Unity’s first quarter results drew a negative market reaction, as revenue declined year over year despite surpassing Wall Street expectations. Management attributed the performance to a combination of strong early traction for its new AI-powered ad platform, Unity Vector, and ongoing growth in its core subscription business. CEO Matthew Bromberg highlighted the completion of the Vector migration ahead of schedule and noted that customers are already experiencing higher returns. However, CFO Jarrod Yahes pointed out that legacy business transitions and the runoff of low-margin services continued to weigh on overall top-line performance.

Is now the time to buy U? Find out in our full research report (it’s free).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions Unity’s Q1 Earnings Call

• Matt Cost (Morgan Stanley) asked if advertisers are increasing spend in response to Vector’s performance. CEO Matthew Bromberg explained that as return on ad spend improves, customers tend to allocate more budget to Unity, though the transition requires time.
• Andrew Boone (JMP Securities) questioned the trajectory and pace of Vector model improvements. Bromberg stressed the iterative nature of AI model development, noting daily incremental gains with occasional step changes expected over time.
• Tom Champion (Piper Sandler) inquired about the operational transition between Vector and legacy ad products, as well as organizational readiness. Bromberg stated that resource allocation is now heavily focused on Vector, and the company is structured for long-term growth rather than optimizing short-term product mix.
• Parker Lane (Stifel) sought clarity on the sequential decline in the Create segment. CFO Jarrod Yahes attributed it to the planned runoff of non-strategic revenues, with core subscription momentum remaining strong.
• Clark Lampen (BTIG) asked about the impact of resource concentration on legacy ad products and the potential for improved data insights. Bromberg confirmed that resource shifts are intentional and outlined plans to leverage platform-wide data for enhanced customer insights in future quarters.

Catalysts in Upcoming Quarters

In upcoming quarters, our analyst team will be watching (1) how quickly Vector’s adoption translates into sustained revenue growth, (2) the pace of customer migration to Unity 6 and subsequent subscription upgrades, and (3) whether Unity can maintain margin improvements as cloud and R&D costs moderate. Progress in industry verticals and the rollout of new platform features will also be key indicators of broader business momentum.

Unity currently trades at $29.18, up from $21.33 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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