Unity Revenue Rises 32% as Its Vector AI Ad Engine More Than Doubles

The results show an AI product changing the finances of a company long known mainly for its game engine. Chief executive Matt Bromberg said Vector grew "126% year-over-year and 40% quarter-over-quarter", according to the company's earnings release filed with the US Securities and Exchange Commission. Unity's shares jumped 13% after the report, The Information reported.

"Third-quarter performance was our strongest ever," Bromberg said in the release.

Unity now reports what it calls strategic revenue, which strips out businesses it is closing or has sold. On that basis revenue rose 59% to $596.6 million in the quarter ended September 30. Strategic revenue from Grow, the advertising business that includes Vector, rose 90% to $431.5 million, while strategic revenue from Create, its game engine and development tools business, rose 11% to $165.1 million.

Non-strategic revenue fell 73% to $25.5 million. It comes mainly from the ironSource Ads network, which Unity shut in the second quarter, and the Supersonic game publishing business, which it sold on August 4. The sale brought in $37.2 million in cash and a $4.5 million gain, the company said.

Profit and cash flow improved sharply. Adjusted EBITDA more than doubled to $256.6 million, a 41% margin, from $109.5 million a year earlier, and free cash flow rose to $219.7 million from $151.3 million. Diluted earnings were 25 cents a share, and net income was 20% of revenue.

For the fourth quarter, Unity forecast strategic revenue of $683 million to $691 million, up 65% to 67% from a year earlier, with $515 million to $520 million from Grow and $168 million to $171 million from Create. It expects non-strategic revenue to fall to $5 million as the legacy businesses wind down, and adjusted EBITDA of $290 million to $295 million, up 132% to 136%.

The Grow forecast implies Vector-driven advertising will make up roughly three-quarters of Unity's strategic sales in the final quarter of the year.