Unity (U, Financial) just dropped a Q4 earnings bomb—smashing expectations and sending shares soaring 25% at 11.16am. The game engine powerhouse is clawing back from a rough year, fueled by the launch of Unity 6, a revamped pricing model, and AI-driven ad tech gains. Revenue for the quarter came in at $457 million, down 25% year-over-year due to a portfolio reset, but the company's cost-cutting moves paid off. Adjusted EBITDA hit $106 million, with a solid 23% margin, while free cash flow surged to $106 million—proof that Unity is tightening up its operations and getting leaner.
The long-term picture is still a mixed bag. Full-year revenue dropped 17% to $1.81 billion, weighed down by a slowdown in Create Solutions, but key segments like subscription revenue and industry strategic revenue saw double-digit growth. Meanwhile, Unity's cash flow from operations hit $316 million for the year—critical breathing room as the company navigates its turnaround. Management's Q1 2025 guidance points to revenue of $405–$415 million, with adjusted EBITDA expected between $60–$65 million, signaling a cautious but steady recovery.
Investors are clearly buying into the rebound story. While challenges remain—especially in stabilizing core revenue streams—Unity's focus on profitability, AI innovation, and operational efficiency is starting to pay off. If the momentum holds, this could be the first real sign that Unity is turning the page on its post-merger struggles and building a more sustainable growth trajectory.
