strong revenue growth, high flow-through contribution margins, combined with cost reductions associated with our strategic actions, that adjusted EBITDA margins will further improve in the back half of 2026.

Jarrod Yahes: For Q2, we're guiding to adjusted EBITDA of $130 million to $135 million, implying adjusted EBITDA growth of 44% to 49% year-over-year. We forecast that with continued strong revenue growth, high flow through contribution margins, combined with cost reductions associated with our strategic actions, that adjusted EBITDA margins will further improve in the back half of 2026. As a result, Unity is poised to expand margins in 2026 to record levels while simultaneously bringing to market an incredibly exciting pipeline of products that will transform the process of game creation. With that, I'd like to thank you for joining us on Unity's Q1 2026 conference call. Let me turn the call over to Alex so that we can take your questions.

Speaker #3: As a result, Unity is poised to expand margins in 2026 to record levels, while simultaneously bringing to market an incredibly exciting pipeline of products that will transform the process of game creation.

Speaker #3: With that, I'd like to thank you for joining us on Unity's first quarter 2026 conference call. Let me turn the call over to Alex so that we can take your questions.

Speaker #4: Thanks, Jared. Operator, we are now ready for questions.

Alex Giaimo: Thanks, Jarrod Yahes. Operator, we are now ready for questions.

Speaker #5: Thank you. We'll now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please raise your hand now.

Operator: Thank you. We'll now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please raise your hand now. Your first question comes from the line of Matthew Cost with Morgan Stanley. Your line is open. Please go ahead.

Speaker #5: If you have dialed into today's call, please press *9 to raise your hand and *6 to unmute. Please stand by as we compile the Q&A roster.

Speaker #5: Your first question comes from the line of Matthew Cost with Morgan Stanley. Your line is open. Please go ahead.

Speaker #4: Great. Good morning, everybody. Thanks for taking the questions. I have one from Matt and one from Jared. Matt, just following up on the Unity AI public beta, obviously a major step forward in terms of putting those tools in the hands of creators.

Matthew Cost: Great. Good morning, everybody. Thanks. Getting to questions. I have one for Matt and one for Jared. Matt, just following up on the Unity AI public beta, obviously a major step forward in terms of putting those tools in the hands of creators. There have been some demos from some of the companies behind the frontier models, where they sort of showcase making games as a use case for some of these, you know, cutting-edge models from these big AI companies.

Speaker #4: There have been some demos from some of the companies behind the frontier models where they sort of showcase making games as a use case for some of these cutting-edge models from these big AI companies.

Speaker #4: I guess, when you think about how that compares to what you can do as Unity AI and your ability to get in front of the next generation of game creators with Unity AI, given that there's going to be this proliferation of other tools that can make some sort of game, I guess, where do you feel you sit in the future of these new AI game creation tools?

Matthew Cost: I guess when you think about how that compares to what you can do with Unity AI and your ability to get in front of the next generation of game creators with Unity AI, given that there's gonna be this proliferation of other tools that can make some sort of game, I guess where do you feel you sit in the future of, you know, these new AI game creation tools? Then for Jarrod Yahes, just on Commerce, there was a really great update to hear about how you have some pretty high-profile partners at launch. I guess how did those conversations evolve? How enthusiastic are the customers that you're talking about potentially working with on Commerce? This seems like a product that could be very needle-moving financially if it starts to get some real traction.

Speaker #4: And then for Jared, just on commerce, there was a really great update to hear about how you have some pretty high-profile partners at launch.

Speaker #4: I guess, how did those conversations evolve? How enthusiastic are the customers that you're talking about potentially working with on commerce? And this seems like a product that could be very needle-moving financially if it starts to get some real traction.

Speaker #4: So is there any way you can help us dimension how impactful that could be financially? Thank you both.

Matthew Cost: Is there any way you can help us dimension how impactful that could be financially? Thank you both.

Speaker #6: Hi, Matt. Thanks for your question. Good morning and good morning to everybody. Unity AI is an integrated agent that's tuned specifically for game development and for use of Unity.

Jarrod Yahes: Hi, Matt. Thanks for your question. Good morning, and good morning to everybody. Unity AI is an integrated agent that's tuned specifically for game development and for use in Unity. As I kind of talked about in the opening, general purpose coding agents are really powerful, but what they lack is Unity engine-specific context, as well as the context of the project you're building itself. That gap matters a lot when shipping a real game across multiple platforms.

Matt Bromberg: Hi, Matt. Thanks for your question. Good morning, and good morning to everybody. Unity AI is an integrated agent that's tuned specifically for game development and for use in Unity. As I kind of talked about in the opening, general purpose coding agents are really powerful, but what they lack is Unity engine-specific context, as well as the context of the project you're building itself. That gap matters a lot when shipping a real game across multiple platforms.

Speaker #6: General as I kind of talked about in the opening, general purpose coding agents are really powerful. But what they lack is Unity engine-specific context as well as the context of the project you're building itself.

Speaker #6: And that gap matters a lot when shipping a real game across multiple platforms. So if you think about the kind of differentiation, you've got full project context.

Matthew Bromberg: If you think about the kind of differentiation, you've got full project context, so it's easier seeing the packages, the assets, and the code in a unified system. Unity-specific tuning for workflows that are platform-aware and aware of your asset pipelines and how they're gonna get integrated. What we're seeing, it's only been about a week, but we're seeing really strong attachment rates in that product. 70% of the users who adopt it are continuing to work with the product 5 days in. That tells us that we are on the right track, and of course, you know, we'll be tracking that as we go forward.

Matt Bromberg: If you think about the kind of differentiation, you've got full project context, so it's easier seeing the packages, the assets, and the code in a unified system. Unity-specific tuning for workflows that are platform-aware and aware of your asset pipelines and how they're gonna get integrated. What we're seeing, it's only been about a week, but we're seeing really strong attachment rates in that product. 70% of the users who adopt it are continuing to work with the product 5 days in. That tells us that we are on the right track, and of course, you know, we'll be tracking that as we go forward.

Speaker #6: So it's easier seen in the packages and the assets and the code in a unified system. And then Unity-specific tuning for workflows that are platform-aware and aware of your asset pipelines and how they're going to get integrated.

Speaker #6: What we're seeing in the it's only been about a week, but we're seeing really strong attachment rates in that product. So 70% of the users who adopt it are continuing to work with the product five days in.

Speaker #6: So that tells us that we are on the right track. And of course, we'll be tracking that as we go forward. This kind of attachment appears to be a function of better performance of our AI product than just generic models alone.

Matthew Bromberg: This kind of attachment appears to be a function of better performance of our AI product than just generic models alone because those models aren't exposed to the context engineering that we bring to the table on our own products. It makes the AI more efficient, it makes it less expensive, it means less prompting is required, and it's faster. Now we've just launched again this earlier this week, but we're really, really excited about it. As I also mentioned a couple of minutes ago, what's really exciting for us also is that Vector, which I think historically most folks have thought of as having being built really just for our advertising business, has really come to the center of everything we're doing.

Matt Bromberg: This kind of attachment appears to be a function of better performance of our AI product than just generic models alone because those models aren't exposed to the context engineering that we bring to the table on our own products. It makes the AI more efficient, it makes it less expensive, it means less prompting is required, and it's faster. Now we've just launched again this earlier this week, but we're really, really excited about it. As I also mentioned a couple of minutes ago, what's really exciting for us also is that Vector, which I think historically most folks have thought of as having being built really just for our advertising business, has really come to the center of everything we're doing.

Speaker #6: Because those models aren't exposed to the context engineering that we bring to the table on our own products. It makes the AI more efficient.

Speaker #6: It makes it less expensive. It means less prompting is required. And it's faster. Now, we've just launched again this earlier this week, but we're really, really excited about it.

Speaker #6: And as I also mentioned a couple of minutes ago, what's really exciting for us also is that Vector, which I think historically most folks have thought of as having being built really just for our advertising business, is has really come to the center of everything we're doing.

Speaker #6: So Unity AI is the first Vector-driven advancement for the Unity engine itself. Meaning the same personalization AI thesis that sits underneath our growth business is also powering our create business.

Matthew Bromberg: Unity AI is the first Vector-driven advancement for the Unity engine itself, meaning the same personalization AI thesis that sits underneath our Grow business is also powering our Create business. We're very excited about the future of this space, and we're really confident in our ability to combine the best tools and technologies, the robust systems and authoring tools, monetization capabilities, distribution capabilities that we do, and we combine the best of what's happening in gen AI. What we're seeing is that is driving our business forward. That is why we have more signups to Unity than ever before. It's why there are more games being created by Unity than ever before. It is why our advertising business is in better shape than it ever has been before.

Matt Bromberg: Unity AI is the first Vector-driven advancement for the Unity engine itself, meaning the same personalization AI thesis that sits underneath our Grow business is also powering our Create business. We're very excited about the future of this space, and we're really confident in our ability to combine the best tools and technologies, the robust systems and authoring tools, monetization capabilities, distribution capabilities that we do, and we combine the best of what's happening in gen AI. What we're seeing is that is driving our business forward. That is why we have more signups to Unity than ever before. It's why there are more games being created by Unity than ever before. It is why our advertising business is in better shape than it ever has been before.

Speaker #6: So we're very excited about the future of the space. And we're really confident in our ability to combine the best tools and technologies, the robust systems and authoring tools, monetization capabilities, distribution capabilities, that we do.

Speaker #6: And we combine the best of what's happening in AI and what we're seeing is that is driving our business forward. That is why we have more sign-ups to Unity than ever before.

Speaker #6: It's why there are more games being created by Unity than ever before. It is why our advertising business is in better shape than it ever has been before.

Jarrod Yahes: Matt, with respect to the update we provided on our commerce product, we too are also extremely excited to be working with landmark customers like SciPlay and Voodoo on the launch of our commerce product. As we've mentioned in the past, value to Unity is gonna come in a number of ways, including data, economic revenue share, and really in helping our customers with merchandising and web shop optimizations and analytics. We're excited about the potential here. This is a classic example where providing customer value and product value in Create can really help the entirety of the Unity platform, including Vector.

Speaker #4: And Matt, with respect to the update we provided on our commerce product, we too are also extremely excited to be working with Landmark customers like Saiplay and Voodoo on the launch of our commerce product.

Speaker #4: As we've mentioned in the past, value to Unity is going to come in a number of ways. Including data, economic revenue share, and really in helping our customers with merchandising and webshop optimizations and analytics.

Speaker #4: We're excited about the potential here. This is a classic example where providing customer value and product value in create can really help the entirety of the Unity platform, including Vector.

Speaker #4: And Unity's extraordinarily well-positioned to offer this product where it can help our game developers solve a real-world problem that they're encountering, which is really ensuring that they can accept IP in an economically viable way, minimize their engineering overhead, and also maximize the value of the data that they ingest as part of their IP processes.

Jarrod Yahes: Unity is extraordinarily well-positioned to offer this product where it can help our game developers solve a real-world problem that they're encountering, which is really ensuring that they can accept IAP in an economically viable way, minimize their engineering overhead, and also maximize the value of the data that they ingest as part of their IAP processes. We're really excited about the progress here, and we're really excited about taking this forward with the two customers that we spoke about.

Speaker #4: So we're really excited about the progress here. And we're really excited about taking this forward with the two customers that we spoke about.

Speaker #1: And your next question comes from the line of Alec Brondolo with Wells Fargo. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Alec Brondolo with Wells Fargo. Your line is open. Please go ahead.

Speaker #5: Yeah. Hey, thanks so much, guys. Appreciate the question. Maybe a couple from me. I think first, is there a specific expectation for Vector's sequential growth in the second quarter?

Alec Brondolo: Yeah. Hey, thanks so much, guys. Appreciate the question. Maybe a couple from me. I think first, is there a specific expectation for Vector sequential growth in Q2? I think you said robust in the prepared remarks, but I think investors are looking for a little bit more granularity there. Second, I think people are trying to unpack, like, why the runtime data is powerful. As I've heard, you know, you guys talk publicly over the last several weeks, as I, as I speak to people in the industry, I think this idea of sequencing keeps coming up, right? The idea that if we can understand what the user is doing in the app in, in order, in a sequence, that's kind of a powerful predictor as to their likelihood to convert.

Speaker #5: I think you said robust and prepared remarks. But I think investors are looking for a little bit more granularity there. Second, I think people are trying to unpack why the runtime data is powerful.

Speaker #5: And as I've heard, you guys talk publicly over the last several weeks as I speak to people in the industry, I think this idea of sequencing keeps coming up, right?

Speaker #5: The idea that if we can understand what the user is doing in the app in order in a sequence, that's kind of a powerful predictor as to their likelihood to convert.

Speaker #5: And so could you maybe just help us understand that in a little bit more detail? Why do you think sequencing is going to be such a powerful avenue of conversion prediction in the mobile game and app space?

Alec Brondolo: Could you maybe just, like, help us understand that in a little bit more detail? Like, why do you think sequencing is going to be such a powerful avenue of conversion prediction in the mobile game and app space? Lastly, just maybe one on the Unity AI beta. How do you think about first-party agents relative to third-party agents? Is there still a commitment to allowing third-party agents to interact with the Unity engine via an MCP connector as you roll out the Unity AI beta? Are you agnostic to whether it's a first-party or third-party agent that the customer uses, or would you prefer them in the 1P product? Thank you.

Speaker #5: And then lastly, just maybe one on the Unity AI data, how do you think about first-party agents relative to third-party agents? Is there still a commitment to allowing third-party agents to interact with the Unity engine via an MCP connector as you roll out the Unity AI beta?

Speaker #5: Are you agnostic to whether it's a first-party to third-party agent that the customer uses, or would you prefer them in the 1P product? Thank you.

Speaker #4: Good morning, Alex. That's quite a question. We're going to hope to provide some time for others as well. But let me take a lot of the time.

Matthew Bromberg: Good morning, Alec Brondolo. That's, that's quite a question. We'll hope to provide some time for others as well. Let me take a lot of the time. Let's start with Vector. Vector is an AI prediction engine, and the reason Vector is continuing to grow is we're doing a better job predicting which customers are gonna like which games and matching those customers with the publisher of the corresponding game. It's a process of continuous improvement, and it's pretty straightforward at a high level. We improve product, which makes it easier and more effective for our customers to use, so they buy more. An example, we rolled out last quarter a day 28 ROAS product, which enables our customers to plan and predict their return on a 28-day basis instead of just a 7-day basis.

Matt Bromberg: Good morning, Alec. That's, that's quite a question. We'll hope to provide some time for others as well. Let me take a lot of the time. Let's start with Vector. Vector is an AI prediction engine, and the reason Vector is continuing to grow is we're doing a better job predicting which customers are gonna like which games and matching those customers with the publisher of the corresponding game. It's a process of continuous improvement, and it's pretty straightforward at a high level. We improve product, which makes it easier and more effective for our customers to use, so they buy more. An example, we rolled out last quarter a day 28 ROAS product, which enables our customers to plan and predict their return on a 28-day basis instead of just a 7-day basis.

Speaker #4: Let's start with Vector. Vector is an AI prediction engine. And the reason Vector is continuing to grow as we're doing a better job predicting which customers are going to like which games and matching those customers with the publisher of the corresponding game.

Speaker #4: It's a process of continuous improvement, and it's pretty straightforward at a high level. We improve product, which makes it easier and more effective for our customers to use.

Speaker #4: So they buy more. So an example, we rolled out last quarter a day 28 ROAS product. Which enables our customers to plan and predict their return on a 28-day basis instead of just a 7-day basis.

Speaker #4: And it's driven an incremental lift of 80% for campaigns and showing a 37% ROAS improvement versus the old day 7 benchmarks. So that's an example of a product improvement.

Matthew Bromberg: It's driven an incremental lift of 80% for campaigns and showing a 37% ROAS improvement versus the old day 7 benchmarks. That's an example of a product improvement. It helps customers, it helps return, they buy more, we deliver value. They spend more. That's product improvements. The second piece is signal improvements. We try to improve the signal, the quality of our data. Every time we do that, it enables us to retrain our models, which are self-learning. We retrain them around that better signal and around the increased demand that we're creating. That constant process of optimization is what makes the product work. All of it results in better return for customers, which drives more demand, and then you start the process again.

Matt Bromberg: It's driven an incremental lift of 80% for campaigns and showing a 37% ROAS improvement versus the old day 7 benchmarks. That's an example of a product improvement. It helps customers, it helps return, they buy more, we deliver value. They spend more. That's product improvements. The second piece is signal improvements. We try to improve the signal, the quality of our data. Every time we do that, it enables us to retrain our models, which are self-learning. We retrain them around that better signal and around the increased demand that we're creating. That constant process of optimization is what makes the product work. All of it results in better return for customers, which drives more demand, and then you start the process again.

Speaker #4: It helps customers. It helps return. They buy more. We deliver value. They spend more. So that's a product improvement. The second piece is signal improvements.

Speaker #4: We try to improve the signal, the quality of our data. And then when we every time we do that, it enables us to retrain our models, which are self-learning.

Speaker #4: We retrain them around that better signal. And around the increased demand that we're creating. And that constant process of optimization is what makes the product work.

Speaker #4: And all of it results in better return for customers, which drives more demand. And then you start the process again. It's better signal, better models, better ROAS, better product, more ad spend.

Matthew Bromberg: Better signal, better models, better ROAS, better product, more ad spend, you begin again. That's the flywheel of our business. As I said many times, what is really exciting for us is we're still at the very, very early part of Vector, product that didn't even exist a year ago, well, more than a year ago. We feel really, really good about our continued ability to run that flywheel that I just described. The growth is a function of the success of that process, we've had about 4 straight quarters of 15% quarter-over-quarter growth. That growth has been broad-based. It's been balanced across different geos, different campaign types, different platforms, and different genres.

Matt Bromberg: Better signal, better models, better ROAS, better product, more ad spend, you begin again. That's the flywheel of our business. As I said many times, what is really exciting for us is we're still at the very, very early part of Vector, product that didn't even exist a year ago, well, more than a year ago. We feel really, really good about our continued ability to run that flywheel that I just described. The growth is a function of the success of that process, we've had about 4 straight quarters of 15% quarter-over-quarter growth. That growth has been broad-based. It's been balanced across different geos, different campaign types, different platforms, and different genres.

Speaker #4: And you begin again. That's the flywheel of our business. And as I said many times, what is really exciting for us is we're still at the very, very early part of Vector product that didn't even exist a year ago.

Speaker #4: A little more than a year ago. And we feel really, really good about our continued ability to run that flywheel that I just described.

Speaker #4: So the growth is a function of the success of that process. And we've had about four straight quarters of 15% quarter over quarter growth.

Speaker #4: That growth has been broad-based. It's been balanced across different geos, different campaign types, different platforms, and different genres. And as you point out, our Q2 guide doesn't yet reflect any of the runtime data contribution.

Matthew Bromberg: As you point out, our Q2 guide doesn't yet reflect any of the runtime data contribution, which is we think can be an incredibly important catalyst for us, as I, and I think was the part 2 of your question. Moving to runtime data. We're really excited and encouraged by what we're seeing in offline testing, and we are expecting to graduate our testing to live production models during the course of Q2. The runtime data is a kind of signal, the value of which is going to build over time and compound. As we've said many times, it's not something we expect immediate spikes around, but we think it'll be steady, meaningful improvements of quality in the model and the data over time.

Matt Bromberg: As you point out, our Q2 guide doesn't yet reflect any of the runtime data contribution, which is we think can be an incredibly important catalyst for us, as I, and I think was the part 2 of your question. Moving to runtime data. We're really excited and encouraged by what we're seeing in offline testing, and we are expecting to graduate our testing to live production models during the course of Q2. The runtime data is a kind of signal, the value of which is going to build over time and compound. As we've said many times, it's not something we expect immediate spikes around, but we think it'll be steady, meaningful improvements of quality in the model and the data over time.

Speaker #4: Which is we think could be an incredibly important catalyst for us as I think was the part two of your question. So moving to runtime data.

Speaker #4: We're really excited and encouraged by what we're seeing in offline testing. And we're expecting to graduate our testing to live production models during the course of Q2.

Speaker #4: The runtime data is a kind of signal of the value of which is going to build over time and compound as we've said many times.

Speaker #4: It's not something we expect immediate spikes around, but we think it'll be steady meaningful improvements of quality in the model and the data over time.

Matthew Bromberg: As you point out, what we believe is really quite valuable about runtime data is that it is real-time, so it is not delayed. It is sequential, which means it helps us to understand not just what consumers are doing, but what order they are doing it in. If you think about your behavior in your own life, the order in which you do things is critical to understanding what it is that you are doing. If you combine that behavioral data from inside games, which is informed also by the context of the games themselves, which are running on our runtime. It is not click data, it is not conversion data, it is not postback data. It is a different category of signal. We are excited about the impact we think it will have.

Speaker #4: And as you point out, what we believe is really quite valuable about runtime data is that it's real-time. So it's not delayed. It is sequential, which means it helps us to understand not just what consumers are doing, but what order they're doing it.

Matt Bromberg: As you point out, what we believe is really quite valuable about runtime data is that it is real-time, so it is not delayed. It is sequential, which means it helps us to understand not just what consumers are doing, but what order they are doing it in. If you think about your behavior in your own life, the order in which you do things is critical to understanding what it is that you are doing. If you combine that behavioral data from inside games, which is informed also by the context of the games themselves, which are running on our runtime.

Speaker #4: Which if you think about your behavior in your own life, the order in which you do things is critical to understanding what it is that you're doing.

Speaker #4: So if you combine that behavioral data from inside games which is informed also by the context of the games themselves, which are running on our runtime, it's not click data.

Matt Bromberg: It is not click data, it is not conversion data, it is not postback data. It is a different category of signal. We are excited about the impact we think it will have. As I mentioned, in the prior remarks, we're seeing really positive 90%+ opt-in rates into our developer data framework. The volume of the live, published games, is increasing and scaling, and we're excited about the impact it is going to have on our business in H2 2026 and going forward.

Speaker #4: It's not conversion data. It's not post-back data. It's a different category of signal. And we're excited about the impact we think it will have.

Matthew Bromberg: As I mentioned, in the prior remarks, we're seeing really positive 90%+ opt-in rates into our developer data framework. The volume of the live, published games, is increasing and scaling, and we're excited about the impact it is going to have on our business in H2 2026 and going forward.

Speaker #4: As I mentioned, in the prior remarks, we're seeing really positive 90-plus percent opt-in rates into our developer data framework. So the volume of the live published games is increasing and scaling.

Speaker #4: And we're excited about the impact it is going to have on our business in the back half of '26 and going forward.

Speaker #1: And your next question comes from a line of James Heaney with Jeffrey's. Your line is open. Please go ahead.

Operator: Your next question comes from the line of James Heaney with Jefferies. Your line is open. Please go ahead.

James Heaney: Great. Thanks for the question. I mean, I know it can be difficult to predict, but based on the guide for strategic grow revenue, I mean, you've been pretty consistent, I think, in sort of this mid-teen sequential growth trajectory. Is there a way that you can help sort of frame up the composition of growth between model enhancements and self-learning? Any way to frame that up? I had another follow-up for Jarrod.

Speaker #4: Yeah, great. Thanks for the question. I mean, I know it can be difficult to predict. But based on the guide for strategic growth revenue, I mean, you've been pretty consistent.

Speaker #4: I think in sort of this mid-teens sequential growth trajectory, is there a way that you can help sort of frame up the composition of growth between model enhancements and self-learning?

Speaker #4: Any way to frame that up? And then I had another follow-up for Jared.

Speaker #3: Yeah. So James, just as we think about strategic growth, we're extremely excited about the trajectory of growth. It's over 50% year over year. 80% of that strategic growth revenue line is now the Unity Ad Network powered by Unity Vector.

Jarrod Yahes: James, just as we think about strategic growth, we're extremely excited about the trajectory of growth. It's over 50% year-over-year. 80% of that strategic growth revenue line is now the Unity Ad Network powered by Unity Vector. That's really the driver of that substantial growth. As Matt mentioned, there are numerous constituents to that growth, which include model improvements, product enhancements, as well as data and signal. We don't break out or delineate the individual contributions in a quarter of any one of those, but suffice it to say, we are powering along all three of those axes with one of the most interesting and proprietary elements of it, our runtime data, on the come. We're enthusiastic about it and we're confident in the future.

Speaker #3: And so that's really the driver of that substantial growth. As Matt mentioned, there are numerous constituents to that growth, which include model improvements, product enhancements, as well as data and signal.

Speaker #3: We don't break out or delineate the individual contributions in a quarter of any one of those. But suffice it to say, we are powering along all three of those axes with one of the most interesting and proprietary elements of it, a runtime data, on the come.

Speaker #3: So we're enthusiastic about it. And we're confident in the future.

Speaker #4: Great. And Jared, while I have you, another one on just additional margin levers that you have at your disposal. I mean, I know there's definitely a ton of natural leverage that you get from the growth of Vector.

James Heaney: Great. Jarrod, while I have you, another one on just additional margin levers that you have at your disposal. I mean, I know there's definitely a ton of natural leverage that you get from the growth of Vector, but are there any other places where you see room to continue slimming down the cost structure and, you know, getting to these milestones that you called out? Thank you.

Speaker #4: But are there any other places where you see room to continue slimming down the cost structure and getting to these milestones that you called out?

Speaker #4: Thank you.

Speaker #3: Yeah. Yeah, James. Absolutely. I mean, for us, we are very deliberate about the way that we think about margin expansion in the business. We've seen consistent operating leverage in G&A and sales and marketing.

Jarrod Yahes: Yeah. Yeah, James, absolutely. I mean, for us, we are very deliberate about the way that we think about margin expansion in the business. We've seen consistent operating leverage in G&A and sales and marketing. You should expect that operating leverage to continue as we automate the way that we operate internally and as we automate the way that we face our customers and interface with our customers and deliver our products and services. There's a couple of catalysts that I would call out separately. Firstly, with respect to some of the strategic actions that we announced, while the Q2 does start to see an impact of some of the revenues of those actions, the costs haven't come out of the business as of yet. That will take place over the H2.

Speaker #3: You should expect that operating leverage to continue as we automate the way that we operate automate the way that we face our customers and interface with our customers and deliver our products and services.

Speaker #3: There's a couple of catalysts that I would call out separately. Firstly, with respect to some of the strategic actions that we announced, while the second quarter does start to see an impact of some of the revenues of those actions, the costs haven't come out of the business as of yet.

Speaker #3: That will take place over the back half of the year. And so that is an opportunity for margin expansion with us as we look towards the back half of 2026.

Jarrod Yahes: That is an opportunity for margin expansion with us, as we look towards the H2 of 2026. The other piece that we would call out is we are currently in the midst of the strategic process for Supersonic. The profitability of Supersonic is such that as we divest the business, that will naturally cause our margin profile to improve. We expect at least 200 basis points of operating profit improvement upon the divestiture of that business. Beyond the normal cost effectiveness and cost actions that we take to operate more prudently, we have sort of 2 known catalysts in the H2 of the year that we expect, which should improve margins even from current run rate levels in the H1 of the year.

Speaker #3: The other piece that we would call out is we are currently in the midst of the strategic process for Supersonic. The profitability of Supersonic is such that as we divest the business, that will naturally cause our margin profile to improve.

Speaker #3: We expect at least 200 basis points of operating profit improvement upon the divestiture of that business. And so beyond the normal cost-effectiveness and cost actions that we take to operate more prudently, we have sort of two known catalysts in the back half of the year that we expect which should improve margins even from current run rate levels in the first half of the year.

Speaker #4: Great. Thank you.

James Heaney: Great. Thank you.

Speaker #1: And your next question comes from the line of Vassily Karasiyab with Cannonball. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Vasily Karasyov with Cannonball. Your line is open. Please go ahead.

Speaker #3: Thank you. I wanted to ask you about Unity Vector performance domestically and internationally. Are you seeing any differences in adoption in revenue growth rates?

Vasily Karasyov: Thank you. Wanted to ask you about Unity Vector performance domestically and internationally. Are you seeing any differences in adoption, in revenue growth rates? Anything, any findings in the past year that would be useful for us to know? Thank you.

Speaker #3: Anything? Any findings in the past year that would be useful for us to know? Thank you.

Matthew Bromberg: No, we're seeing very broad strength in Vector growth across all geographies, campaign types, genres, et cetera. We're really pleased with that. There's nothing I'd call out for you.

Speaker #5: No, we're seeing very, very broad strength in Vector growth across all geographies, campaign types, genres, etc. And we're really pleased with that. So there's nothing I'd call out for you.

Matt Bromberg: No, we're seeing very broad strength in Vector growth across all geographies, campaign types, genres, et cetera. We're really pleased with that. There's nothing I'd call out for you.

Speaker #3: And the same for expectations for the runtime data integration?

Vasily Karasyov: The same for expectations for the runtime data integration?

Speaker #5: Indeed.

Matthew Bromberg: Indeed.

Matt Bromberg: Indeed.

Speaker #3: Thank you.

Vasily Karasyov: Thank you.

Operator: Your next question comes from the line of Clark Lampen with BTIG. Your line is open. Please go ahead.

Speaker #1: And your next question comes from the line of Clark Lampen with BTIG. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Clark Lampen with BTIG. Your line is open. Please go ahead.

Speaker #6: Hey, did I get all the unmutes correct here? Can you guys hear me?

Clark Lampen: Hey, did I get all the unmutes correct here? Can you guys hear me?

Speaker #3: We can.

Matthew Bromberg: We can.

Matt Bromberg: We can.

Speaker #6: Okay, perfect. So Matt, I appreciate some of the data points. And I guess comments that you made upfront around release volume, sign-up trends. I can't recall a lot of quarters over the past couple of years where we've had those sort of positive callouts.

Clark Lampen: Okay, perfect. Matt, appreciate some of the data points and I guess comments that you made upfront around release volume, sign-up trends. I can't recall a lot of quarters over the past couple of years where we've had those sort of positive call-outs. At the risk of connecting dots, it feels like, you know, browser AI tools, a lot of the work on the product side that you're doing with Create, is closing some of the gaps that might have been sort of temporarily created at the upper end of the market. I'm curious how you guys see this sort of collectively changing the commercial opportunity for the Create business as it relates to sort of both professionals and hobbyists, and maybe what that means for segment growth near to medium term.

Speaker #6: At the risk of connecting dots, it feels like browser AI tools a lot of the work on the product side that you're doing with Create is closing some of the gaps that might have been sort of temporarily created at the upper end of the market.

Speaker #6: I'm curious how you guys see this sort of collectively changing the commercial opportunity for the Create business as it relates to sort of both professionals and hobbyists, and maybe what that means for segment growth near to medium term, quick follow-up, I guess, just for Jared.

Clark Lampen: Quick follow-up, I guess, just for Jarrod. You talked about the rundown of M&A amortization. Is it possible to give us a feel for how big that is? When going back to some of the filings, we thought that that was a number that maybe was around $200 million, are we right to think about the change in D&A being something in that magnitude when we look at 2027 and beyond? Thanks a lot.

Speaker #6: You talked about the rundown of M&A, amortization, is it possible to give us a feel for how big that is when going back to some of the filings we thought that that was a number that maybe was around 200 million?

Speaker #6: Are we right to think about the change in DNA being something of that magnitude when we look at '27 and beyond? Thanks a lot.

Speaker #3: Thank you. Good to hear from you this morning. Yeah, listen, we've been on a journey of product journey over the last couple of years.

Matthew Bromberg: Thank you. Good to hear from you this morning. Listen, we've been on a journey, a product journey over the last couple of years. It's been a really exciting one. As you recall, the first stop on that journey was ensuring that our software for our core professional audience was stable and performant, that the product roadmaps and were sound and reflected what customers wanted from us, that we delivered those advancements in a timely fashion, and backed up our promises and delivered on those promises. We talked a lot in the beginning, as you recall, about rebuilding a relationship and the trust we have with our customers. That part of the process has been really gratifying. It's one that continues.

Matt Bromberg: Thank you. Good to hear from you this morning. Listen, we've been on a journey, a product journey over the last couple of years. It's been a really exciting one. As you recall, the first stop on that journey was ensuring that our software for our core professional audience was stable and performant, that the product roadmaps and were sound and reflected what customers wanted from us, that we delivered those advancements in a timely fashion, and backed up our promises and delivered on those promises. We talked a lot in the beginning, as you recall, about rebuilding a relationship and the trust we have with our customers. That part of the process has been really gratifying. It's one that continues.

Speaker #3: And it's been a really exciting one. And as you recall, the first stop on that journey was ensuring that our software for our core professional audience was stable and performant that the product roadmaps and were sound and reflected what customers wanted from us, and that we delivered those advancements in a timely fashion and backed up our promises and delivered on those promises.

Speaker #3: We talked a lot in the beginning, as you recall, about rebuilding a relationship and the trust we have with our customers. That part of the process has been really gratifying.

Speaker #3: It's one that continues as Jared pointed out. We have never had a product that is as performant and stable as it is now. Issues with the product are down more than 20%.

Matthew Bromberg: As Jarrod pointed out, we have never had a product that is as performant and stable as it is now. Issues with the product are down more than 20% over the last quarter, and that will continue to keep going down. That's just a critical part of any of any business. As we look forward, as I talked about in our front remarks, we're extraordinarily excited about two avenues of growth. The first one is that we believe, and as I talked about, and as you rightly pointed out, I think we are seeing the evidence in the marketplace that advancements in AI are creating the opportunity to be more effective and efficient in building. That is a very important advantage for our professional customers.

Matt Bromberg: As Jarrod pointed out, we have never had a product that is as performant and stable as it is now. Issues with the product are down more than 20% over the last quarter, and that will continue to keep going down. That's just a critical part of any of any business. As we look forward, as I talked about in our front remarks, we're extraordinarily excited about two avenues of growth. The first one is that we believe, and as I talked about, and as you rightly pointed out, I think we are seeing the evidence in the marketplace that advancements in AI are creating the opportunity to be more effective and efficient in building. That is a very important advantage for our professional customers.

Speaker #3: Over the last quarter, and it will continue to keep going down. And that's just a critical part of any business. As we look forward, as I talked about in the upfront remarks, we're extraordinarily excited about two avenues of growth.

Speaker #3: The first one is that we believe and as I talked about and as you rightly pointed out, I think we're seeing the evidence in the marketplace that advancements in AI are creating the opportunity to be more effective and efficient in building.

Speaker #3: That is an very important advantage for our professional customers. And I have noted before that having spent many, many years developing games, I can tell you that the biggest and most frustrating part of the timeline of building a game is building the systems that are largely common and very similar in a genre from game to game.

Matthew Bromberg: I have noted before that having spent many, many years developing games, I can tell you that the biggest and most frustrating part of the timeline of building a game is building the systems that are largely common and very similar in a genre from game to game. You know that a lot of what you're building has been built before many times, and what you're itching to do is get to the part of the development process where you can create differentiation, where the part that you're really excited about when you begin.

Matt Bromberg: I have noted before that having spent many, many years developing games, I can tell you that the biggest and most frustrating part of the timeline of building a game is building the systems that are largely common and very similar in a genre from game to game. You know that a lot of what you're building has been built before many times, and what you're itching to do is get to the part of the development process where you can create differentiation, where the part that you're really excited about when you begin.

Speaker #3: And so you know that a lot of what you're building has been built before many times. And what you're itching to do is get to the part of the development process where you can create differentiation.

Speaker #3: Where the part that you're really excited about when you begin tools that enable more efficiency, allow you to get to that creative head end much faster, and will ultimately result in better games and will drive the creation of more games more efficiently.

Matthew Bromberg: Tools that enable more efficiency, allow you to get to that creative head end much faster, and will ultimately result in better games, and will drive the creation of more games more efficiently, and I think will be great for our industry and great for our customers, and will drive more usage of our tools. As we talked about over time, now and over time, our tools will merge with the best of what is available in the market from a neural perspective and combine those neural capabilities with the systemization, the syndication, and the commercialization that we do best. That's all gonna be great for our professional customers. We're equally excited about the creation of a new class of creators that ultimately is gonna be much, much larger than the professional class.

Matt Bromberg: Tools that enable more efficiency, allow you to get to that creative head end much faster, and will ultimately result in better games, and will drive the creation of more games more efficiently, and I think will be great for our industry and great for our customers, and will drive more usage of our tools. As we talked about over time, now and over time, our tools will merge with the best of what is available in the market from a neural perspective and combine those neural capabilities with the systemization, the syndication, and the commercialization that we do best. That's all gonna be great for our professional customers. We're equally excited about the creation of a new class of creators that ultimately is gonna be much, much larger than the professional class.

Speaker #3: And I think will be great for our industry and great for our customers. And will drive more usage of our tools. And as we talked about over time, now and over time, our tools will merge with the best of what is available in the market from a neural perspective.

Speaker #3: And combined those neural capabilities with the systemization the syndication, the commercialization, that we do best. And that's all going to be great for our professional customers.

Speaker #3: But we're equally excited about the creation of a new class of creators. That ultimately is going to be much, much larger than the professional class.

Speaker #3: There will be distinctions as there always have been, and there always will be, between those that are capable of creating professional hit interactive entertainment and a class of call it prosumers who will, however, be newly enabled and capable of creating very high-level interactive entertainment.

Matthew Bromberg: There will be distinctions, as there always have been and there always will be, between those that are capable of creating professional hit interactive entertainment and a class of, call it prosumers, who, will, however, be newly enabled and capable of creating very high-level interactive entertainment. If you think about the hundreds of millions of folks around the world, for example, who are creators on various social networks, who are mostly doing creating linear video. We believe in the future, all those creators will be adding interactive elements and interactive entertainment, to the kinds of things that they're creating, because that is the, by far, the most direct way to increase engagement. Engagement, as always, is the coin of the realm here.

Matt Bromberg: There will be distinctions, as there always have been and there always will be, between those that are capable of creating professional hit interactive entertainment and a class of, call it prosumers, who, will, however, be newly enabled and capable of creating very high-level interactive entertainment. If you think about the hundreds of millions of folks around the world, for example, who are creators on various social networks, who are mostly doing creating linear video. We believe in the future, all those creators will be adding interactive elements and interactive entertainment, to the kinds of things that they're creating, because that is the, by far, the most direct way to increase engagement. Engagement, as always, is the coin of the realm here.

Speaker #3: And if you think about the hundreds of millions of folks around the world, for example, who are creators on social various social networks who are mostly doing creating linear video, we believe in the future, all those creators will be adding interactive elements and interactive entertainment to the kinds of things that they're creating because that is the by far the most direct way to increase engagement and engagement has always is the coin of the realm here.

Speaker #3: So the tools that we and the history we have, the unique ability to build products that are informed and leverage the best of neural technologies but also take advantage of 20 years of understanding of game consumers and how games are built.

Matthew Bromberg: The tools that we, and the history we have, the unique ability to build products that are informed and leverage the best of neural technologies, but also take advantage of 20 years of understanding of game consumers and how games are built, so that we can use context engineering to make our products work better than generic AI-driven products, will benefit both professionals and this prosumer class, which is gonna be a whole new set of Unity customers. We're gonna build products for both of them, and we're really excited about that future.

Matt Bromberg: The tools that we, and the history we have, the unique ability to build products that are informed and leverage the best of neural technologies, but also take advantage of 20 years of understanding of game consumers and how games are built, so that we can use context engineering to make our products work better than generic AI-driven products, will benefit both professionals and this prosumer class, which is gonna be a whole new set of Unity customers. We're gonna build products for both of them, and we're really excited about that future.

Speaker #3: So that we can use context engineering to make our products work better than generic AI-driven products. We'll benefit both professionals and this prosumer class, which is going to be a whole new set of unity customers.

Speaker #3: And we're going to build products for both of them. And we're really excited about that future.

Jarrod Yahes: Clark, to your question on amortization, you know, we are extremely pleased to be able to talk about the pull forward of Unity's timeline towards becoming a GAAP profitable company. This is something that, for us, is a result of a lot of hard work on the part of the team in terms of driving margin expansion and exerting discipline around the way we run and operate our business. You should expect M&A amortization to fall off quite precipitously this year. From Q1, where we experienced $117 million of amortization, we would expect $80 million of amortization in each of Q2 and Q3, dropping down to $55 million of amortization in Q4.

Speaker #5: And Clark, to your question on amortization, we are extremely pleased to be able to talk about the pull forward of Unity's timeline towards becoming a gap profitable company.

Speaker #5: This is something that for us is a result of a lot of hard work on the part of the team in terms of driving margin expansion and exerting discipline around the way we run and operate our business.

Speaker #5: You should expect M&A amortization to fall off quite precipitously this year. From the first quarter, where we experienced 117 million dollars of amortization, we would expect 80 million dollars of amortization in each of Q2 and Q3, dropping down to 55 million dollars of amortization in the fourth quarter.

Jarrod Yahes: You should expect M&A amortization to fall off quite precipitously this year. From Q1, where we experienced $117 million of amortization, we would expect $80 million of amortization in each of Q2 and Q3, dropping down to $55 million of amortization in Q4. In calendar year 2027, that amortization for the full year should be sub $25 million, so dramatically lower levels of M&A amortization. That, combined with lower levels of stock comp, vastly improved profitability, is really creating the glide path for GAAP profitability in Q4 2026 for Unity.

Speaker #5: And in calendar year 2027, that amortization for the full year should be sub 25 million dollars. So dramatically lower levels of M&A amortization that combined with lower levels of stock comp, vastly improved profitability is really creating the glide path for gap profitability in the fourth quarter of 2026 for Unity.

Jarrod Yahes: In calendar year 2027, that amortization for the full year should be sub $25 million, so dramatically lower levels of M&A amortization. That, combined with lower levels of stock comp, vastly improved profitability, is really creating the glide path for GAAP profitability in Q4 2026 for Unity.

Speaker #6: Hey, Jarrod, any chance you might be willing to give us a little detail around the SBC trends? Where could those go, I guess? Maybe not quarter by quarter, but just sort of directionally.

Clark Lampen: Jarrod, any chance you might be willing to give us a little detail around, the SBC trends? Like, where could those go, I guess, maybe not quarter by quarter, but just sort of directionally. Is that sort of compressing in the same way that we're seeing with amort?

Speaker #6: Is that sort of compressing in the same way that we're seeing with Amork?

Speaker #5: So we experienced 76 million dollars of SBC this quarter. That's down 20% year over year. It's down to 15% as a percentage of revenue.

Jarrod Yahes: We experienced $76 million of SBC this quarter. That's down 20% year over year. It's down to 15% as a percentage of revenue. It's literally been cut in half as a percentage of revenue year over year. You should expect it to remain relatively stable, at current run rates, which, as we grow our business, will also take it down as a percentage of revenues.

Speaker #5: It's literally been cut in half as a percentage of revenue year over year. You should expect it to remain relatively stable at current run rates.

Speaker #5: Which as we grow our business, we'll also take it down as a percentage of revenues.

Speaker #6: Thanks a lot. Appreciate it.

Clark Lampen: Thanks a lot. Appreciate it.

Speaker #7: And your next question comes from the line of Andrew Boone with Citizens. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Andrew Boone with Citizens. Your line is open. Please go ahead.

Speaker #8: Thanks so much for taking the questions. I wanted to ask about AI and the increased use of tokens across the platform. Matt, as I think about what the potential is in terms of moving towards more of a usage model, can you help us unpack how the business model has to evolve as AI just becomes more of the centralized piece of Unity?

Andrew Boone: Thanks so much for taking the questions. I wanted to ask about AI and the increased use of tokens across the platform. Matt, as I think about what the potential is in terms of moving towards more of a usage model, can you help us unpack how the business model has to evolve as AI just becomes more of the centralized piece of Unity? For Create, you guys mentioned strength in terms of the non-game portion of Create. Can you guys unpack that? We haven't had an update there in a while. What's going on with that portion of the business? Thank you.

Speaker #8: And then for create, you guys mentioned strength in terms of the non-game portion of create. Can you guys unpack that? We haven't had an update there in a while.

Speaker #8: What's going on with that portion of the business? Thank you.

Speaker #5: Yeah, so let me talk a little bit about the future and the future of our business model. As we've said this morning, AI-driven products are effectively a productivity enhancement for our customers.

Matthew Bromberg: Yeah. Let me talk a little bit about the future and the future of our business model. As we've said this morning, AI-driven products are effectively a productivity enhancement for our customers. And the principle is that pricing should scale with usage and value created, and we don't want to penalize our creators for being more productive. Because ultimately, as Jarrod noted at the outset, customers value the outputs, not the inputs. And our models are adapting to that preference. Our current relationship with our large enterprise customers is already one that leverages this, an idea of minimum pricing that's only partially driven by the number of seats, and it's really very amenable to modifications that can reflect consumption. And the business model is evolving very organically, it's in the right place.

Matt Bromberg: Yeah. Let me talk a little bit about the future and the future of our business model. As we've said this morning, AI-driven products are effectively a productivity enhancement for our customers. And the principle is that pricing should scale with usage and value created, and we don't want to penalize our creators for being more productive. Because ultimately, as Jarrod noted at the outset, customers value the outputs, not the inputs. And our models are adapting to that preference. Our current relationship with our large enterprise customers is already one that leverages this, an idea of minimum pricing that's only partially driven by the number of seats, and it's really very amenable to modifications that can reflect consumption. And the business model is evolving very organically, it's in the right place.

Speaker #5: And the principle is that pricing should scale with usage and value created. And we don't want to penalize our creators for being more productive.

Speaker #5: Because ultimately, as Jarrod noted at the outset, customers value the outputs, not the inputs. And our models are adapting to that preference. So our current relationship with our large enterprise customers is already one that leverages an idea of minimum pricing that's only partially driven by the number of seats and is really very amenable to modifications that reflect consumption.

Speaker #5: And so the business model is evolving very organically is in the right place. And ultimately, it's driven by the quality of the products you have in the market and how much value create.

Matthew Bromberg: Ultimately, it's driven by the quality of the products we have in the market and how much value created. As we talked about, we believe we can create and drive distinct value, and our products are going to be better. If we can deliver a differentiated value with these products because the context matters to the performance of the AI, and we can deliver product experience that's going to be fundamentally better and more performant, then we feel really good about our ability to inflate new areas of growth, like consumption, into our models. The pricing of Unity AI currently reflects that, and it reflects not just a consumption model, but also a recognition that concurrency is important.

Matt Bromberg: Ultimately, it's driven by the quality of the products we have in the market and how much value created. As we talked about, we believe we can create and drive distinct value, and our products are going to be better. If we can deliver a differentiated value with these products because the context matters to the performance of the AI, and we can deliver product experience that's going to be fundamentally better and more performant, then we feel really good about our ability to inflate new areas of growth, like consumption, into our models. The pricing of Unity AI currently reflects that, and it reflects not just a consumption model, but also a recognition that concurrency is important. In the future, we will have, of course, both human beings as well as agents interacting with our software, working together, and our pricing comprehends that.

Speaker #5: As we talked about, we believe we can create and drive distinct value in our products are going to be better. And if we can deliver a differentiated value with these products, because the context matters to the performance of the AI, and we can deliver product experiences that's going to be fundamentally better and more performant, then we feel really good about our ability to inflect new areas of growth like consumption, into our models.

Speaker #5: The pricing of Unity AI currently reflects that. And it reflects not just a consumption model, but also a recognition that concurrency is important. So you will be in the future, we will have, of course, both human beings as well as agents interacting with our software, working together, and our pricing comprehends that.

Matthew Bromberg: In the future, we will have, of course, both human beings as well as agents interacting with our software, working together, and our pricing comprehends that.

Speaker #5: And Andrew, in respect of create, we're really pleased to see this step up in growth that we've experienced over the course of the last several quarters.

Jarrod Yahes: Andrew, in respect of Create, we're really pleased to see the step up in growth that we've experienced over the course of the last several quarters. There's a number of things that are working well for us that we've called out. Our industry business outside of gaming continues to grow very strongly. We're really a leader in auto HMI. There's a range of use cases where people are looking to have interactive content for extremely sophisticated models available across a range of platforms and operating systems, which really plays to Unity's strengths. We believe in that business. We're seeing good strength and pull through in that business. We're not gonna discreetly call out the revenue growth or the contribution of that business.

Speaker #5: There's a number of things that are working well for us that we've called out. Our industry business outside of gaming continues to grow very strongly.

Speaker #5: We're really a leader in auto HMI. There's a range of use cases where people are looking to have indirect content for extremely sophisticated models available across a range of platforms and operating systems, which really plays to Unity's strengths.

Speaker #5: So we believe in that business. We're seeing good strength and pull through in that business. We're not going to discreetly call out the revenue growth or the contribution of that business.

Jason Bazinet: Thank you.

Andrew Boone: Thank you.

Speaker #8: Thank you.

Speaker #7: And your next question comes from the line of Jason Baznet with Citi. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Jason Bazinet with Citi. Your line is open. Please go ahead.

Speaker #8: Thanks so much. I'm guessing the single biggest driver of the vector growth is just improved conversion rates. And I guess if you could confirm that.

Jason Bazinet: Thanks so much. I'm guessing the single biggest driver of the Vector growth is just improved conversion rates. I guess if you could confirm that. Is there any way you can sort of frame maybe in terms of multiples, like where your conversion rates now are versus what you see as best in class or where this could go? Thank you.

Speaker #8: And then is there any way you can sort of frame as maybe in terms of multiples? Where are your conversion rates now are versus what you see as best in class?

Speaker #8: Or where this could go? Thank you.

Speaker #5: Hey, Jason. Thanks for the question. The way we've articulated this a little bit earlier in the call and in our prepared remarks is, I think, the right conceptual model for you to think about.

Matthew Bromberg: Hey, Jason. Thanks for the question. You know, the way we've articulated this a little bit earlier in the call and in our prepared remarks is I think the right conceptual model for you to think about. The improvements are multifaceted and happen at each portion of the development of Vector, quality of signal, optimization of models, improvement of returns, and all that process that I've been through is really the right way to think about it.

Matt Bromberg: Hey, Jason. Thanks for the question. You know, the way we've articulated this a little bit earlier in the call and in our prepared remarks is I think the right conceptual model for you to think about. The improvements are multifaceted and happen at each portion of the development of Vector, quality of signal, optimization of models, improvement of returns, and all that process that I've been through is really the right way to think about it.

Speaker #5: The improvements are multifaceted and happen at each portion of the development of vector quality of signal optimization of models. Improvement of returns and all that process that I've been through is really the right way to think about it.

Speaker #8: But don't all those drive to a conversion rate? I mean, at the end of the day, if you're making product enhancements.

Jason Bazinet: Don't all those drive to conversion rate? I mean, at the end of the day, if you're making product enhancements.

Matthew Bromberg: They ultimately drive to advertiser return. Advertiser return drives revenue.

Matt Bromberg: They ultimately drive to advertiser return. Advertiser return drives revenue.

Speaker #5: They ultimately drive to advertiser return, and advertiser return drives revenue.

Speaker #8: Okay. Thank you.

Jason Bazinet: Okay. Thank you.

Speaker #5: One of the things to think about at a high level, just notionally, is that industry conversion rates are in the single digits. So when you think about opportunities for improvement in our business and improvement in the for everybody in the industry, they're almost infinite.

Jarrod Yahes: One of the things to think about at a high level, just notionally, is that industry conversion rates, you know, are in the single digits.

Matt Bromberg: One of the things to think about at a high level, just notionally, is that industry conversion rates, you know, are in the single digits.

Matthew Bromberg: Right.

Jason Bazinet: Right.

Matthew Bromberg: When you think about opportunities for improvement in our business and improvement in the for everybody in the industry, they're almost infinite. This is why this is so incredibly exciting. As we get better and better at this, there is so much headroom for everybody in the industry to be better at conversion at a high level.

Matt Bromberg: When you think about opportunities for improvement in our business and improvement in the for everybody in the industry, they're almost infinite. This is why this is so incredibly exciting. As we get better and better at this, there is so much headroom for everybody in the industry to be better at conversion at a high level.

Speaker #5: I mean, this is why this is so incredibly exciting. As we get better and better at this, there is so much headroom for everybody in the industry to be better.

Speaker #5: At conversion at a high level.

Speaker #8: I totally agree. Thank you.

Jason Bazinet: I totally agree. Thank you.

Speaker #7: And your next question comes from the line of Omar Desouski with Bank of America. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Omar Dessouky with Bank of America. Your line is open. Please go ahead.

Omar Dessouky: Hi. Can you hear me?

Speaker #8: Hi. Can you hear me?

Omar Dessouky: Hi. Can you hear me?

Speaker #5: Yes.

Jarrod Yahes: Yes.

Speaker #8: Hi. Great. Thank you. It's Omar Desouski. Thanks so let's see. For the remainder of this year, you're going to get some runtime data your engineers are going to be experimenting and hopefully finding improvements to your models.

Omar Dessouky: Hi. Great. Thank you. It's Omar Dessouky. Thanks. Let's see. You know, for the remainder of this year, you're gonna get some runtime data. Your engineers are going to be experimenting and hopefully, you know, finding improvements to your models with every passing month. I wanted to know how you think about the evolution of cloud costs and your contribution margin in the context of that, and whether you want to maintain some minimum kind of contribution margin above which investments would not exceed.

Speaker #8: With every passing month, I wanted to know how you think about the evolution of cloud costs and your contribution margin in the context of that.

Speaker #8: And whether you want to maintain some minimum kind of contribution margin above which investment would not exceed.

Speaker #5: So Omar, it's a great question. We've experienced 82, 83 percent adjusted gross margins, which are inclusive of our cloud costs as the largest contributor to that comms line.

Jarrod Yahes: Omar, it's a great question. You know, we've experienced 82%, 83% adjusted gross margins, which are inclusive of our cloud costs as the largest contributor to that COGS line. It is true that when we are in the process of investment and testing, that those cloud costs can bump up in any 1 particular quarter, and we typically see an operating leverage that follows as a result of the revenue growth that comes from those investments. We do believe that as this business scales and grows, that there is an opportunity for long-term operating leverage with respect to cloud costs. If you look at larger competitors in this space, their cloud costs as a percentage of revenues are materially lower than Unity's at a larger size of scale in a similar business.

Speaker #5: It is true that when we are in the process of investment and testing, those cloud costs can bump up in any one particular quarter.

Speaker #5: And we typically see an operating leverage that follows. As a result of the revenue growth that comes from those investments. We do believe that as this business scales and grows, that there is an opportunity for long-term operating leverage with respect to cloud costs.

Speaker #5: If you look at larger competitors in this space, their cloud costs as a percentage of revenues are materially lower than Unity's at a larger size and scale and a similar business.

Speaker #5: And so that is a significant opportunity for us. The reason why we don't talk about gross margin leverage and commit to that in concrete terms is we really want to make sure that we preserve the flexibility for our teams to invest in AI and to invest in vector and make sure that they have those degrees of freedom to invest for growth.

Jarrod Yahes: That is a significant opportunity for us. The reason why we don't talk about gross margin leverage and commit to that in concrete terms is we really wanna make sure that we preserve the flexibility for our teams to invest in AI and to invest in Vector and make sure that they have those degrees of freedom to invest for growth. That is our current focus. If given a preference of optimizing cloud costs versus accelerating revenue growth in the future, we would tilt towards accelerating revenue growth in the future with the knowledge that we will optimize cloud costs over time as the business scales and grows.

Speaker #5: That is our current focus. And so if given a preference of optimizing cloud costs versus accelerating revenue growth in the future, we would tilt towards accelerating revenue growth in the future with the knowledge that we will optimize cloud costs over time as the business scales and grows.

Omar Dessouky: Okay. If I'm looking at Q2, it looks to me like your margins are guided down a little bit. You know, does that come from operating expenses or, you know, from this kind of contribution gross margin leverage? Right. Obviously, you have runtime data coming online. I would imagine you're running more experiments. You know, is that the driver of a slightly lower margin or is it something else? Or, am I missing it?

Speaker #5: Oh, okay. So if I'm looking at the second quarter, it looks to me like your margins are guided down a little bit. Does that come from operating expenses or from this kind of contribution gross margin leverage?

Speaker #5: Obviously, you have runtime data coming online. I would imagine you're running more experiments. Is that the driver of a slightly lower margin? Is it something else?

Speaker #5: Or am I missing it? There's a couple of components of that. One is we're continuing to invest heavily from a cloud perspective. And so as I mentioned, the gross margins would bounce around based on where we are in that investment cycle.

Jarrod Yahes: There's a couple components of that. One is, we're continuing to invest heavily from a cloud perspective. As I mentioned, the gross margins would bounce around based on where we are in that investment cycle. I would say the larger contribution is the fact that we have taken some strategic actions which are bringing down total revenue in Q2. There is two fewer months of the ironSource ad network, the cost of which are still in the system in Q2, and we would expect to leave the system in H2. It's that operating de-leverage that hits us in Q2, but we know we're gonna get those costs out in H2.

Speaker #5: I would say the larger contribution is the fact that we have taken some strategic actions, which are bringing down total revenue in the second quarter.

Speaker #5: There's two fewer months of the iron source ad network. The cost of which are still in the system. In the second quarter. And we would expect to leave the system in the back half of the year.

Speaker #5: So it's that operating leverage that hits us in the second quarter, but we know we're going to get those costs out in the back half of the year.

Speaker #7: And your next question comes from the line of Bernie McTernan with Needham. Your line is open. Please go ahead. Reminder that you may need to press star six to unmute.

Operator: Your next question comes from the line of Bernie McTernan with Needham.

Speaker #9: Hey, can you hear me?

[Analyst] (Needham): Hey, can you hear me?

Stefanos Crist: Hey, can you hear me?

Speaker #8: Yes, sir.

Jarrod Yahes: Yes, sir.

Speaker #9: Hey, this is Stefanos Christ calling in for Bernie. Thanks for taking our question. You mentioned the runtime would be steady improvements. Could you maybe give us more detail, maybe what you're seeing on the tests you're running and when do you think that could show meaningful revenue contribution?

[Analyst] (Needham): Hey, this is Stefanos Crest calling in for Bernie McTernan. Thanks for taking our question. You mentioned the runtime would be steady improvements. Could you maybe give us more detail, maybe what you're seeing on the tests you're running, and when do you think that could show meaningful, you know, revenue contribution? Thank you.

Stefanos Crist: Hey, this is Stefanos Crist calling in for Bernie. Thanks for taking our question. You mentioned the runtime would be steady improvements. Could you maybe give us more detail, maybe what you're seeing on the tests you're running, and when do you think that could show meaningful, you know, revenue contribution? Thank you.

Speaker #9: Thank you.

Speaker #5: Yeah, as I noted, we're really excited and encouraged by what we're seeing in our offline testing currently. And we expect to graduate that testing till our live production miles during the course of this quarter.

Matthew Bromberg: Yeah. As I noted, we're really excited and encouraged by what we're seeing in our offline testing currently, and we expect to graduate that testing to our live production models during the course of this quarter. You know, not to be a broken record, it's the kind of signal that builds over time and compounds rather than producing immediate spikes. We think of it as a long-term quality enhancement, a really durable mode and differentiation, but we're not expecting immediate spikes. Other than that, I would observe again that we couldn't be more excited about it.

Matt Bromberg: Yeah. As I noted, we're really excited and encouraged by what we're seeing in our offline testing currently, and we expect to graduate that testing to our live production models during the course of this quarter. You know, not to be a broken record, it's the kind of signal that builds over time and compounds rather than producing immediate spikes. We think of it as a long-term quality enhancement, a really durable mode and differentiation, but we're not expecting immediate spikes. Other than that, I would observe again that we couldn't be more excited about it.

Speaker #5: And not to be a broken record, it's the kind of signal that builds over time and compounds rather than producing immediate spikes. We think of it as a long-term quality enhancement, a really durable mode and differentiation but we're not expecting immediate spikes.

Speaker #5: And other than that, I would just observe again that we couldn't be more excited about it.

Speaker #9: Got it. Thank you.

[Analyst] (Needham): Got it. Thank you.

Stefanos Crist: Got it. Thank you.

Speaker #7: And your next question comes from the line of Benjamin Black with Deutsche Bank. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Benjamin Black with Deutsche Bank. Your line is open. Please go ahead.

Benjamin Black: Great. Thank you for taking my question. It seems that the 28-day ROAS targeting release was a decently sized unlock. Maybe talk about the feedback you're getting from your clients. You know, Matt, you spoke about, you know, promising product roadmap at Vector. Beyond runtime, where do you think Vector could benefit from upgrades? Jarrod Yahes, can't help but notice that, you know, cash is piling up on the balance sheet. Your free cash is improving. I'd be curious to hear sort of capital allocation priorities and how you think philosophically about supplementing the business with perhaps inorganic growth. Thank you.

Speaker #5: Great. Thank you for taking my question. It seems that the 2020 data is targeting release. So there was a decently sized unlock. So maybe talk about the feedback you're getting from your clients and Matt, you spoke about a promising product roadmap at vector.

Speaker #5: So beyond runtime, where do you think vector could benefit from upgrades? And Jarrod, can't help but notice that cash is piling up on the balance sheet.

Speaker #5: Your free cash is improving. I'd be curious to hear, sort of, about capital allocation priorities and how you think philosophically about supplementing the business with perhaps inorganic growth.

Speaker #5: Thank you.

Matthew Bromberg: Yeah. Listen, the set of product improvements that we have planned for Vector over the course of the next quarter is really exciting. It's designed really to provide two different kinds of advantages for customers. The first kind is like the kind of day 28 product, more flexibility, and more insight that will enable greater spends. Keep in mind, as I said before, we are very much at the beginning of the process of Vector. It's still a very young product. From a features perspective, just setting aside the model, the efficiency model, from a features perspective, there's still much, much more that we can do and that we're really, really quite excited about.

Speaker #8: Yeah, listen, the set of product improvements that we have planned for vector over the course of the next quarter is really exciting. And it's designed really to provide two different kinds of advantages for customers.

Matt Bromberg: Yeah. Listen, the set of product improvements that we have planned for Vector over the course of the next quarter is really exciting. It's designed really to provide two different kinds of advantages for customers. The first kind is like the kind of day 28 product, more flexibility, and more insight that will enable greater spends. Keep in mind, as I said before, we are very much at the beginning of the process of Vector. It's still a very young product. From a features perspective, just setting aside the model, the efficiency model, from a features perspective, there's still much, much more that we can do and that we're really, really quite excited about.

Speaker #8: The first kind is, like the kind of day 28 product, more flexibility and more insight. That will enable greater spends. Keep in mind, as I said before, we are very much at the beginning of this of the process of vector.

Speaker #8: It's still a very young product. And so from a features perspective, just setting aside the model and the efficiency model from the features perspective, there is still much, much more that we can do.

Speaker #8: And that we're really quite excited about. The second piece of improvement for our customers that we're working on, is ability for them to automate meaningfully in terms of how they interact with our systems.

Matthew Bromberg: The second piece of improvement for our customers that we're working on, is a ability for them to automate meaningfully in terms of how they interact with our systems, enabling them to buy more efficiently, track performance more efficiently in a more automated fashion, which we think is gonna really help drive greater conversions and more spend as well.

Matt Bromberg: The second piece of improvement for our customers that we're working on, is a ability for them to automate meaningfully in terms of how they interact with our systems, enabling them to buy more efficiently, track performance more efficiently in a more automated fashion, which we think is gonna really help drive greater conversions and more spend as well.

Speaker #8: And enabling them to buy more efficiently, track performance more efficiently, and then own more automated fashion. Which we think is going to really help drive greater conversions and more spend as well.

Speaker #5: And then to your second question, you are correct. Cash is building up on the balance sheet. We have 2.15 billion of cash. As at the first quarter, it's a function of extremely strong free cash flow.

Jarrod Yahes: Ben, to your second question, you are correct. Cash is building up on the balance sheet. We have $2.15 billion of cash as at Q1. It's a function of extremely strong free cash flow. On a trailing 12-month basis, free cash flow is up 50% to $463 million, up from $308 million last year. There's a tremendous amount of free cash flow the business is generating, and we're poised for margin expansion in H2 of the year as well. Right now we are planning on paying off the 2026 convert that's coming due in November. Other than that, in terms of uses of cash, we're really focused on our product roadmap, organic investment in our business.

Speaker #5: On a trailing 12-month basis, free cash flow is up 50% to 463 million up from 308 million last year. So there's a tremendous amount of free cash flow the business is generating with and we're poised for margin expansion in the back half of the year as well.

Speaker #5: Right now, we are planning on paying off the 26 convert that's coming due in November. Other than that, in terms of uses of cash, we're really focused on our product roadmap, organic investment in our business.

Speaker #5: We think we have an extraordinarily exciting AI roadmap in front of us. And there is a high threshold as we evaluate M&A opportunities. So I think you'll see us be prudent with our cash, not distract our product teams and make sure we can execute on the really strong organic growth opportunity we have in front of us.

Jarrod Yahes: We think we have an extraordinarily exciting AI roadmap in front of us, and there is a high threshold as we evaluate M&A opportunities. I think you'll see us be prudent with our cash, not distract our product teams, and make sure we can execute on the really strong organic growth opportunity we have in front of us.

Benjamin Black: That's all. Thanks very much.

Speaker #5: Helpful. Thanks very much.

Speaker #7: This concludes the question and answer session. I will now turn the call back to Alex for closing remarks.

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. Look forward to speaking to everyone throughout the quarter. Have a great day.

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Q1 2026 Unity Software Inc Earnings Call

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Q1 2026 Unity Software Inc Earnings Call

Thursday, May 7th, 2026 at 12:30 PM

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Unity

Earnings

Q1 2026 Unity Software Inc Earnings Call

Thursday, May 7th, 2026 at 12:30 PM

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