Unity Software Inc.

Previous wording

Please read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition, or results of operations. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K filed with the SEC on February 11, 2026 and "Part II, Item 1A. Risk Factors" included elsewhere in this report. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments. See the section titled "Note Regarding Forward-Looking Statements" in this report.

Current wording

Please read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition, or results of operations. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K filed with the SEC on February 11, 2026, “Part II, Item 1A. Risk Factors” of our Form 10-Q filed with the SEC on May 7, 2026, and "Part II, Item 1A. Risk Factors" included elsewhere in this report. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments. See the section titled "Note Regarding Forward-Looking Statements" in this report.

Previous wording

In the first quarter of 2026, we announced we would sunset the ironSource Ads Network, one of our monetization networks, effective April 30, 2026, and engaged a financial advisor to assist with the planned divestiture of our Supersonic game publishing business. As a result, revenue from these businesses is now included in non-strategic revenue for all periods presented.

Current wording

In the first quarter of 2026, we announced we would sunset the ironSource Ads Network, one of our monetization networks, effective April 30, 2026, and we began the process of exiting our Supersonic game publishing business. As a result, revenue from these businesses is now included in non-strategic revenue for all periods presented. The sunset of the ironSource Ads Network was substantially completed in the second quarter of 2026, and the sale of our Supersonic business was completed on August 4, 2026.

Previous wording

As a result of these decisions, we incurred impairments on related long-lived assets of $279 million, in the three months ended March 31, 2026, associated with these decisions. The impairment charges include $227 million within cost of revenue, and $47 million within sales and marketing expense.

Current wording

As a result of these decisions, we incurred impairments on related long-lived assets of $279 million, in the six months ended June 30, 2026. The impairment charges include $227 million within cost of revenue, and $47 million within sales and marketing expense.

Previous wording

The following table summarizes our consolidated statements of operations data for the periods indicated (in thousands):

Current wording

The following table summarizes our condensed consolidated statements of operations data for the periods indicated (in thousands):

Previous wording

We generate Create Solutions revenue primarily through our suite of Create Solutions subscriptions inclusive of enterprise support, professional services, and consumption services. Our subscriptions provide customers access to technologies that allow them to edit, run, and iterate interactive, RT3D and

Current wording

We generate Create Solutions revenue primarily through our suite of Create Solutions subscriptions inclusive of enterprise support, professional services, and consumption services. Our subscriptions provide customers access to technologies that allow them to edit, run, and iterate interactive, RT3D and 2D experiences that can be created once and deployed to a variety of platforms. Enhanced support services are provided to our enterprise customers and are generally sold separately from the Create

Previous wording

2D experiences that can be created once and deployed to a variety of platforms. 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 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.

Current wording

Solutions subscriptions. 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.

Previous wording

As a result of the sunsetting of the ironSource Ads Network (one of our monetization networks), and planned divestiture of our Supersonic game publishing services, we expect Grow Solutions revenue to consist primarily of our "Unity Ad Network" (our principal monetization network), by the end of 2026.

Current wording

As a result of the sunsetting of the ironSource Ads Network (one of our monetization networks), and divestiture of our Supersonic game publishing services, we expect Grow Solutions revenue to consist primarily of our "Unity Ads Network" (our principal monetization network), by the end of 2026.

Previous wording

Total revenue increased in the three months ended March 31, 2026, compared to the comparable prior year period, primarily due to an increase in Grow Solutions revenue from growth in the Unity Ad Network, driven by “Unity Vector”, partially offset by decreases in the IronSource Ad Network.

Current wording

Total revenue increased in the three and six months ended June 30, 2026, compared to the comparable prior year periods, primarily due to an increase in Grow Solutions revenue from growth in the Unity Ads Network, driven by “Unity Vector”, partially offset by decreases in revenue from the ironSource Ads Network.

Previous wording

The increase in total revenue was further driven by an increase in Create Solutions revenue, primarily due to increases in subscription revenue, partially offset by decreases in cloud and hosting services revenue, driven by our portfolio reset in 2025.

Current wording

The increase in total revenue was further driven by a slight increase in Create Solutions revenue, primarily due to increases in subscription revenue, partially offset by decreases in cloud and hosting services revenue, driven by our portfolio reset in 2025. Create Solutions subscription revenue in 2025 also benefited from the sale of a term license for approximately $12 million in the second quarter of that year.

Previous wording

Included in revenue in the three months ended March 31, 2026 and 2025, are approximately $76 million and $115 million, respectively, of non-strategic revenue, primarily in Grow Solutions.

Current wording

Included in revenue in the six months ended June 30, 2026 and 2025, are approximately $136 million and $204 million, respectively, of non-strategic portfolio revenue, primarily in Grow Solutions.

Previous wording

Cost of revenue for the three months ended March 31, 2026 increased, compared to the comparable prior year period, due to an impairment of long-lived intangible assets in the first quarter of

Current wording

Cost of revenue for the six months ended June 30, 2026 increased, compared to the comparable prior year period, primarily due to an impairment of long-lived intangible assets in the first quarter of 2026.

Previous wording

During 2025 we had workforce reductions from our ongoing restructuring efforts. In the three months ended March 31, 2025, we incurred incremental employee separation costs related to these actions of approximately $14 million, primarily within research and development, and sales and marketing. In addition, we incurred approximately $6 million of non-employee charges associated with this restructuring in 2025.

Current wording

During 2025 we had workforce reductions from our ongoing restructuring efforts. In the six months ended June 30, 2025, we incurred incremental employee separation costs related to these actions of approximately $20 million, primarily within research and development, and sales and marketing. In addition, we incurred approximately $11 million of non-employee charges associated with this restructuring in 2025.

Previous wording

In the first quarter of 2026, we announced we would sunset the ironSource Ads Network, effective April 30, 2026, and engaged a financial advisor to assist with the planned divestiture of our Supersonic game publishing business. Following these announcements, we incurred incremental impairment charges of $279 million, in the three months ended March 31, 2026, associated with these decisions. The impairment charges include $227 million within cost of revenue, and $47 million within sales and marketing expense. Furthermore, we incurred employee separation costs and other non-employee charges of approximately $7 million, in the three months ended March 31, 2026, from our ongoing restructuring efforts. These incremental charges are primary in research and development, and sales and marketing.

Current wording

In the first quarter of 2026, we announced we would sunset the ironSource Ads Network, effective April 30, 2026, and we began the process of exiting our Supersonic game publishing business. Following these announcements, we incurred incremental impairment charges of $279 million, in the six months ended June 30, 2026, associated with these decisions. The impairment charges include $227 million within cost of revenue, and $47 million within sales and marketing expense. Furthermore, in the six months ended June 30, 2026, we incurred employee separation costs and other non-employee charges of approximately $38 million from our ongoing global restructuring efforts, primarily related to the planned closure of Unity France. These incremental charges are primarily in research and development.

Previous wording

Research and development expense for the three months ended March 31, 2026 increased, compared to the comparable prior year period, due to an increase in amortization costs from the change in useful lives of certain intangible assets in 2025.

Current wording

Research and development expense for the three and six months ended June 30, 2026 increased, compared to the comparable prior year periods, primarily due to an increase in amortization costs from the change in useful lives of certain intangible assets in 2025, and an increase in hosting expenses.

Previous wording

Our sales and marketing expenses consist primarily of the amortization and impairment of intangible assets, personnel-related costs, 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 decrease as a result of the divestiture of the Supersonic business.

Current wording

Our sales and marketing expenses consist primarily of personnel-related costs, the amortization and impairment of 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 Unite user conferences. We expect that our sales and marketing expense will decrease as a result of the divestiture of the Supersonic business.

Previous wording

Sales and marketing expense for the three months ended March 31, 2026 increased, compared to the comparable prior year period, primarily due to an impairment of long-lived intangible assets in the first quarter of 2026, partially offset by a decrease in personnel costs.

Current wording

Sales and marketing expense for the six months ended June 30, 2026 was approximately flat, compared to the comparable prior year period, primarily due to an impairment of long-lived intangible assets recognized in the first quarter of 2026, offset by decreases in amortization of intangible assets, driven by the same impairment, and personnel costs.

Previous wording

Interest income and other income (expense), net, consists primarily of interest income earned on our cash and cash equivalents, and impairments of equity investments. As we have expanded our global operations, our exposure to fluctuations in foreign currencies has increased, and we expect this to continue.

Current wording

Interest income and other income (expense), net, consists primarily of interest income earned on our cash and cash equivalents, impairments of equity investments, and foreign currency gains and losses. Our exposure to fluctuations in foreign currencies results primarily from our global operations, and related personnel expense.

Previous wording

Interest income and other income (expense), net, for the three months ended March 31, 2026 decreased, compared to the comparable prior year period, primarily due to gains on the repurchase of convertible debt of $42.7 million in the first quarter of 2025, and an impairment of an equity investment of $15.0 million in the first quarter of 2026.

Current wording

Interest income and other income (expense), net, for the six months ended June 30, 2026 decreased, compared to the comparable prior year period, primarily due to gains on the repurchase of convertible debt of $42.7 million in the first quarter of 2025, and an impairment of an equity investment of $15.0 million in the first quarter of 2026.

Previous wording

Benefit from income taxes for the three months ended March 31, 2026 changed, compared to the provision for income taxes in the comparable prior year period, primarily due to a larger current year tax benefit in foreign jurisdictions resulting from restructuring activities initiated in the first quarter of 2026.

Current wording

Benefit from income taxes for the six months ended June 30, 2026 changed, compared to the provision for income taxes in the comparable prior year period, primarily due to a larger current-year tax benefit in foreign jurisdictions resulting from restructuring activities initiated in the first quarter of 2026. For the three months ended June 30, 2026, the provision for income taxes was approximately flat compared to the prior year period.

Previous wording

percentage of revenue. We define adjusted EBITDA as net income or loss excluding benefits or expenses associated with stock-based compensation, amortization and impairment of acquired intangible assets, depreciation, restructurings and reorganizations, interest, income tax, and other non-operating activities, which primarily consist of foreign exchange rate gains or losses.

Current wording

We define adjusted gross profit as GAAP gross profit excluding expenses associated with stock-based compensation, amortization and impairment 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-based compensation, amortization and impairment of acquired intangible assets, depreciation, restructurings and reorganizations, interest, income tax, and other non-operating activities, which primarily consist of foreign exchange rate gains or losses.

Previous wording

As of March 31, 2026, 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 time deposits and in government money market funds.

Current wording

As of June 30, 2026, our principal sources of liquidity were cash and cash equivalents totaling $2.4 billion, which were primarily held for working capital purposes. Our cash equivalents are invested primarily in time deposits and in government money market funds.

Previous wording

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 Part I, Item I, Note 7 — "Commitments and Contingencies" for additional discussion of our principal contractual commitments.

Current wording

Our material cash requirements from known contractual and other obligations consist of our convertible notes, obligations under operating leases for office space, contractual obligations for hosting services to support our business operations, and our commitment to acquire shares of AppsFlyer. See Part I, Item I, Note 7 — "Commitments and Contingencies" for additional discussion of our principal contractual commitments.

Previous wording

Since our inception, we have generated losses from our operations as reflected in our accumulated deficit of $4.5 billion as of March 31, 2026. We expect to continue to incur operating losses on a GAAP basis for the foreseeable future due to the investments we will continue to make in research and development, sales and marketing, and general and administrative. As a result, we may require additional capital to execute our strategic initiatives to grow our business.

Current wording

Since our inception, we have generated losses from our operations as reflected in our accumulated deficit of $4.5 billion as of June 30, 2026. As a result, we may require additional capital to execute our strategic initiatives to grow our business.

Previous wording

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. Our future capital requirements, however, will depend on many factors, including our growth rate; the timing and extent of spending to support our research and development efforts; capital expenditures to build out new facilities and purchase hardware and software; the expansion of sales and marketing activities; 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. 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. In addition, depending on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors, we may also from time to time seek to retire or purchase our outstanding debt, including the Notes, through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. If additional

Current wording

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 the repayment of the 2026 Notes in cash upon their 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. Our future capital requirements, however, will depend on many factors, including our growth rate; the timing and extent of spending to support our research and development efforts; capital expenditures to build out new facilities and purchase hardware and software; the expansion of sales and marketing activities; and our continued need to invest in our IT infrastructure to support our growth. In addition, we have in the past entered into, and may in the future 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. 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. In addition, depending on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors, we may also from time to time seek to retire or purchase our outstanding debt, including the Notes, through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable

Previous wording

financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all, including as a result of macroeconomic conditions such as high interest rates, volatility in the capital markets and liquidity concerns at, or failures of, banks and other financial institutions. 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.

Current wording

to us, or at all, including as a result of macroeconomic conditions such as high interest rates, volatility in the capital markets and liquidity concerns at, or failures of, banks and other financial institutions. 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.

Previous wording

During the three months ended March 31, 2026, net cash provided by operating activities was primarily due to a decrease in our net loss, adjusted for certain non-cash items, which include impairments, depreciation and amortization, stock-based compensation, 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.

Current wording

During the six months ended June 30, 2026, net cash provided by operating activities was primarily due to our net loss, adjusted for certain non-cash items, which include impairments, depreciation and amortization, stock-based compensation, 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.

Previous wording

During the three months ended March 31, 2026, net cash used in investing activities consisted primarily of purchases of property and equipment.

Current wording

During the six months ended June 30, 2026, net cash used in investing activities consisted primarily of purchases of property and equipment.

Previous wording

During the three months ended March 31, 2026, net cash provided by financing activities consisted of proceeds from the issuance of common stock under our employee equity plans.

Current wording

During the six months ended June 30, 2026, net cash provided by financing activities consisted of proceeds from the issuance of common stock under our employee equity plans.