Unity Software Inc (NYSE:U) beat Q1 revenue estimates and posted a sharp jump in adjusted earnings but took a $279 million impairment charge related to shutting down its ironSource ad network and selling off its Supersonic game publishing unit.
The San Francisco-based company posted revenue of $508 million for the quarter ended March 31, up 17% from a year earlier and slightly above the $506 million analysts had forecast.
Adjusted EBITDA surged 65% year-over-year to $138 million, though gross margin of 82% came in below the 82.8% consensus estimate. Earnings per share of $0.23 matched expectations but fell 4% from the prior-year period.
Unity's Grow Solutions segment, which houses its advertising and monetization tools, led the quarter with revenue of $352 million, up 24% year-over-year. Create Solutions, which includes the company's core development engine, generated $157 million, a more modest 4% gain.
The company officially shuttered its ironSource Ad Network at the end of April and said it intends to divest the Supersonic game publishing business. The $279 million in impairment charges recorded in the quarter reflect the financial impact of both decisions.
For the second quarter, Unity guided for revenue of $505 million to $515 million, bracketing the $512 million analyst consensus, representing year-over-year growth of 15% to 17%. Adjusted EBITDA is expected in the range of $130 million to $135 million, implying growth of 44% to 49% from a year ago.
The company also provided a breakdown of its "Strategic Revenue" category for Q2, projecting $455 million to $465 million, with Strategic Grow Revenue, its key growth engine, seen rising 50% to 52% year-over-year to $302 million to $306 million.
Unity said it expects to reach GAAP profitability by the fourth quarter of 2026.
Shares of Unity initially jumped more than 7% in premarket trading following the results but reversed course during the morning session, last trading down more than 2%.