What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-11 compared with 2025-02-21 · 97 added, 111 removed, 188 unchanged (53% of the section changed)

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fiscal 2024 and 2023 that are not included in this Form 10-K can be found under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operation" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, that was filed with the SEC on February 21, 2025, and are incorporated by reference herein.

Unity offers a suite of tools to create, market and grow games and interactive experiences across all major platforms from mobile, PC, and console, to extended reality (XR).

Unity offers a suite of tools to develop, deploy, and grow games and interactive experiences across all major platforms from mobile, PC, and console, to extended reality (XR).

Our platform consists of two complementary sets of solutions:

Create Solutions and Grow Solutions, which together comprise our Strategic Portfolio surrounding the Unity Engine and related consumption services, and Monetization.

Recent Developments in Our Business

Create Solutions and Grow Solutions.

Starting in the fourth quarter of 2023, we began to reset our product and service offerings to focus on our core businesses, which we refer to as our "Strategic Portfolio":

the Unity Engine and related consumption services, and Monetization, while narrowing our investments in new businesses to those most attractive, mainly Industries beyond gaming.

We also exited businesses where we do not believe that we can provide unique value to customers or generate a sound return to investors.

Specifically, we have limited our Professional Services business to a few selected strategic engagements, we are shifting our multiplayer business to support the demands of live multiplayer games beyond infrastructure, and we have stopped the independent development of professional artistry tools, which we will instead consider integrating into the Unity Editor.

During the year ended December 31, 2024 we recognized approximately $90 million of revenue associated with these non-strategic portfolios and we expect that these amounts will decline throughout 2025.

In the year ended December 31, 2024, we began to substantially reduce our workforce and our office footprint.

This resulted in approximately $214 million in employee separation costs, primarily related to the acceleration and modifications of equity awards, and $53 million of non-employee charges associated with these reductions.

We are continuing to evaluate our facility needs, and expect more changes in 2025.

In the third quarter of 2023, we announced changes to our pricing model for our Create Solutions.

We experienced a high volume of negative customer feedback including a boycott and a slow down of signing new contracts and renewals as a result of these changes.

In the third quarter of 2024, before the pricing changes took effect, we announced the cancellation of those pricing changes, the reversion to a subscription-based model, and price increases, for gaming customers.

While the initial customer response to this announcement has been positive and we expect this change to benefit our business over the long term, the ultimate impact remains uncertain.

primarily, the Unity Engine and related consumption services, and monetization solutions.

Recent Developments in Our Business

In the year ended December 31, 2025, we had reductions to our workforce and our office footprint, that resulted in approximately $33 million in employee separation costs, and $14 million of non-employee charges associated with these reductions.

We will continue to evaluate our facility needs.

For additional details, refer to the section titled "Risk Factors."

We monitor the following key metrics to help us evaluate the health of our business, identify trends affecting our growth, formulate goals and objectives, and make strategic decisions.

In light of our portfolio reset, we have revised and restated these metrics to include inputs from our Strategic Portfolio only.

Customers Contributing More Than $100,000 of Revenue

We focus on the number of customers that generated more than $100,000 of revenue in our Strategic Portfolio, in the trailing 12 months, as this segment of our customer base represents the majority of our revenue.

We define a customer as an individual or entity that generated revenue during the measurement period.

A single organization with multiple divisions, segments, or subsidiaries is generally counted as a single customer, even though we may enter into commercial agreements with multiple parties within that organization.

We had 1,254, 1,222, and 1,202 such customers in the trailing 12 months

Unity Software Inc.

as of December 31, 2024, 2023, and 2022, respectively.

The year over year increase was largely a result of our subscriptions growth.

While these customers represented the substantial majority of revenue for the years ended December 31, 2024, 2023, and 2022, respectively, no one customer accounted for more than 10% of our revenue for any of those years.

Dollar-Based Net Expansion Rate

Our ability to drive growth and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with our Create and Grow Solutions customers and to increase their use of our platform.

We track our performance by measuring our dollar-based net expansion rate, which compares our Create and Grow Solutions revenue, excluding Strategic Partnerships and Supersonic, from the same set of customers across comparable periods, calculated on a trailing 12-month basis.

Our dollar-based net expansion rate as of a period end is calculated as current period revenue divided by prior period revenue.

Prior period revenue is the trailing 12-month revenue measured as of such prior period end and includes revenue from all customers that contributed revenue during such trailing 12-month period.

Current period revenue is the trailing 12-month revenue from these same customers as of the current period end.

Our dollar-based net expansion rate includes the effect of any customer renewals, expansion, contraction, and churn but excludes revenue from new customers in the current period.

As of December 31,

2024 2023 2022

Dollar-based net expansion rate 96 % 100 % 111 %

Our dollar-based net expansion rate as of December 31, 2024 was driven primarily by decreases in Grow Solutions revenue, due to competition in the advertising market, and to a lesser extent decreases in professional services revenue within Create Solutions, offset by growth in subscriptions revenue.

Our dollar-based net expansion rate as of December 31, 2023, was driven primarily by decreases in Grow Solutions revenue, due to competition in the advertising market, offset by growth in subscriptions revenue, and professional services revenue, within Create Solutions.

Our dollar-based net expansion rate as of December 31, 2022, was driven primarily by increases in Grow Solutions revenue, due in part to the ironSource merger, and growth in subscriptions revenue, and professional services revenue, within Create Solutions.

The decrease in dollar-based net expansion rate, compared to the comparable prior year periods, is attributable to declines in Grow Solutions, and professional services revenue, as noted above.

Unity Software Inc.

The chart below illustrates that our dollar-based net expansion rate has been declining over the last year.

Results of Operations

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Enhanced support services are provided to our enterprise customers and are generally sold separately from the Create Solutions subscriptions.

Professional services are provided to our customers and include consulting, platform integration, training, and custom application and workflow development.

Cloud and hosting services are provided to our customers to simplify and enhance the way our users access and harness our solutions.

Professional services are provided to our customers which are primarily platform integrations, but also include consulting, training, and custom application and workflow development.

Consumption services consist of cloud and hosting services provided to our customers to simplify and enhance the way our users access and harness our solutions.

Grow Solutions

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Our monetization solutions allow publishers, original equipment manufacturers, and mobile carriers to sell available advertising inventory on their mobile applications or hardware devices to advertisers for in-application or on-device placements.

Our revenue represents the amount we retain from the transaction we are facilitating through our Unified Auction and mediation platform.

Our revenue represents the amount we retain from the transaction we are facilitating through our auction and mediation platform.

Our game publishing services provide game developers with the infrastructure and expertise to launch their mobile games and manage their growth;

this is achieved through marketability testing tools, live games management tools and game design support, and optimizing the implementation of the customer's commercial model.

Through these publishing services, we generate revenue from in-app advertising in published games and in some cases, in-app purchase revenue.

Our Grow Solutions revenue did benefit from seasonality in 2024, with the fourth quarter being the strongest quarter for our Grow Solutions primarily as a result of an increase in players during the holidays and device sales during the fourth quarter holiday season.

Through these publishing services, we generate revenue from in-app advertising and related purchases in published games.

Unity Software Inc.

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Total revenue $ 1,849,648 $ 1,813,255 $ 2,187,317

Total revenue decreased in the year ended December 31, 2024, compared to the comparable prior year period, primarily due to a decrease in Create Solutions revenue, primarily due to the termination of the subscription agreement with Wētā FX Limited, which includes approximately $99 million of incremental revenue in the fourth quarter of 2023 from terminating Wētā FX Limited's subscription rights in exchange for a perpetual license;

and a decrease in professional services revenue, and consumption services revenue, both caused by the portfolio reset.

The decrease in Create Solutions revenue was partially offset by increases in subscription revenue.

The decrease in total revenue was further driven by a decrease in Grow Solutions revenue, which was negatively impacted by competition.

To be more competitive we are focused on enhancing our machine learning stack and data infrastructure capabilities, which we believe will take some time to manifest in sustainable increased performance.

In the near term, we are transitioning to use the new machine learning stack, and we expect that this transition will negatively impact our Grow Solutions revenue, and improve gradually as our model improves and learns over time.

The decrease in Grow Solutions revenue was further driven by the return of customer incentives, issued by ironSource prior to the merger, for which we received approximately $72 million of revenue in 2023, and no material amounts in 2024.

We do not expect to receive any material amounts related to these customer incentives in any future periods.

Total revenue increased in the year ended December 31, 2025, compared to the comparable prior year period, primarily due to an increase in Grow Solutions revenue driven by migrating one of our advertising networks, which we call the "Unity Ad Network", to our new AI Platform, which we call “Unity Vector”, partially offset by decreases in our other advertising network, which we call the "IronSource Ad Network".

As a result of these changes the Unity Ad Network and IronSource Ad Network represent 56% and 11%, respectively, of total Grow Solutions revenue for the fourth quarter of 2025.

The increase in total revenue was further driven by an increase in Create Solutions revenue, driven by increases in subscription revenue, offset by decreases in consumption services revenue, driven by our portfolio reset.

Included in revenue in the years ended December 31, 2025 and 2024, are approximately $28 million and $90 million, respectively, of revenue associated with the non-strategic portfolio, primarily in Create Solutions, generated mainly in North America and Europe.

Cost of Revenue, Gross Profit, and Gross Margin

Cost of revenue consists primarily of personnel costs (including salaries, benefits, and stock-based compensation) for employees and subcontractors associated with our product support and professional services organizations, hosting expenses, the amortization of intangible assets, and costs of related facilities.

Gross profit, or revenue less cost of revenue, has been and will continue to be affected by various factors, including our product mix, the costs associated with third-party hosting services and the extent to which we expand and drive efficiencies in our hosting costs, professional services, and customer support organizations.

We expect our gross profit to increase in absolute dollars in the long term but decrease in the short term as we reset our product portfolio to focus on the Unity Engine and related consumption services, and Monetization solutions.

We expect our gross profit as a percentage of revenue, or gross margin, to fluctuate from period to period.

Cost of revenue for the year ended December 31, 2024 decreased, compared to the comparable prior year period, primarily due to a decrease in amortization expenses related to intangible assets acquired through our business combinations, which includes $105 million of incremental expenses in the fourth quarter of 2023 from fully amortizing intangible assets related to the Wētā FX Limited contract that was terminated, a decrease in personnel costs, driven by our reductions in headcount, and a decrease in our hosting expenses in line with decreases in related revenue.

We expect our gross profit to increase in absolute dollars in the long term, but to fluctuate from period to period as a percentage of revenue.

Cost of revenue for the year ended December 31, 2025 was roughly flat, compared to the comparable prior year period, due to a decrease in personnel costs, driven by our reductions in headcount, offset by an increase in hosting and other direct costs to support the revenue growth in our advertising networks.

Operating Expenses

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The most significant component of our operating expenses is personnel-related costs, including salaries and wages, sales commissions, bonuses, benefits, stock-based compensation, and payroll taxes.

Unity Software Inc.

As part of our efforts to restructure and streamline our organizational structure, in 2023 we began workforce reductions, and began to reduce our number of corporate offices.

We incurred restructuring and reorganization expenses of approximately $70 million for the year ended December 31, 2023, of which $52 million related to reductions in our workforce, largely within research and development expense, and $18 million related to our intent to exit certain leased facilities, primarily impairment charges on operating lease assets in general and administrative expense.

Further, in January 2024, we committed to a plan to eliminate approximately 25% of our workforce, and we mutually agreed to the departure of the founders of ironSource Ltd.

In January 2024, we commenced a plan to reduce our workforce, and we mutually agreed to the departure of the founders of ironSource Ltd.

Following these announcements and substantially in the first quarter of 2024, we incurred incremental employee separation costs of approximately $214 million in the year ended December 31, 2024, largely driven by the acceleration and modification of equity awards, including $15 million within cost of revenue, $48 million within research and development expense, $58 million within sales and marketing expense, and $93 million within general and administrative expense.

In addition, we incurred approximately $53 million of non-employee charges associated with this restructuring in 2024, largely within research and development expense.

Unity Software Inc.

Further, during 2025 we had additional workforce reductions.

In the year ended December 31, 2025, we incurred incremental employee separation costs related to these actions of approximately $33 million, primarily within research and development, and sales and marketing.

In addition, we incurred approximately $14 million of non-employee charges associated with this restructuring in 2025.

Additionally, starting in the third quarter of 2025 we revised down our estimate of the remaining useful life of certain intangible assets, due to those assets no longer being actively developed or planned for incorporation into future Unity offerings.

These intangible assets primarily arose from our acquisition of Wētā FX Limited, and their useful lives were reduced from four to seven years, down to one to three years.

This change in estimate increased the amortization expense in our consolidated financial statements by $77 million for the year ended December 31, 2025, primarily in research and development expense.

Research and Development

Research and development expenses primarily consist of personnel-related costs for the design and development of our platform, IT hosting and SaaS expenses, and amortization expenses related to intangible assets.

We expect our research and development expenses to increase in absolute dollars in the long term, as we expand our teams to develop new solutions, expand features and functionality with existing solutions, and enter new markets, but decrease in the short term as we reset our Strategic Portfolio.

Research and development expenses primarily consist of personnel-related costs for the design and development of our platform, hosting expenses, and amortization expenses related to intangible assets.

We expect our research and development expenses to increase in absolute dollars in the long term, as we invest in new solutions, expand features and functionality with existing solutions, and enter new markets.

We expect research and development expenses to fluctuate as a percentage of revenue from period to period.

Research and development expense for the year ended December 31, 2024 decreased, compared to the comparable prior year period, primarily due to a decrease in personnel costs driven by our reductions in headcount in the first quarter of 2024.

Research and development expense for the year ended December 31, 2025 was roughly flat, compared to the comparable prior year period, due to a decrease in personnel costs driven by our reductions in headcount, offset by an increase in amortization costs from the change in useful lives of certain intangible assets.

Sales and Marketing

Our sales and marketing expenses consist primarily of personnel-related costs, amortization expenses related to intangible assets, and advertising and marketing programs, including user acquisition costs and digital account-based marketing, user events such as developer-centric conferences and our annual Unite user conferences.

We expect that our sales and marketing expense will increase in absolute dollars in the long term, as we hire additional personnel, increase our account-based marketing, direct marketing and community outreach activities, invest in additional tools and technologies, and continue to build brand awareness, but decrease in the short term as we reset our Strategic Portfolio.

We expect that our sales and marketing expense will increase in absolute dollars in the long term, as we increase our user acquisition spend, direct marketing and community outreach activities, and invest in additional tools and technologies.

We expect sales and marketing expenses to fluctuate as a percentage of revenue from period to period.

Sales and marketing expense for the year ended December 31, 2024 decreased, compared to the comparable prior year period, primarily due to a decrease in personnel costs, driven by our reductions in headcount in the first quarter of 2024, and a decrease in amortization expenses related to intangible assets.

Sales and marketing expense for the year ended December 31, 2025 decreased, compared to the comparable prior year period, primarily due to a decrease in personnel costs, driven by our reductions in headcount.

General and Administrative

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allocated overhead, and professional fees for external legal, accounting, and other professional services.

We expect that our general and administrative expenses will increase in absolute dollars in the long term, as we scale to support the growth of our business but decrease in the short term as we reset our Strategic Portfolio.

We expect that our general and administrative expenses will increase in absolute dollars in the long term, as we scale to support the growth of our business.

We expect general and administrative expenses to fluctuate as a percentage of revenue from period to period.

General and administrative expense for the year ended December 31, 2024 increased, compared to the comparable prior year period, primarily due to higher personnel-related costs, driven by employee separation costs in the first quarter of 2024.

Unity Software Inc.

General and administrative expense for the year ended December 31, 2025 decreased, compared to the comparable prior year period, primarily due to decreases in personnel-related costs and in impairments of operating lease assets, both driven by lower employee separation costs and reductions in our real estate footprint due to restructuring in 2025.

Interest Expense

Interest expense consists primarily of interest expense associated with our convertible debt and amortization of debt issuance costs.

Interest expense for the year ended December 31, 2024 decreased, compared to the comparable prior year period, in line with our outstanding debt obligations.

Unity Software Inc.

Interest expense for the year ended December 31, 2025 increased, compared to the comparable prior year period, due to the amortization of new debt issuance costs from the issuance of the 2030 Notes, partially offset by a reduction in the amortization of debt issuance costs, driven by the repurchase of a portion of the 2026 Notes.

Interest Income and Other Income (Expense), Net

Interest income and other income (expense), net, consists primarily of gains on the repurchase of convertible debt, interest income earned on our cash, cash equivalents, and short-term investments, and foreign currency gains and losses.

Interest income and other income (expense), net, consists primarily of interest income earned on our cash and cash equivalents, gains on the repurchase of convertible debt, and foreign currency gains and losses.

As we have expanded our global operations, our exposure to fluctuations in foreign currencies has increased, and we expect this to continue.

Interest income and other income (expense), net, for the year ended December 31, 2024 increased, compared to the comparable prior year period, primarily due to gains on the repurchase of convertible debt of $61.4 million in the first quarter of 2024.

Interest income and other income (expense), net, for the year ended December 31, 2025 decreased, compared to the comparable prior year period, primarily due to changes in the amount of gain recognized from the repurchase of convertible debt.

In the first quarter of 2024, we recognized $61.4 million of gain on repurchase of convertible debt, compared to $42.7 million in the first quarter of 2025.

This decrease was partially offset by gains from foreign exchange.

Provision for (benefit from) Income taxes

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See Note 13, "Income Taxes," of the Notes to Consolidated Financial Statements.

The benefit from income taxes for the year ended December 31, 2024 changed as compared to the provision for income taxes in the comparable prior year period, primarily due to a tax benefit from our foreign losses in connection with employee separation costs recorded in the first quarter of 2024 and our continued restructuring efforts in the first quarter of 2024 that enhanced our ability to offset deferred tax liabilities in the U.S.

in future periods, thereby partially reducing the need for a valuation allowance.

The provision for income taxes for the year ended December 31, 2025 changed as compared to the benefit from income taxes in the comparable prior year period, primarily due to higher earnings in foreign jurisdictions and the absence of a tax benefit recognized in the first quarter of 2024 in connection with our restructuring activities.

Non-GAAP Financial Measures

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As a result, our non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered in isolation or as a substitute for our consolidated financial statements presented in accordance with GAAP.

Adjusted Gross Profit and Adjusted EBITDA

Adjusted Gross Profit , Adjusted EBITDA, and Adjusted EPS

We define adjusted gross profit as GAAP gross profit excluding expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, and restructurings and reorganizations.

We define adjusted gross margin as adjusted gross profit as a percentage of revenue.

We define adjusted EBITDA as net income or loss excluding benefits or expenses associated with stock-

We define adjusted EBITDA as net income or loss excluding benefits or expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, restructurings and

Unity Software Inc.

based compensation, amortization of acquired intangible assets, depreciation, acquisitions, restructurings and reorganizations, insurance reimbursement for legal expenses, interest, income tax, and other non-operating activities, which primarily consist of foreign exchange rate gains or losses.

We use adjusted gross profit and adjusted EBITDA in conjunction with traditional GAAP measures to evaluate our financial performance.

We believe that adjusted gross profit and adjusted EBITDA provide our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as these metrics exclude expenses that we do not consider to be indicative of our overall operating performance.

Adjusted gross profit and adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

reorganizations, interest, income tax, and other non-operating activities, which primarily consist of foreign exchange rate gains or losses.

We define adjusted EPS as net income or loss excluding benefits or expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, restructurings and reorganizations, and the income tax impact of the preceding adjustments (cumulatively "adjusted net income"), increased by the tax effected impacts from any relevant dilutive securities, divided by the diluted weighted-average outstanding shares.

The effective tax rate used in calculating adjusted EPS is estimated for each period, based on the net income or loss adjusted for the items noted above, and may differ from the effective rate used in our financial statements.

Shares of common stock that are excluded in our calculation of GAAP diluted net loss per share due to their antidilutive impact on such calculations, are included in the diluted weighted average outstanding shares used in our calculation of adjusted EPS, to the extent they have a dilutive impact on adjusted EPS given the adjusted net income in each period.

We use adjusted gross profit, adjusted EBITDA, and adjusted EPS, in conjunction with traditional GAAP measures to evaluate our financial performance.

We believe that adjusted gross profit, adjusted EBITDA, and adjusted EPS provide our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as these metrics exclude expenses that we do not consider to be indicative of our overall operating performance.

Adjusted gross profit, adjusted EBITDA, and adjusted EPS have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

Some of these limitations are:

• they exclude expense associated with our equity compensation plans, although equity compensation has been, and will continue to be, an important part of our compensation strategy;

• adjusted gross profit and adjusted EBITDA excludes the expense of amortization of acquired intangible assets and depreciation of property and equipment, and although these are non-cash expenses, the assets being amortized may have to be replaced in the future and adjusted gross profit and adjusted EBITDA does not reflect cash expenditure for such replacements;

• adjusted EBITDA excludes costs incurred from our acquisitions;

• adjusted gross profit and adjusted EBITDA excludes costs incurred from restructuring activities;

• adjusted EBITDA excludes costs incurred from legal settlements that we anticipate recovering through insurance, and subsequent recoveries of those amounts;

• the expenses and other items that we exclude in our calculation of adjusted gross profit and adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from this measure or similarly titled measures, which reduces their usefulness as comparative measures.

• adjusted gross profit, adjusted EBITDA, and adjusted EPS excludes the expense of amortization of acquired intangible assets and depreciation of property and equipment, and although these are non-cash expenses, the assets being amortized may have to be replaced in the future and adjusted gross profit, adjusted EBITDA, and adjusted EPS does not reflect cash expenditure for such replacements;

• adjusted EBITDA, and adjusted EPS exclude costs incurred from our acquisitions;

• adjusted gross profit, adjusted EBITDA, and adjusted EPS exclude costs incurred from restructuring activities;

• adjusted EBITDA, and adjusted EPS exclude costs incurred from legal settlements that we anticipate recovering through insurance, and subsequent recoveries of those amounts;

• the expenses and other items that we exclude in our calculation of adjusted gross profit, adjusted EBITDA, and adjusted EPS may differ from the expenses and other items, if any, that other companies may exclude from this measure or similarly titled measures, which reduces their usefulness as comparative measures.

Unity Software Inc.

The following table presents a reconciliation of our adjusted gross profit to our GAAP gross profit, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands):

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Adjusted gross margin 83 % 83 %

Unity Software Inc.

The following table presents a reconciliation of our adjusted EBITDA to net loss, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands):

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Depreciation expense 42,253 55,609

Acquisition-related costs — 888

Restructuring and reorganization costs 46,781 266,855

Insurance reimbursement for legal settlement — (3,250)

Interest expense 24,007 23,542

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Adjusted EBITDA $ 408,831 $ 389,814

Unity Software Inc.

The following table presents a reconciliation of adjusted EPS to diluted net loss per share attributable to Unity Software Inc., the most directly comparable measures as determined in accordance with GAAP, for the periods presented (in thousands):

GAAP net loss $ (401,493) $ (664,287)

Stock-based compensation expense 380,159 469,128

Amortization of intangible assets expense 418,691 353,371

Depreciation expense 42,253 55,609

Restructuring and reorganization costs 46,781 266,855

Income tax impact of adjusting items (94,907) (111,073)

Adjusted net income used for calculation of adjusted EPS, before impact of dilutive instruments $ 391,484 $ 369,603

Increase from forgone financing costs on dilutive convertible notes, net of tax 18,729 18,226

Adjusted net income used for calculation of adjusted EPS, including impact of dilutive instruments $ 410,213 $ 387,829

Weighted-average common shares used in GAAP diluted net loss per share attributable to Unity Software Inc.

420,914 395,951

Convertible notes 38,672 24,766

Stock options and PVOs 6,136 11,197

Unvested RSUs, PVUs, and PSUs 8,945 4,820

Non-GAAP weighted-average common shares used in adjusted EPS 474,805 436,948

GAAP diluted net loss per share attributable to Unity Software Inc.

$ (0.96) $ (1.68)

Total impact on diluted net loss per share attributable to Unity Software Inc.

from non-GAAP adjustments $ 1.89 $ 2.61

Total impact on diluted net loss per share attributable to Unity Software Inc.

from antidilutive common stock now included $ (0.07) $ (0.04)

Adjusted EPS $ 0.86 $ 0.89

Free Cash Flow

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• other companies may calculate free cash flow or similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a tool for comparison;

Unity Software Inc.

• the utility of free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for any given period.

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Free cash flow $ 403,931 $ 286,004

Net cash provided by (used in) investing activities $ (42,409) $ 44,040

Net cash used in financing activities $ (338,307) $ (174,015)

Unity Software Inc.

Net cash used in investing activities $ (24,024) $ (42,409)

Net cash provided by (used in) financing activities $ 110,091 $ (338,307)

Liquidity and Capital Resources

As of December 31, 2025, our principal sources of liquidity were cash and cash equivalents totaling $2.1 billion, which were primarily held for working capital purposes.

Our cash equivalents are invested primarily in government money market funds and time deposits.

Our cash equivalents are invested primarily in time deposits and in government money market funds.

Our material cash requirements from known contractual and other obligations consist of our convertible notes, obligations under operating leases for office space, and contractual obligations for hosting services to support our business operations.

See Item 8 of Part II, "Financial Statements and Supplementary Data — Note 10 — Commitments and Contingencies" for additional discussion of our principal contractual commitments.

In connection with the ironSource Merger in November 2022, we issued $1.0 billion in aggregate principal amount of the 2027 Notes, the proceeds of which were used to fund repurchases under our share repurchase program.

We previously issued approximately $1.7 billion in aggregate principal amount of the 2026 Notes in November 2021, of which approximately $480 million in aggregate principal was repurchased in March 2024 for approximately $415 million.

In the first quarter of 2025 we issued $690 million in aggregate principal amount of the 2030 Notes, the proceeds of which were used to fund repurchases of outstanding 2026 Notes.

We previously issued $1.7 billion in aggregate principal amount of the 2026 Notes in November 2021, of which $688 million in aggregate principal amount was repurchased in first quarter 2025 for $642 million, and $480 million in aggregate principal amount was repurchased in March 2024 for $415 million.

We also previously issued $1.0 billion in aggregate principal amount of the 2027 Notes.

See Note 9, "Borrowings," for additional discussion of the Notes.

In July 2022, our board of directors approved our share repurchase program, which authorized the repurchase of up to $2.5 billion of shares of our common stock in open market transactions, which expired in November 2024.

Since our inception, we have generated losses from our operations as reflected in our accumulated deficit of $4.1 billion as of December 31, 2025.

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As a result, we may require additional capital to execute our strategic initiatives to grow our business.

We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditures for at least the next 12 months.

We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditures for at least the next 12 months, including our current intent to settle the principal amount of the 2026 Notes with cash upon maturity in November 2026.

We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and potential future equity or debt transactions.

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and our continued need to invest in our IT infrastructure to support our growth.

In addition, we may enter into additional strategic partnerships as well as agreements to acquire or invest in complementary offerings, teams and technologies, including intellectual property rights, which could increase our cash requirements.

In addition, we may enter into additional strategic partnerships as well as agreements to acquire or invest in complementary offerings, teams and

Unity Software Inc.

technologies, including intellectual property rights, which could increase our cash requirements.

As a result of these and other factors, we may choose or be required to seek additional equity or debt financing sooner than we currently anticipate.

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If we are unable to raise additional capital when required, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, and financial condition would be adversely affected.

Unity Software Inc.

Our changes in cash flows were as follows (in thousands):

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2025 2024 2023

Net cash provided by (used in) operating activities $ 315,553 $ 234,700 $ (59,431)

Net cash provided by operating activities $ 422,955 $ 315,553 $ 234,700

Net cash provided by (used in) investing activities (24,024) (42,409) 44,040

Net cash used in financing activities (338,307) (174,015) (226,634)

Net cash provided by (used in) financing activities 110,091 (338,307) (174,015)

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash 27,398 (11,223) (6,146)

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Cash Provided by Operating Activities

During the year ended December 31, 2024, net cash provided by operating activities was primarily due to a decrease in our net loss, adjusted for certain non-cash items, which include depreciation and amortization, stock-based compensation, gain on convertible notes, impairments, and other, offset by a decrease in operating assets and liabilities.

During the year ended December 31, 2025, net cash provided by operating activities was primarily due to a decrease in our net loss, adjusted for certain non-cash items, which include depreciation and amortization, stock-based compensation, gain on convertible notes, impairments, and other, and to a lesser extent, an increase in operating assets and liabilities.

Our cash flows can fluctuate from period to period due to revenue seasonality, timing of billings, collections, and publisher payments, and historical cash flows are not necessarily indicative of our results in any future period.

Cash Used in Investing Activities

During the year ended December 31, 2024, net cash used in investing activities consisted primarily of purchases of property and equipment, and purchases of intangible assets.

Cash Used in Financing Activities

During the year ended December 31, 2024, net cash used in financing activities consisted of repayments of convertible notes, offset by the proceeds from the issuance of common stock under our employee equity plans.

During the year ended December 31, 2025, net cash used in investing activities consisted primarily of purchases of property and equipment.

Cash Provided by Financing Activities

During the year ended December 31, 2025, net cash provided by financing activities consisted of proceeds from issuance of convertible notes, and the issuance of common stock upon exercise of stock options and purchase of ESPP shares, offset by repayments of convertible notes and the purchase of capped calls.

Critical Accounting Policies and Estimates

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To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

The critical accounting estimates, assumptions and judgements that we believe have the most significant impact on our consolidated financial statements are described below.

The critical accounting estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below.

Unity Software Inc.

Revenue Recognition

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We consider the embedded cloud functionality to be a separate performance obligation, however, its pattern of performance aligns with the software and software updates, which enables us to treat the subscription agreements as one performance obligation that is recognized ratably over the term of the agreement.

Unity Software Inc.

For advertisements placed through our Grow Solutions networks, we evaluate whether we are the principal, where revenue would be reported on a gross basis, or the agent, where revenue would be reported on a net basis.

This evaluation of whether to present revenue on a gross or net basis requires significant judgment.

We present revenue on a net basis for sales where we are facilitating the transaction between advertisers and publishers and do not have control over in-app placement.

Alternatively, we present revenue on a gross basis for advertising sales where we are the publisher and have control of the in-app placement.

We are subject to income taxes in the United States and numerous foreign jurisdictions.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis