Analysts at Wedbush are optimistic heading into Unity Software Inc (NYSE:U)’s third quarter earnings report on November 5, expecting results to come in ahead of guidance as momentum builds across the company’s core businesses.
The firm reiterated its ‘Outperform’ rating and $42 price target, writing that expectations are “reasonably high” as Unity’s ad network stabilizes and its new Vector platform gains traction.
“Unity’s Vector platform expansion continues to rise, while its ad network is stabilizing with minimal cannibalization,” they wrote.
The analysts added that the company appears to have “passed the inflection point, with a return to revenue and EBITDA growth in 2H 2025 and beyond.”
The firm’s Q3 estimates call for revenue of $450 million and adjusted EBITDA of $95 million, both at the high end of company guidance.
The Wall Street consensus stands slightly above Wedbush’s forecast, at $451 million in revenue and $102 million in adjusted EBITDA.
Wedbush expects a “Q3 guidance beat driven by strong trends across Unity’s businesses.”
The note highlighted optimism for both of Unity’s key segments. Wedbush projects Create revenue of $148 million, down 4% sequentially but in line with management’s forecast for a modest decline. “Unity is rebuilding trust among its users by emphasizing stability, support, and performance, and moving further away from the Runtime fee debacle,” the analysts noted.
For Grow, Wedbush expects revenue of at least $302 million, growing 5%+ sequentially, in line with guidance for mid-single sequential growth.
While Vector remains an early-stage initiative, Wedbush sees significant long-term upside. “Vector is in its infancy, and its customers are only beginning to ‘steer’ their customers to web stores,” they wrote.
The analysts said Unity’s access to runtime data positions it “well for rapid growth.”
Following a recent discussion with industry expert Eric Seufert, Wedbush concluded that “there is more than enough room for both AppLovin and Unity to thrive in this ecosystem.”
Wedbush expects Unity’s Q3 call to emphasize progress in its Vector and commerce management platforms, game engine improvements, with Switch 2 likely the focus, and growing opportunities in industries beyond gaming.
The analysts view the company’s new commerce management platform positively, noting that “although Unity has opted to offer the platform at no additional cost beyond transaction processor fees, we believe it will enhance product stickiness by deepening developer integration.”
Looking beyond Q3, Wedbush anticipates Q4 guidance in line with its expectations for $480 million in revenue and $111 million in adjusted EBITDA.
“Unity can deliver sustainable growth in future years, justifying the premium multiple,” the analysts concluded.
Shares of Unity traded hands at $36 on Thursday, up more than 60% in the year to date.