Unity Is Quietly Becoming an AI PlayUnity Software, Inc.BATS:UmoonyptoUnity’s latest earnings report showed a much stronger business than investors were seeing a year ago.. In Q2 2026, revenue reached $546 million, up 24% year over year, while strategic revenue climbed 38% to $486 million. The major growth engine was Grow, which generated $389 million, up 35%, while Create revenue was much slower at $158 million, up 2% This means Unity’s advertising and monetization business is currently driving the recovery, with Vector AI playing an increasingly important role 📈 Margins and Cash Flow Are Becoming More Important The biggest improvement was not just revenue growth, but profitability and cash generation. Unity reported $160 million in adjusted EBITDA, up from $90 million a year earlier, pushing the adjusted EBITDA margin to 29% from 21%.. Free cash flow also increased to $202 million from $127 million, while the GAAP net loss narrowed dramatically to $23 million from $107 million. Unity ended June with approximately $2.36 billion in cash and restricted cash, giving the company significantly more financial flexibility as it continues investing in its product roadmap and reducing balance sheet obligations 🤖 Vector and Unity 7 Are the Core Growth Story AI is becoming central to Unity’s next phase. Unity says Vector is driving growth in its Ads business by improving how games acquire and monetize players, while Unity 7 is being designed around developers working alongside coding agents and other AI tools. Unity plans to start Unity 7 beta testing in December 2026, with the full release scheduled for Q1 2027, and the upgrade is designed to avoid forcing developers to rebuild existing Unity 6 projects The company also announced immediate engine support for Meta’s new VR Glasses, allowing developers to bring existing Quest titles to the platform ahead of its planned spring 2027 retail launch. ⚠️ Meta Just Added a New Competitive Risk There is also a fresh reason for investors to be cautious. On September 24, Meta introduced Horizon Create and Horizon Studio, AI powered tools that allow users to create 2D and 3D games using natural language prompts. Unity shares initially fell sharply following the announcement, highlighting concerns that generative AI could reduce the barrier to game creation and increase competition for traditional game development platforms. Unity itself is also embracing AI, but Meta’s move shows that large technology companies are increasingly targeting parts of the game creation stack that Unity has historically served. 📊 The Stock Is No Longer Priced Like a Distressed Turnaround Unity closed at $41.55 on September 25, giving the company a market capitalization of about $18.3 billion. The stock remains highly volatile, with a 52 week range of $16.78 to $52.15 and a beta of roughly 2.06. At the current price, Unity trades at about 28 times forward earnings and 7.5 times forward sales, so investors are already paying for continued growth rather than simply betting on a recovery. The next major test comes with Unity’s expected November 4, 2026 earnings report, where investors will be watching whether Vector can keep accelerating Grow revenue, whether Create finally improves, and whether the margin expansion continues.