10q10k10q10k.net

What changed in Unity Software Inc.'s 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of Unity Software Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+390 added−402 removedSource: 10-K (2026-02-11) vs 10-K (2025-02-21)

Top changes in Unity Software Inc.'s 2025 10-K

390 paragraphs added · 402 removed · 295 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

24 edited+2 added−5 removed8 unchanged
Biggest changeCompliance with these laws, rules, and regulations has not had, and is not expected to have, a material effect upon our capital expenditures, results of operations, or competitive position, and we do not currently anticipate material capital expenditures for environmental control facilities.
Biggest changeGovernment Regulations Our worldwide business activities are subject to various laws, rules, and regulations of the United States as well as numerous other countries and jurisdictions. Compliance with these laws, rules, and regulations has not had, and is not expected to have, a material effect upon our capital expenditures, results of operations, or competitive position.
As of such date, we also had 1 registered design patent in the United States and 31 registered design patents in non-U.S. jurisdictions. While we believe our patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to us as a whole.
As of such date, we also had 1 registered design patent in the United States and 28 registered design patents in non-U.S. jurisdictions. While we believe our patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to us as a whole.
The scale of our creator community provides us with a significant competitive advantage, and by incentivizing third-party platforms to strategically partner and integrate with us, we are able to further expand our community. Third-party platforms partner with Unity to make it easy for our creators to deploy content onto their platforms.
The scale of our creator community provides us with a significant competitive advantage, and by incentivizing third-party platforms to strategically partner and integrate with us, we are able to further expand our community. Numerous third-party platforms partner with Unity to make it easy for our creators to deploy content seamlessly onto their platforms.
In addition, our geographic diversification enhances our ability to retain and attract talent, and as of December 31, 2024, approximately 77% of our full-time employees were located outside of the United States. Unity's benefit offerings are designed to help attract and retain our workforce.
In addition, our geographic diversification enhances our ability to retain and attract talent, and as of December 31, 2025, approximately 77% of our full-time employees were located outside of the United States. Unity's benefit offerings are designed to help attract and retain our workforce.
We further control the use of our proprietary technology and intellectual property through provisions in our terms of service. We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective.
We further limit the use of our proprietary technology and intellectual property through provisions in our terms of service. We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective.
We control access to and use of our proprietary technology and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, customers, and partners. It is our practice to enter into confidentiality agreements with our third parties in order to limit access to, disclosure, and use of, our confidential information and proprietary information.
We control access to and use of our proprietary technology and other confidential information through the use of internal and external measures, including contractual protections with employees, contractors, customers, and partners. It is our practice to enter into confidentiality agreements with relevant third parties in order to limit access to, disclosure, and use of, our confidential information and proprietary information.
Item 1. Business General Unity is the leading platform to create and grow games and interactive experiences. We offer a suite of tools across all major platforms from mobile, PC, and console, to extended reality (XR).
Item 1. Business General Unity is the leading platform to develop, deploy, and grow games and interactive experiences. We offer a suite of tools across all major platforms from mobile, PC, and console, to extended reality (XR).
Most of these competitors offer point solutions that represent a subset of the offerings on our platform: • Create Solutions: We primarily compete against proprietary game engines built in-house by large game studios, as well as Cocos2d-x (Chukong Technologies), Godot, and Unreal Engine (Epic Games), which offer game development tools primarily serving the PC games and mobile games sectors, and, in the case of Unreal Engine (Epic Games), industries beyond gaming.
Most of these competitors offer point solutions that represent a subset of the offerings on our platform: • Create Solutions: We primarily compete against proprietary game engines built in-house by large game studios, as well as Cocos2d-x (Chukong Technologies), Godot, and Unreal Engine (Epic Games), which offer game development tools primarily serving the PC games and mobile games sectors, and, in the case of Unreal Engine (Epic Games), industries beyond gaming, as well as with various social entertainment platforms.
Examples of these large companies are Amazon, Facebook, Google, Microsoft, and Tencent. Most of these companies are also our partners and customers. Examples of other companies we compete against include AppLovin, Voodoo, and Digital Turbine.
Examples of these large companies are Amazon, Meta, Google, Microsoft, and Tencent. Most of these companies are also our partners and customers. Examples of other companies we compete against include AppLovin, Voodoo, Moloco, and Digital Turbine.
Grow Solutions Our Grow Solutions are our Monetization products, which offer customers the ability to grow and engage their user base and monetize their content—from 2D puzzle games to multiplayer, multi-platform games, or other 3D interactive content—irrespective of whether the content was created in Unity.
Grow Solutions Our Grow Solutions primarily consist of our ads products, which offer customers the ability to grow and engage their user base and monetize their content—from 2D puzzle games to multiplayer, multi-platform games, or other 3D interactive content—irrespective of whether the content was created in Unity.
Our Customers and Creator Community Our globally diverse customers range from the largest enterprises to mid-market companies, to government and non-profit institutions, to mid-sized, small, and independent businesses and individuals across a variety of industries. We have a very large, active, and highly engaged global community of RT3D creators.
Our Customers and Creator Community Our globally diverse customers range from the largest enterprises to mid-market companies, to government and non-profit institutions, to mid-sized, small, and independent businesses and individual developers across a variety of industries. We have a very large, active, and highly engaged global community of real-time 3D ("RT3D") creators.
We believe that the principal competitive factors in our market are: • cross-platform deployability; • the pace and quality of new product innovation, such as the rise of AI and machine learning and the increasing use of data and trained models; • supply from publishers, who may also use channels beyond in-app advertising to grow revenue; • product capabilities, including flexibility, scalability, performance, security, and reliability; • integration with existing platforms; • high-quality customer support, training, and services; • brand recognition and reputation; • return on investment of sales and marketing efforts; • volume and leverage of user data and analytics; • price and affordability of our solutions and customer economics; • ease of use of products; and • ability to expand to adjacent industries.
We believe that the principal competitive factors in our market are: • cross-platform deployability; • the pace and quality of new product innovation, such as the rise of AI and machine learning and the increasing use of data and trained models; • supply from publishers, who may also use channels beyond in-app advertising to grow revenue; • product capabilities, including flexibility, scalability, performance, security, and reliability; • integration with existing platforms; • high-quality customer support, training, and services; • brand recognition and reputation; • return on investment of sales and marketing efforts; • volume and leverage of user data and analytics; • price and affordability of our solutions and customer economics; • ease of use of products; • ability to expand to existing and adjacent industries; • the impact of evolving industry standards and changing regulations; and • mergers, acquisitions and other strategic relationships amongst our competitors.
Outside of gaming, we also compete with other development platforms that offer 2D and 3D design products. • Grow Solutions: We operate in a fragmented ecosystem composed of privately held companies up to select divisions of large, well-established public companies. The large companies in our ecosystem may play multiple different roles given the breadth of their business.
Outside of gaming, we also compete with other development platforms and software solutions that offer 2D and 3D design products. • Grow Solutions: We operate in a fragmented ecosystem composed of both privately-held companies and large, well-established public companies or their relevant divisions. The large companies in our ecosystem may play multiple different roles given the breadth of their business.
We help our customers grow their businesses in the mobile app ecosystem by offering a comprehensive suite of products designed to help customers successfully scale their businesses, including our mediation platform, ad networks, and offerwall.
We help our customers grow their businesses in the mobile app ecosystem by offering a comprehensive suite of products designed to help customers successfully scale their businesses, including our mediation platform, ad networks (like the Unity Ad Network, powered by Unity Vector), and offerwall.
Finally, Aura from Unity enables app developers to connect with users through a unique channel that offers on-device app discovery, while allowing telecom operators to better engage and monetize their users throughout the device lifecycle. 1 Table of Contents Unity Software Inc.
Finally, Aura from Unity enables app developers to connect with users through a unique channel that offers on-device app discovery, while allowing telecom operators to better engage and monetize their users throughout the device lifecycle.
Forms 8-K, may be obtained, free of charge, electronically on this website as soon as reasonably practicable after we file such material with, or furnish such material to, the SEC.
Copies of our reports on Forms 10-K, Forms 10-Q, and Forms 8-K, may be obtained, free of charge, electronically on this website as soon as reasonably practicable after we file such material with, or furnish such material to, the SEC.
These partnerships help us to maximize audience-reach for our customers and retain our platform’s position as the leading hub for RT3D content creation. Competition We primarily compete with other content development tools and monetization services.
These partnerships help us to maximize audience-reach for our customers and retain our platform’s position as the leading hub for RT3D content creation. 1 Table of Contents Unity Software Inc. Competition We primarily compete with other content development tools and monetization services.
Human Capital Management As of December 31, 2024, we had a total of 4,987 full-time employees, across 34 offices and in 17 countries. We also engage contractors and consultants. We had 3,217 employees in technical roles, which accounted for approximately 65% of our total headcount.
Human Capital Management As of December 31, 2025, we had a total of 4,412 full-time employees, across 25 offices and in 16 countries. We also engage contractors and consultants. We had 2,887 employees in technical roles, which accounted for approximately 65% of our total headcount.
Available Information Our investor relations website is https://investors.unity.com/ and we encourage investors to use it as a way of easily finding information about us. Copies of our reports on Forms 10-K, Forms 10-Q, and 3 Table of Contents Unity Software Inc.
Available Information Our investor relations website is https://investors.unity.com/ and we encourage investors to use it as a way of easily finding information about us.
Our team of security practitioners, working in partnership with peers across our company, works to identify and mitigate risks, assess our security measures against industry standards and best practices, and continue to evaluate ways to improve.
Our team of security practitioners, in partnership with information technology professionals and product engineers across our company, works to identify and mitigate risks, assess our security measures against industry standards and best practices, and continue to evaluate ways to improve. 2 Table of Contents Unity Software Inc.
As of December 31, 2024, we had 256 issued utility patents in the United States that expire between 2031 and 2042, 34 issued utility patents in non-U.S. jurisdictions, and 59 utility patent applications (including 3 provisional applications) pending in the United States and globally.
As of December 31, 2025, we had 204 issued utility patents in the United States ("U.S.") that expire between August 2031 and July 2044, 29 issued utility patents in non-U.S. jurisdictions, and 51 utility patent applications (including 1 provisional application) pending in the United States and globally.
We believe we compete favorably with respect to these factors. Refer to "Item 1A. Risk Factors" for a discussion of risks related to competition. 2 Table of Contents Unity Software Inc. Privacy and Data Security Creative assets, performance and user data are critical to our customers’ businesses.
Refer to "Item 1A. Risk Factors" for a discussion of risks related to competition. Privacy and Data Security Creative assets, performance, and user and end-user data are critical to our customers’ businesses.
Our comprehensive set of software, including AI solutions, supports developers through the entire development lifecycle – from prototyping to live service operation, user acquisition, and monetization. Our platform is used by creators of all types - such as developers, artists, and designers - to build content in gaming and non-gaming industries, including retail, automotive, architecture, engineering, and construction.
Our comprehensive set of software, including AI solutions, supports developers through the entire development lifecycle – from prototyping to live service operation, user acquisition, and monetization.
Designed for developers, these tools and services are used across a range of industries from games to automotive, aerospace, construction to retail, medical to manufacturing, and beyond.
Create Solutions Our Create Solutions are a robust set of tools and services used to build, ship and run high-definition, real-time 2D and 3D content. Designed for developers, these tools and services are used across a range of industries from games to automotive, retail, manufacturing, healthcare, public sector and robotics.
Removed
Unity was originally founded as Over the Edge Entertainment in Denmark in 2004. In 2009, we reorganized as a Delaware corporation and changed our name to Unity Software Inc. Our principal corporate offices are located in San Francisco, California.
Added
Our platform is used by creators of all types - such as developers, artists, and designers - to build content in gaming and non-gaming industries, including automotive, retail, manufacturing, healthcare, public sector, robotics, architecture, civil and mechanical engineering, design and construction. Our platform consists of two complementary sets of solutions: Create Solutions and Grow Solutions.
Removed
We completed our initial public offering in September 2020 and our common stock is listed on the New York Stock Exchange under the symbol "U".
Added
Information contained on or accessible through our website is not incorporated into, and does not form a part of, this Annual Report on Form 10-K or any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 3 Table of Contents Unity Software Inc.
Removed
In November 2022, we completed the transactions contemplated by the Agreement and Plan of Merger, dated July 13, 2022, by and among Unity Software Inc., Ursa Aroma Merger Subsidiary Ltd., a company organized under the laws of the State of Israel and a direct wholly owned subsidiary of Unity, and ironSource Ltd., a company organized under the laws of the State of Israel ("ironSource", and such transactions, the "ironSource Merger").
Removed
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. Create Solutions Our Create Solutions are a robust set of tools and services used to build, ship and run high-definition, real-time 2D and 3D content.
Removed
Government Regulations Our worldwide business activities are subject to various laws, rules, and regulations of the United States as well as of foreign governments.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

204 edited+76 added−70 removed205 unchanged
Biggest changeSpecifically, we have faced and may continue to face competition as a result of: • increased costs for advertisers to target users due to changes in the privacy landscape; • reduced supply from publishers, who may also use channels beyond in-app advertising to grow revenue; • rapid technological change, such as the rise of AI and machine learning, increasing use of data and trained models, evolving industry standards, changing regulations, as well as changing customer needs, requirements and preferences; • the internal development of alternative solutions by a significant number of companies, including other gaming companies; • lower prices or free solutions offered by our competitors, some of whom may offer more favorable payment terms to publishers; • mergers, acquisitions and other strategic relationships amongst our competitors which may allow them to provide more comprehensive offerings or achieve greater economies of scale than us, and may introduce new competitors in our markets; • intense competition within the gaming market which may impact our company and a significant number of our customers, who also operate in the gaming market; and • the introduction of alternative solutions by larger, more experienced companies that offer 2D and 3D design solutions in the industries in which we may expand into.
Biggest changeSpecifically, we have faced and may continue to face competition as a result of: • rapid technological change, such as the rise of AI, and machine learning and increasing use of data and trained models as well as changing customer needs, requirements and preferences; • the impact of evolving industry standards and changing regulations, which may affect us differently than some our competitors, including, for example, increased costs for advertisers to target users due to changes in the data privacy landscape; • reduced supply from game publishers, who may also use channels beyond in-app advertising to grow revenue; • the development of alternative solutions by a significant number of companies, including other gaming and ad-tech companies; • lower prices or free solutions offered by our competitors, some of whom may offer more favorable payment terms to publishers; • the introduction of alternative solutions by larger, more experienced companies that offer 2D and 3D design solutions in the industries in which we currently operate or may expand into; and • mergers, acquisitions and other strategic relationships amongst our competitors which may allow them to provide more comprehensive offerings or achieve greater economies of scale than us, and which may introduce new competitors in our markets.
The markets in which we participate are competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed. The markets in which we operate are highly competitive.
The markets in which we participate are highly competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed. The markets in which we operate are highly competitive.
Risks Related to Laws, Regulations, and the Global Economy We and the third parties with whom we work are subject to rapidly changing and increasingly stringent laws, regulations, contractual obligations, industry standards and other obligations relating to privacy and, data security, and the protection of children.
Risks Related to Laws, Regulations, and the Global Economy We and the third parties with whom we work are subject to rapidly changing and increasingly stringent laws, regulations, contractual obligations, industry standards and other obligations relating to privacy, data security, and the protection of children.
If one or more holders elect to convert their 2026 Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
If one or more holders elect to convert their 2030 Notes or 2026 Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
If we do not effectively expand our direct sales capabilities to address these industries effectively or develop effective sales and marketing strategies for those industries, or if we focus our efforts on non-gaming industries that end up being slow adopters of our platform and solutions, our ability to increase sales of our platform and solutions to industries and for use cases outside gaming will be adversely affected.
If we do not effectively expand our direct sales or technical capabilities to address these industries effectively or develop effective sales and marketing strategies for those industries, or if we focus our efforts on non-gaming industries that end up being slow adopters of our platform and solutions, our ability to increase sales of our platform and solutions to industries and for use cases outside gaming will be adversely affected.
The Capped Call Transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2026 Notes, as the case may be, with such reduction and/or offset subject to a cap.
The Capped Call Transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of 2030 Notes or 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2030 Notes or 2026 Notes, as the case may be, with such reduction and/or offset subject to a cap.
We and our customers are subject to the standard policies and terms of service of the operating system platforms on which we create, run and monetize applications and content, as well as policies and terms of service of the various application stores, such as the Apple App Store or Google Play Store, which make applications and content available to end users.
We and our customers are subject to the standard policies and terms of service of the operating system platforms on which we create, run and monetize applications and content, as well as policies and terms of service of the various application stores, such as the Apple App Store or Google Play Store, which make our customers' applications and content available to end users.
If we are unable to agree to contracting requirements of governmental entities, we may be limited in our ability to sell our solutions to these customers. Such entities may have statutory, contractual or other legal rights to terminate contracts with us or our partners for convenience or for other reasons.
If we are unable to agree to contracting requirements of governmental or regulated entities, we may be limited in our ability to sell our solutions to these customers. Such entities may have statutory, contractual or other legal rights to terminate contracts with us or our partners for convenience or for other reasons.
In addition, we will need to appropriately scale our internal business, IT, and financial, operating and administrative systems to serve our growing customer base, while continuing to manage headcount, capital and operating and reporting processes in an efficient manner.
In addition, we will need to appropriately scale our internal business, IT, and financial, operating and administrative systems to serve our growing customer base, while continuing to manage headcount, capital and operating and reporting processes and expenses in an efficient manner.
These activities are regulated by an increasing number of various federal, state, local, and foreign privacy and data security laws and regulations. These have become increasingly stringent and continue to evolve, requiring significant resources for compliance.
These activities are regulated by an increasing number of federal, state, local, and foreign privacy and data security laws and regulations. These laws have become increasingly stringent and continue to evolve, requiring significant resources for compliance.
Further, any such purchases or exchanges may result in us acquiring and retiring a substantial amount of such indebtedness, which could impact the trading liquidity of such indebtedness; and • the conditional conversion feature of the 2026 Notes, if triggered, and the conversion feature of the 2027 Notes may adversely affect our liquidity if we elect or are required to settle a portion or all of our conversion obligation through the payment of cash.
Further, any such purchases or exchanges may result in us acquiring and retiring a substantial amount of such indebtedness, which could impact the trading liquidity of such indebtedness; and • the conditional conversion features of the 2030 Notes and the 2026 Notes, if triggered, and the conversion feature of the 2027 Notes may adversely affect our liquidity if we elect or are required to settle a portion or all of our conversion obligation through the payment of cash.
For example, existing laws or new laws regarding the marketing or the use of in-app purchases or such enabling technology, labeling of free-to-play games or regulation of currency, banking institutions, unclaimed property or money transmission may be interpreted to cover games made with our solutions and the revenue that we receive from our Grow Solutions.
For example, existing laws or new laws regarding the marketing or the use of in-app purchasing or such enabling technology, labeling of free-to-play games or regulation of currency, banking institutions, unclaimed property or money transmission may be interpreted to cover games made with our solutions and the revenue that we receive from our Grow Solutions.
In addition, our revenue has varied and, in certain quarters and annual periods, declined and could vary and decline in the future. We are not certain whether we will achieve or maintain profitability in the future. Our costs and expenses may increase in the long term on a GAAP basis, which could negatively affect our future results of operations.
In addition, our revenue has varied and, in certain periods, declined and could vary or decline in the future. We are not certain whether we will achieve or maintain profitability in the future. Our costs and expenses may increase in the long term on a GAAP basis, which could negatively affect our future results of operations.
Our success in these markets will depend, to a substantial extent, on the widespread adoption of our platform as an alternative to existing solutions, such as traditional 2D and 3D modeling and rendering tools, or adoption by customers that are not currently using any software solutions.
Our success in these markets will depend, to a substantial extent, on the widespread adoption of our products as an alternative to existing solutions, such as traditional 2D and 3D modeling and rendering tools, or adoption by customers that are not currently using any software solutions.
In addition to the other risks described herein, factors that may affect our results of operations include the following: • fluctuations in demand for, usage of, or pricing of our platform; • changes in mix of solutions purchased by our customers; • demand for our gaming customers' products and their ability to monetize those products, which in turn can have a significant impact on our revenue-share and consumption-based solutions; • timing and amount of our investments to expand the capacity of our third-party cloud hosting providers; • seasonality, especially with respect to our Grow Solutions, which tend to generate higher revenue during periods of increased time spent on entertainment, such as holidays; • downturns or upturns in our sales which may not be immediately reflected in our financial position and results of operations; • timing of customer budget cycles, purchases--including longer sales cycles for enterprise customers--and usage of our platform; • market conditions and risks associated with the gaming industry, including the popularity, price and timing of release of games, changes in consumer demographics, the availability and popularity of other forms of entertainment, public tastes and preferences; • timing of updates and new features on our platform; • fluctuations or delays in purchasing decisions in anticipation of new solutions or enhancements by us or our competitors; • amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions, many of which occur in advance of the anticipated benefits resulting from such expenses; • amount and timing of non-cash expenses, including stock-based compensation, amortization of acquired intangibles and acquisition-related expenses; • amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees; • timing of acquisitions and costs associated with integrating acquired companies; • uncertain macroeconomic conditions, including changing international trade relations, as well as conditions specifically affecting industries in which our customers operate, which can impact customer spending and result in longer deal cycles; • incorrect estimates or judgments relating to our critical accounting policies; • impact of new accounting pronouncements or changes in accounting principles; • costs that we incur in order to comply with changing regulatory, tax or legal requirements, especially with respect to AI, privacy and security matters; and 10 Table of Contents Unity Software Inc. • significant security breaches of, technical difficulties with or interruptions to the delivery and use of our platform.
In addition to the other risks described herein, factors that may affect our results of operations include the following: • fluctuations in demand for, usage of, or pricing of our solutions; • changes in the mix of solutions purchased by our customers; • demand for our gaming customers' products and their ability to monetize those products, which in turn can have a significant impact on our revenue-share and consumption-based solutions; • timing and amount of our investments to expand the capacity of our third-party cloud hosting providers; • seasonality, especially with respect to our Grow Solutions, which tend to generate higher revenue during periods of increased time spent on entertainment, such as holidays; • downturns or upturns in our sales which may not be immediately reflected in our financial position and results of operations; • timing of customer budget cycles, purchases--including longer sales cycles for enterprise customers--and usage of our platform; • market conditions and risks associated with the gaming industry, including the popularity, price and timing of release of games, changes in consumer demographics, the availability and popularity of other forms of entertainment, public tastes and preferences; • timing of updates and new features on our platform, or the release of new product offerings and our investments to support these features and offerings; • fluctuations or delays in purchasing decisions by customers in anticipation of new solutions or enhancements by us or our competitors; • amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions, many of which occur in advance of the anticipated benefits resulting from such expenses; • amount and timing of non-cash expenses, including stock-based compensation, amortization of acquired intangibles and acquisition-related expenses; • amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees; • timing of acquisitions and costs associated with integrating acquired companies; • uncertain macroeconomic conditions, including changing international trade relations, as well as conditions specifically affecting industries in which our customers operate, which can impact customer spending and result in longer deal cycles; • incorrect estimates or judgments relating to our critical accounting policies; • impact of new accounting pronouncements or changes in accounting principles; • costs that we incur in order to comply with changing regulatory, tax or legal requirements, especially with respect to AI, privacy and security matters; and • significant security breaches of, technical difficulties with or interruptions to the delivery and use of our platform.
In connection with establishing their initial hedges of the Capped Call Transactions, the counterparties or their respective affiliates likely entered into various derivative transactions with respect to our common stock and/or purchased shares of our common stock concurrently with or shortly after the pricing of the 2026 Notes, including with certain investors in the 2026 Notes.
In connection with establishing their initial hedges of the Capped Call Transactions, the option counterparties or their respective affiliates likely entered into various derivative transactions with respect to our common stock and/or purchased shares of our common stock concurrently with or shortly after the pricing of the 2030 Notes or the 2026 Notes, including with certain investors in the 2030 Notes or the 2026 Notes.
The EU GDPR, UK GDPR, and other European privacy and data security laws generally prohibit the transfer of personal information to countries outside the European Economic Area ("EEA"), such as the U.S., that are not considered by some authorities as generally providing an adequate level of data protection.
GDPR, and other European privacy and data security laws generally prohibit the transfer of personal information to countries outside the European Economic Area ("EEA"), such as the U.S., that are not considered by some authorities as generally providing an adequate level of data protection.
In the future, if we, or our resellers, are found to be in violation of U.S. sanctions or export control regulations, significant fines or penalties and possible incarceration for responsible employees and managers, as well as reputational harm and loss of business, could result.
If we, or our resellers, are found to be in violation of U.S. sanctions or export control regulations, significant fines or penalties and possible incarceration for responsible employees and managers, as well as reputational harm and loss of business, could result.
The gaming market is characterized by intense competition, rapid technological change, increased focus by regulators, and economic uncertainty and, as such, there is no guarantee that any of our customers' games will gain any meaningful traction with end users.
The gaming market is characterized by intense competition, rapid technological change, increased focus by regulators, and economic uncertainty, and there is no guarantee that any of our customers' games will gain any meaningful traction with end users.
Our reputation and ability to attract and retain customers and grow our business depends in part on our ability to operate our platform at high levels of reliability, scalability and performance, including the ability of our existing and potential customers to access our platform at any time and within an acceptable amount of time.
Our reputation and ability to attract and retain customers and grow our business depend in part on our ability to operate our platform at high levels of reliability, scalability and performance, including the ability of our existing and potential customers to access our platform at any time and within an acceptable amount of time.
Foreign Corrupt Practices Act ("FCPA"), U.S. bribery laws, the United Kingdom ("U.K.") Bribery Act, and similar laws and regulations in other jurisdictions; and • adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
Foreign Corrupt Practices Act ("FCPA"), U.S. bribery laws, the United Kingdom ("UK") Bribery Act, and similar laws and regulations in other jurisdictions; and • adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
We license and make available software to customers. Although those customers are restricted in the manner in which they can use and share our software, we cannot assure you that unauthorized use or copying of our software will not occur.
We license and make available software and source code to customers. Although those customers are restricted in the manner in which they can use and share our software, we cannot assure you that unauthorized use or copying of our software or source code will not occur.
In addition, even if holders do not elect to convert their 2026 Notes, we could be required under applicable accounting rules to classify or reclassify all or a portion of the outstanding principal of the 2026 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
In addition, even if holders are not able or do not elect to convert their 2030 Notes or 2026 Notes, we could be required under applicable accounting rules to classify or reclassify all or a portion of the outstanding principal of the 2030 Notes or 2026 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
We are subject to a variety of risks related to the Notes, such as: • servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt, and our ability to make scheduled payments of the principal and interest, or to refinance or repurchase our Notes depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control; 33 Table of Contents Unity Software Inc. • our ability to refinance or repurchase our indebtedness will depend on the capital markets and our financial condition at such time, and if we are unable to engage in any of these activities or engage in these activities on desirable terms, we may be unable to meet the obligations of our Notes; • if shares of our common stock are issued to the holders of the Notes upon conversion, there will be dilution to our stockholders' equity and the market price of our common stock may decrease due to the additional selling pressure in the market.
We are subject to a variety of risks related to the Notes, such as: • servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt, and our ability to make scheduled payments of the principal and interest, or to refinance or repurchase our Notes depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control; • our ability to refinance or repurchase our indebtedness will depend on the capital markets and our financial condition at such time, and if we are unable to engage in any of these activities or engage in these activities on desirable terms, we may be unable to meet the obligations of our Notes; • if shares of our common stock are issued to the holders of the Notes upon conversion, there will be dilution to our stockholders' equity and the market price of our common stock may decrease due to the additional selling pressure in the market.
In addition, the California Consumer Privacy Act ("CCPA"), which applies to personal information of consumers, business representatives, employees, and other individuals with whom we interact, imposes a number of obligations on covered businesses, including requirements to respond to requests from California residents related to their personal information. The CCPA contains significant potential penalties for noncompliance.
In addition, the CCPA, which applies to personal information of consumers, business representatives, employees, and other individuals with whom we interact, imposes a number of obligations on covered businesses, including requirements to respond to requests from California residents related to their personal information and contains significant potential penalties for noncompliance.
We cannot assure you that our existing platform and new offerings will not contain defects. Any real or perceived errors, failures, vulnerabilities, or bugs in our platform could result in negative publicity or lead to data security, access, retention or other performance issues, all of which could harm our business.
We cannot assure you that our existing platform and new offerings will not contain defects or vulnerabilities or that they will not be exploited. Any real or perceived errors, failures, vulnerabilities, or bugs in our platform could result in negative publicity or lead to data security, access, retention or other performance issues, all of which could harm our business.
Government demand and payment for solutions are affected by public sector budgetary cycles and funding authorizations, funding reductions, shutdowns by the federal government or other delays may adversely affect public sector demand that could develop for our solutions.
Government demand and payment for solutions are affected by public sector budgetary cycles and funding authorizations, funding reductions, shutdowns by the federal government or other delays that have affected and may affect public sector demand that could develop for our solutions.
We expect to invest in sales and marketing resources to develop and expand the use of our solutions by customers in these industries, and we will need to increase our sales and marketing, legal and compliance and other efforts as we seek to expand into new industries that require a different go-to-market strategy than the gaming industry.
We expect to invest in sales and marketing resources to develop and expand the use of our solutions by customers in these industries, and we will need to increase our sales and marketing, legal and compliance and other efforts as we seek to expand into additional industries that often require a different go-to-market strategy than the gaming industry.
We are and may in the future become subject to legal proceedings and claims that arise from time to time, such as claims brought by our customers in connection with commercial disputes, employment claims made by our current or former employees, or securities class action litigation suits.
We have been and may in the future become subject to legal proceedings and claims that arise from time to time, such as claims brought by our customers in connection with commercial disputes, employment claims made by our current or former employees, or securities class action litigation suits.
Restrictions on our ability to collect and use data as desired could negatively impact our Create Solutions and Grow Solutions as well as our resource planning and feature development planning for our software.
Restrictions on our ability to offer solutions or collect and use data as desired could negatively impact our Create Solutions and Grow Solutions as well as our resource planning and feature development planning for our software.
Any intellectual property claim asserted against us, or for which we are required to provide indemnification, may require us to do one or more of the following: • cease selling or using solutions that incorporate the intellectual property rights that we allegedly infringe, misappropriate or violate; • make substantial payments for legal fees, settlement payments or other costs or damages; • obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or 23 Table of Contents Unity Software Inc. • redesign or rebrand the allegedly infringing solutions to avoid infringement, misappropriation or violation, which could be costly, time-consuming or impossible.
Any intellectual property claim asserted against us, or for which we are required to provide indemnification, may require us to do one or more of the following: • cease selling or using solutions that incorporate the intellectual property rights that we allegedly infringe, misappropriate or violate; • make substantial payments for legal fees, settlement payments or other costs or damages; • obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or • redesign or rebrand the allegedly infringing solutions to avoid infringement, misappropriation or violation, which could be costly, time-consuming or impossible.
Our future success depends on our ability to retain our existing customers, expand their use of our platform and attract new customers. Our marketing efforts may not be successful despite the resources we devote to them. We derive a significant portion of our revenue from our Grow Solutions, and such revenue is primarily generated under a revenue-share or profit-share model.
Our future success depends on our ability to retain our existing customers, expand their use of our platform and attract new customers. Our marketing efforts may not be successful despite the resources we devote to them. We derive a significant portion of our revenue from our Grow Solutions, which is primarily generated under revenue-share or profit-share models.
Create Solutions customers have no obligation to renew their subscriptions, which are primarily one to five years in length, after they expire, and have no obligation to continue using our Grow Solutions, which are primarily sold under revenue-share or profit-share-based models.
Create Solutions customers have no obligation to renew their subscriptions, which are primarily for one to five years in length, after they expire, and our Grow Solutions, which are primarily sold under revenue-share or profit-share-based models.
Our current and future global business and operations involve a variety of risks, including: • slower than anticipated availability and adoption of our platform by creators outside the U.S., for example, in China where we experienced softness throughout 2023 and 2024; • the need to adapt and localize our platform for specific countries; • maintaining our company culture, which emphasizes developing and launching new and innovative solutions and which we believe is essential to our business, across all of our offices globally and requires aligning our values across cultures and viewpoints; • difficulty collecting accounts receivable and potential for longer payment cycles; 13 Table of Contents Unity Software Inc. • increased reliance on resellers and other third parties for our global expansion; • burdens of complying with a variety of foreign laws, including costs associated with legal structures, accounting, statutory filings and tax liabilities; • stringent and evolving regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe and China and certain U.S. states; • differing and potentially more onerous labor regulations and practices, especially in Europe; • challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, statutory equity requirements and compliance programs that are specific to each jurisdiction; • changes in trade relations, particularly with China, regulations, laws or enforcement, including changes to export control restrictions, economic sanctions, and trade embargoes; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • increased travel, real estate, infrastructure and legal compliance costs associated with multiple global locations and subsidiaries; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of hedging transactions; • higher levels of credit risk and payment fraud, particularly the risk that excessive fraudulent activity could harm our ability to meet credit card association merchant standards and our right to accept credit cards for payment; • restrictions on the transfer of funds, such as limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general market preferences for local vendors; • reduced or uncertain intellectual property protection or difficulties obtaining, maintaining, protecting or enforcing our intellectual property rights, including foreign government interference with our intellectual property that resides outside of the U.S.; • political instability, societal unrest, hostilities, war, or terrorist activities, including in Israel or the surrounding region where a significant portion of our Grow Solutions team is located; and subsequent retaliatory measures and sanctions; • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
Our current and future global business and operations involve a variety of risks, including: • slower than anticipated availability and adoption of our platform by creators outside the U.S., for example, in China where we experienced softness throughout 2023 and 2024; • the need to adapt and localize our platform for specific countries; • maintaining our company culture, which emphasizes developing and launching new and innovative solutions and which we believe is essential to our business, across all of our offices globally and requires aligning our values across cultures and viewpoints; • difficulty collecting accounts receivable and potential for longer payment cycles, including due to disruptions or delays in global payment operations, and international payments or money transfers resulting from trade restrictions or sanctions or banking processes and procedures adopted in response; • increased reliance on resellers and other third parties for our global expansion; 14 Table of Contents Unity Software Inc. • burdens of complying with a variety of foreign laws, including costs associated with legal structures, accounting, statutory filings and tax liabilities; • stringent and evolving regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe and China and certain U.S. states; • differing and potentially more onerous labor regulations and practices, especially in Europe; • challenges inherent in efficiently managing, and the increased costs associated with, having a geographically diverse workforce, including the need to implement appropriate systems, policies, benefits, statutory equity requirements and compliance programs that are specific to each jurisdiction; • changes in trade relations, particularly between the U.S. and China, regulations, laws or enforcement, including changes to export control restrictions, economic sanctions, and trade embargoes; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • increased travel, real estate, infrastructure and legal compliance costs associated with multiple global locations and subsidiaries; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of hedging transactions; • higher levels of credit risk and payment fraud, particularly the risk that excessive fraudulent activity could harm our ability to meet credit card association merchant standards and our right to accept credit cards for payment; • restrictions on the transfer of funds, such as limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general market preferences for local vendors; • reduced or uncertain intellectual property protection or difficulties obtaining, maintaining, protecting or enforcing our intellectual property rights, including foreign government interference with our intellectual property that resides outside of the U.S.; • political instability, societal unrest, hostilities, war, or terrorist activities, including in Israel or the surrounding region where a significant portion of our Grow Solutions team is located; and subsequent retaliatory measures and sanctions; • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
At this time, we do not expect Pillar Two legislation to have a material impact to our consolidated financial statements; • changes to our assessment of our ability to realize our deferred tax assets that are based on estimates of our future results, the feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • the outcome of current and future tax audits, examinations or administrative appeals; and • limitations or adverse findings regarding our ability to do business in some jurisdictions.
At this time, we do not expect Pillar Two legislation to have a material impact to our consolidated financial statements; • changes to our assessment of our ability to realize our deferred tax assets that are based on estimates of our future results, the feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • the outcome of current and future tax audits, examinations or administrative appeals; and • limitations or adverse findings regarding our ability to do business in some jurisdictions. 31 Table of Contents Unity Software Inc.
The conditional conversion feature of the 2026 Notes, if triggered, and the conversion feature of the 2027 Notes may adversely affect our financial condition and operating results.
The conditional conversion features of the 2030 Notes and 2026 Notes, if triggered, and the conversion feature of the 2027 Notes may adversely affect our financial condition and operating results.
Our inability to enforce our unique licensing structure, including financial eligibility tiers, and our inability to protect our proprietary technology against unauthorized copying or use, including circumvention of licensing or usage restrictions as well as any costly litigation or diversion of our management's attention and resources, could delay further sales or the implementation of our solutions, 22 Table of Contents Unity Software Inc. impair the functionality of our platform, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our offerings, or injure our reputation.
Our inability to enforce our unique licensing structure, including financial eligibility tiers, and our inability to protect our proprietary technology against unauthorized copying or use, including circumvention of licensing or usage restrictions as well as any costly litigation or diversion of our management's attention and resources, could delay further sales or the implementation of our solutions, impair the functionality of our platform, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our offerings, or injure our reputation.
The importance of these functions will increase as we expand our business, pursue new customers and seek to expand the use of our platform and solutions by enterprise customers in new industries outside of gaming.
The importance of these functions will increase as we expand our business, pursue new customers, offer new products and seek to expand the use of our platform and solutions, including by enterprise customers in new industries outside of gaming.
Additionally, when we announce or release new versions of our platform or advancements in our technology, such as Unity 6, we could fail to sufficiently explain or train our customers on how to use such new versions or advancements or we may announce or release such versions prematurely.
Additionally, when we announce or release new versions of our platform or advancements in our technology, we could fail to sufficiently explain or train our customers on how to use such new versions or advancements or we may announce or release such versions prematurely.
For example, European privacy and data security laws, including the European Union's General Data Protection Regulation ("EU GDPR"), the European Union's Digital Services Act, the United Kingdom's GDPR ("UK GDPR") and others, impose significant and complex burdens on processing personal information and provide for robust regulatory enforcement and significant penalties for noncompliance.
For example, European privacy and data security laws, including the European Union's General Data Protection Regulation ("EU GDPR"), the European Union's Digital Services Act, the United Kingdom's GDPR ("U.K. GDPR") and others, impose significant and complex burdens on the processing of personal information and provide for robust regulatory enforcement and significant penalties for noncompliance.
Our agreements with our customers and other third parties may include indemnification provisions under which we agree to indemnify or otherwise be liable for losses suffered or incurred as a result of certain claims relating to or arising from our software, services, platform, our acts or omissions under such agreements or other contractual obligations.
Our agreements with our customers and other third parties may include indemnification provisions under which we agree to indemnify or otherwise be liable for losses suffered or incurred as a result of 15 Table of Contents Unity Software Inc. certain claims relating to or arising from our software, services, platform, our acts or omissions under such agreements or other contractual obligations.
Such disputes and intellectual property litigation can be time-consuming and expensive to resolve and they divert management's time and attention. Companies in the internet, technology and gaming industries own large numbers of patents, copyrights, trademarks, domain names and trade secrets and frequently enter into litigation based on allegations of infringement, misappropriation or other violations of intellectual property or other rights.
Such disputes and intellectual property litigation can be time-consuming and expensive to resolve and they divert management's time and attention. Companies in the internet, technology and gaming industries own large numbers of patents, copyrights, trademarks, domain names and trade secrets and frequently litigate allegations of infringement, misappropriation or other violations of intellectual property or other rights.
It is possible that a number of laws and regulations may be adopted or construed to apply to us or our customers in the U.S. and elsewhere that could restrict the online and mobile industries, including player privacy, advertising, taxation, content suitability, copyright, distribution, antitrust, and the use of artificial intelligence, and therefore our solutions or components may be deemed or perceived illegal or unfair practices.
It is possible that a number of laws and regulations may be adopted or construed to apply to us or our customers in the U.S. and elsewhere that could restrict the online and mobile industries, including player privacy, advertising, taxation, content suitability, copyright, distribution, antitrust, and the use of 33 Table of Contents Unity Software Inc. artificial intelligence, and therefore our solutions or components may be deemed or perceived illegal or unfair practices.
Furthermore, if we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of holders of our common stock.
Furthermore, if we issue additional equity or convertible securities, existing stockholders will experience dilution, and the new securities could have rights senior to those of holders of our common stock.
In certain cases where our customers choose not to implement, or incorrectly implement, those features or measures, misuse 19 Table of Contents Unity Software Inc. our services, or otherwise experience their own vulnerabilities, policy violations, credential exposure or security breaches, even if we are not the cause of a resulting customer security issue or incident, our customer relationships reputation, and revenue may be adversely impacted.
In certain cases where our customers choose not to implement, or incorrectly implement, those features or measures, misuse our services, or otherwise experience their own vulnerabilities, policy violations, credential exposure or security breaches, even if we are not the cause of a resulting customer security issue or incident, our customer relationships reputation, and revenue may be adversely impacted.
If our platform is unavailable or if our customers are unable to access our platform within a reasonable amount of time or at all, we may experience a loss of customers, lost or delayed market acceptance of our platform, delays in payment to us by customers, injury to our reputation and brand, legal claims against us, significant cost of remedying these problems and the diversion of our resources.
If our platform is unavailable or difficult to update, or our solutions are difficult or time-consuming to update or if our customers are unable to access our platform within a reasonable amount of time or at all, we may experience a loss of customers, lost or delayed market acceptance of our platform, delays in payment to us by customers, injury to our reputation and brand, legal claims against us, significant costs of remedying these problems and the diversion of our resources.
If we fail to deliver timely releases of our solutions that are ready for commercial use, release a new version, service, tool or update with material errors, or are unable to enhance our platform to keep pace with rapid technological and regulatory changes or respond to new offerings by our competitors, or if new technologies emerge that are able to deliver competitive solutions at lower prices, more efficiently, more conveniently or more securely than our solutions, or if new operating systems, gaming platforms or devices are developed and we are unable to support our customers' deployment of games and other applications onto those systems, platforms or devices, our business, financial condition and results of operations could be adversely affected. 5 Table of Contents Unity Software Inc.
If we fail to deliver timely releases of our solutions that are ready for commercial use, we release a version, service, tool or update with a material vulnerability, or other error, or we are unable to enhance our platform to keep pace with rapid technological changes or respond to new offerings by our competitors, or if new technologies emerge that are able to deliver competitive solutions at lower prices, more efficiently, more conveniently or more securely than our solutions, or if new operating systems, gaming platforms or devices are developed and we are unable to support our customers' deployment of games and other applications onto those systems, platforms or devices, our business, financial condition and results of operations could be adversely affected.
If any of these third parties were to suspend, limit or cease their operations or otherwise terminate their relationships with us, our results of operations could be adversely affected. We have entered into separate agreements with each of our strategic partners. Our agreements with our strategic partners are non-exclusive and typically have multi-year terms.
If any of these third parties were to suspend, limit or cease their operations or otherwise terminate their relationships with us, our results of operations could be adversely affected. Our agreements with our strategic partners are non-exclusive and typically have multi-year terms.
Failure to achieve these certifications may adversely impact our ability to grow our business at the pace that may be expected by our investors. Additionally, material interruptions to our service due to security-related incidents may expose us to regulatory fines in certain jurisdictions where we operate even in the absence of data loss.
Failure to achieve these certifications may adversely impact our ability to grow our business at the pace that may be expected by our investors. Additionally, material interruptions to our service due to security-related incidents may expose us to regulatory fines in certain jurisdictions where we operate even in the absence of data loss. 20 Table of Contents Unity Software Inc.
The counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our 34 Table of Contents Unity Software Inc. common stock or other securities of ours in secondary market transactions prior to the maturity of the 2026 Notes (and are likely to do so on each exercise date of the Capped Call Transactions or, to the extent we exercise the relevant election under the Capped Call Transactions, following any repurchase, redemption or conversion of the 2026 Notes).
The option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2030 Notes or the 2026 Notes (and are likely to do so on each exercise date of the Capped Call Transactions or, to the extent we exercise the relevant election under the Capped Call Transactions, following any repurchase, redemption or conversion of the 2030 Notes or the 2026 Notes).
The capped call transactions may affect the value of the 2026 Notes and our common stock.
The capped call transactions may affect the value of the 2030 Notes or 2026 Notes and our common stock.
Similarly, China's Personal Information Protection Law and Data Security Law, Canada's Personal Information Protection and Electronic Documents Act, related provincial laws, and Canada's Anti-Spam Legislation, Israel's Privacy Protection Law 5741-1981, and new and emerging privacy and data security regimes in other jurisdictions in which we operate, such as China, Canada and Israel, broadly regulate processing of personal information and impose comprehensive compliance obligations and penalties.
Similarly, China's Personal Information Protection Law and Data Security Law, Canada's Personal Information Protection and Electronic Documents Act, related provincial laws, and Canada's Anti-Spam Legislation, Israel's Privacy Protection Law 5741-1981, and new and emerging privacy and data security regimes in other jurisdictions in which we operate, broadly regulate the processing of personal information and impose comprehensive compliance obligations and penalties.
A prolonged service disruption affecting our data centers or cloud-based services for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers or otherwise harm our business.
A prolonged service disruption affecting our data centers or cloud-based services for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers or otherwise harm our business. 24 Table of Contents Unity Software Inc.
New regulation by the U.S. federal government and its agencies, such as the Federal Trade Commission ("FTC"), U.S. states and state agencies or foreign jurisdictions, which may vary significantly across 32 Table of Contents Unity Software Inc. jurisdictions, could require that certain game content be modified or removed from games, increase the costs of operating our customer's games, impact player engagement and thus the functionality and effectiveness of our Grow Solutions or otherwise harm our business performance.
New regulation by the U.S. federal government and its agencies, such as the FTC, U.S. states and state agencies or foreign jurisdictions, which may vary significantly across jurisdictions, could require that certain game content be modified or removed from games, increase the costs of operating our customer's games, impact player engagement and thus the functionality and effectiveness of our Grow Solutions or otherwise harm our business performance.
Our products and services are subject to export controls and economic sanctions laws 29 Table of Contents Unity Software Inc. and regulations of the United States and potentially other jurisdictions in which we have operations. Compliance with such laws and regulations can be time-consuming and may result in the delay or loss of sales opportunities.
Our products and services are subject to export controls and economic sanctions laws and regulations of the United States and potentially other jurisdictions in which we have operations. Compliance with such laws and regulations can be time-consuming and may result in the delay or loss of sales opportunities.
Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your shares of our common stock in an acquisition. 36 Table of Contents Unity Software Inc.
Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your shares of our common stock in an acquisition.
In addition, although we employ open source software license screening measures, if we were to combine our proprietary software solutions with certain open source software in a particular manner we could, under certain open source licenses, be required to release the source code of our proprietary software solutions.
In 23 Table of Contents Unity Software Inc. addition, although we employ open source software license screening measures, if we were to combine our proprietary software solutions with certain open source software in a particular manner we could, under certain open source licenses, be required to release the source code of our proprietary software solutions.
Under such models, our customers depend on us as a source of their own revenue, which in some cases may represent a significant portion of their revenue. Should customers lose confidence in the value or effectiveness of our Grow Solutions or if our Grow Solutions are less effective, consumption of these offerings could decline.
Under these models, our customers depend on us as a source of their own revenue, which in some cases may represent a significant portion of their total revenue. Should customers lose confidence in the value or effectiveness of our Grow Solutions, consumption of these offerings could decline.
These efforts may not be effective or sufficient to offset our expenses, and may themselves have adverse impacts, such as loss of continuity or accumulated knowledge, inefficiency during transitional periods, distraction, and potential challenges operating our business with fewer resources.
These efforts may not be effective or sufficient to offset our expenses, and may themselves have adverse impacts, such as loss of continuity or accumulated knowledge, limited technological support on legacy products, inefficiency during transitional periods, distraction, and potential challenges operating our business with fewer resources.
Further, disruptions in the mobile application industry, financial markets, economic downturns, poor business decisions, or reputational harm may adversely affect our partners and may increase their propensity to engage in fraud or otherwise illegal activity which could harm our business reputation, and they may not be able to continue honoring their obligations to us, or we may cease our arrangements with them.
Further, disruptions in the mobile application industry, financial markets, economic downturns, poor 12 Table of Contents Unity Software Inc. business decisions, or reputational harm may adversely affect our partners and may increase their propensity to engage in fraud or otherwise illegal or improper activity which could harm our business reputation, and they may not be able to continue honoring their obligations to us, or we may cease our arrangements with them.
We provide service-level agreement commitments related to certain of our Create and Grow Solutions customers. If we fail to meet these contractual commitments, our business could be harmed. Certain of our Create and Grow Solutions customers are entitled to service-level agreements commitments.
We provide service-level agreement commitments related to certain of our customers. If we fail to meet these contractual commitments, our business could be harmed. Certain of our customers are entitled to service-level agreements commitments.
Our security measures could also be 18 Table of Contents Unity Software Inc. compromised by personnel, theft or errors, and have been in the past and may in the future be insufficient to prevent harm resulting from security vulnerabilities in software or systems on which we rely. Additionally, our remote workforce poses increased risks to our IT assets and data.
Our security measures could also be compromised by personnel, theft or errors, and have been in the past and may in the future be insufficient to prevent harm resulting from security vulnerabilities in our platform or the software or systems on which we rely. Additionally, our remote workforce poses increased risks to our IT assets and data.
Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities and others of security breaches involving certain types of data. In addition, our agreements with certain customers and partners may require us to notify them in the event of a security breach.
Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities and others 19 Table of Contents Unity Software Inc. of security breaches involving certain types of data. In addition, our agreements with certain customers and partners may require us to notify them in the event of a security breach.
Some open source projects have known vulnerabilities and architectural instabilities and are provided on an "as-is" basis which, if not properly addressed, could negatively affect the performance of our solution.
Some open source projects have known vulnerabilities and architectural instabilities and are provided on an "as-is" basis which, if not properly addressed, could negatively affect the performance of our solution or lead to security incidents.
These investments will occur in advance of our realization of significant revenue from such industries, particularly given that customers in these industries are typically enterprise customers with long contracting cycles, which will make it difficult to determine if we are allocating our resources effectively and efficiently.
These investments may occur in advance of our realization of significant revenue from such industries, particularly in industries characterized by enterprise customers with long contracting cycles, which will make it difficult to determine if we are allocating our resources effectively and efficiently.
As of December 31, 2024, we had net operating loss ("NOL") carryforwards for U.S. federal, state, and foreign purposes of $619 million, $472 million, and $1.0 billion, respectively, which may be available to offset taxable income in the future, and portions of which expire in various years beginning in 2026.
As of December 31, 2025, we had net operating loss ("NOL") carryforwards for U.S. federal, state, and foreign purposes of $685 million, $477 million, and $1.1 billion, respectively, which may be available to offset taxable income in the future, and portions of which expire in various years beginning in 2026.
For example, the Indian government blocked the distribution of several applications of Chinese origin in the interest of sovereignty and integrity of India, defense of India, and security of the Indian state. In undertaking this action, the Indian government partially blocked some of Unity's services.
For example, the Indian government blocked the distribution of several applications of Chinese origin in the interest of sovereignty and integrity of India, defense of India, and security of the Indian state. In undertaking this action, the Indian government temporarily and partially blocked some of Unity's services. More recently, the U.S.
If we fail to successfully execute our plans to reset our portfolio to focus on our Strategic Portfolio and to right-size our investments, our business will be harmed. We have reset our portfolio to focus on the Unity Engine and related consumption services, and Monetization solutions, exiting other businesses and right-sizing our investments.
If we fail to successfully execute our plans to reset our portfolio to focus on our Strategic Portfolio and to right-size our investments, our business will be harmed. We have realigned our business to focus on the Unity Engine and related consumption services, and monetization solutions, and are continuing to exit other businesses and right-size our investments.
In November 2022, we issued $1.0 billion in aggregate principal amount of 2.0% convertible senior notes due 2027 (the "2027 Notes"), and in November 2021, we issued approximately $1.7 billion in aggregate principal amount of 0% convertible senior notes due 2026 (the "2026 Notes," together with the 2027 Notes, the "Notes").
In February 2025, we issued approximately $690 million in aggregate principal amount of 0% convertible senior notes due 2030 (the "2030 Notes"), in November 2022, we issued $1.0 billion in aggregate principal amount of 2.0% convertible senior notes due 2027 (the "2027 Notes"), and in November 2021, we issued approximately $1.7 billion in aggregate principal amount of 0% convertible senior notes due 2026 (the "2026 Notes," together with the 2030 Notes and 2027 Notes, the "Notes").
Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property rights. We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with other third parties, including suppliers and other partners.
Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property rights. We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with other third parties, including suppliers and other 21 Table of Contents Unity Software Inc. partners.
If these tax benefits are reduced, canceled or discontinued, our Israeli taxable income from the Preferred Technological Enterprise would be subject to a higher corporate tax rate in Israel. The standard corporate tax rate for Israeli companies has been 23% since 2018.
If these tax benefits are reduced, canceled or discontinued, our Israeli taxable income from the Preferred Technological Enterprise would be subject to a higher corporate tax rate in Israel. The standard corporate tax rate for Israeli companies has been 23% since 2018. 32 Table of Contents Unity Software Inc.
Our results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance.
Our results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be 10 Table of Contents Unity Software Inc. indicative of our future performance.
If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class action suits.
If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class action suits. 11 Table of Contents Unity Software Inc.
We are increasingly building AI into certain of our offerings, and issues raised by the use of AI in our offerings may adversely affect our business, reputation, or financial results.
We are increasingly building AI into certain of our offerings, and issues raised by the use of, or failure to successfully use, AI in our offerings, or the use of AI by our customers and competitors may adversely affect our business, reputation, or financial results.
If we fail to protect our intellectual property 21 Table of Contents Unity Software Inc. rights adequately, or fail to continuously innovate and advance our technology, our competitors could gain access to our proprietary technology and develop and commercialize substantially identical products, services or technologies. In addition, defending our intellectual property rights might entail significant expense.
If we fail to protect our intellectual property rights adequately, or fail to continuously innovate and advance our technology, our competitors could gain access to our proprietary technology and develop and commercialize substantially identical products, services or technologies. In addition, defending our intellectual property rights might entail significant expense.
Accordingly, you may need to rely on sales of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on your investment.
Accordingly, you may need to rely on sales of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on your investment. 36 Table of Contents Unity Software Inc.
Our offerings, and particularly our Grow Solutions, rely on our ability to process sensitive, proprietary, confidential, and regulated information, including personal information, that belongs to us or that we, or the third parties with whom we work, handle on behalf of others such as our customers.
Our offerings, and particularly our Grow Solutions and their access to unique runtime data through our Developer Data Framework, rely on our ability to process sensitive, proprietary, confidential, and regulated information, including personal information, that belongs to us or that we, or the third parties with whom we work, handle on behalf of others such as our customers.
In addition, at the state level, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state 31 Table of Contents Unity Software Inc. taxes owed.
In addition, at the state level, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
In the event the conditional conversion feature of the 2026 Notes is triggered, holders of the 2026 Notes will be entitled under the indenture governing the 2026 Notes to convert their 2026 Notes at any time during specified periods at their option.
In the event the conditional conversion features of the 2030 Notes or 2026 Notes is triggered, holders of the 2030 Notes or 2026 Notes will be entitled under the indenture governing the 2030 Notes or 2026 Notes to convert their 2030 Notes or 2026 Notes, as applicable, at any time during specified periods at their option.
Adverse events relating to our customers or their games could have a negative impact on our business. Our gaming customers are not the end users of our solutions, but rather they use our platform and solutions to create and/or operate their games, which are ultimately sold or distributed to an end user.
Adverse events relating to our customers or their games could have a negative impact on our business. Our gaming customers use our platform and solutions to create and/or operate their games, which are ultimately sold or distributed to an end user.

… 270 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

13 edited+1 added−0 removed4 unchanged
Biggest changeOur risk management process includes employee education and annual analysis of risks from across the company, which are then prioritized for remediation. Our approach to cybersecurity is integrated into our overall company-wide approach to risk management.
Biggest changeThe security program includes implementation of software security throughout the development life cycle, vulnerability and configuration management software across certain of our data infrastructure, and our products and services offerings. Our risk management process includes annual employee education and annual analysis of security-related risks from across the company, which are then prioritized for mitigation or remediation.
In 2024, we did not identify any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. Despite our efforts, we cannot eliminate all risks from cybersecurity threats or provide assurances that we have not experienced undetected cybersecurity incidents. Refer to "Item 1A.
In 2025, we did not identify any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. Despite our efforts, we cannot eliminate all risks from cybersecurity threats or provide assurances that we have not experienced undetected cybersecurity incidents. Refer to "Item 1A.
Our Deputy Chief Security Officer and Data Privacy Officer oversee our assessment, prevention, detection and management of cybersecurity risks, and report to our executive team, including our Chief Information Officer, Chief Financial Officer and Chief Legal Officer.
Our Interim Chief Information Security Officer and Data Privacy Officer oversee our assessment, prevention, detection and management of cybersecurity risks, and report to our executive team, including our Chief Financial Officer and Chief Legal Officer.
Additionally, the Audit Committee of our board of directors meets on a quarterly basis with our Chief Security Officer about our cybersecurity risk management and strategy, including any significant investigations, and biannually with our Data Privacy Officer about our privacy program.
The Audit Committee of our board of directors meets on a quarterly basis with our Interim Chief Information Security Officer about our cybersecurity risk management and strategy, including any significant investigations, and periodically with our Data Privacy Officer about our privacy program.
Countries around the world have adopted or are proposing similar laws and regulations relating to privacy and data security, and we may become subject to them as we expand our operations into new geographic markets. 37 Table of Contents Unity Software Inc.
Countries around the world have adopted or are proposing similar laws and regulations relating to privacy and data security, and we may become subject to them as we expand our operations into new geographic markets.
We engage third party services in connection with our processes for vendor security reviews and incidents. We are continuing to refine our processes to oversee and identify the risks from cybersecurity threats associated with our use of any third-party service provider.
We engage third party services in connection with our processes for vendor security reviews and security incidents. Assessments of our program are performed by our internal audit team or through independent third-party engagements. We are continuing to refine our processes to oversee and identify the risks from cybersecurity threats associated with our use of any third-party service provider.
Our management team, including our Deputy Chief Security Officer and our Data Privacy Officer, evaluates risks from cybersecurity threats against our overall business objectives and regularly reports to both the Audit Committee of our board of directors and to our internal audit function which evaluates our overall enterprise risk.
Our management team, including our Interim Chief Information Security Officer and our Data Privacy Officer, also regularly reports to the Audit Committee of our board of directors regarding their evaluation of risks from cybersecurity threats against our overall business objectives and other relevant cybersecurity matters.
We have a security policy which outlines mandatory security requirements for all of our employees, contractors or other agents. This policy is supported by internal standards, directives and procedures. The security program includes implementation of software security throughout the development life cycle, vulnerability and configuration management software across certain data infrastructure, products and services.
We have a security policy which outlines mandatory security requirements for all of our employees, contractors or other agents. This policy is supported by internal standards, directives and procedures and our security infrastructure and tools.
Our Chief Security Officer also provides a quarterly summary of investigations given to an executive data council, and our Data Privacy Officer reports on our compliance posture with respect to new and pending laws and regulations.
Our Interim Chief Information Security Officer also provides a regular summary of significant investigations to our Chief Financial Officer and Chief Legal Officer, as well as our Audit Committee, and our Data Privacy Officer reports on our compliance posture with respect to new and pending laws and regulations periodically as well.
Our security team follows an incident response process which we are continuing to evaluate and enhance. Pursuant to this process, incidents which may result in economic loss to the company, reputational harm or require notifications to individuals and government authorities are reported to our executive team.
Pursuant to this process, incidents which may result in economic loss to the company, reputational harm or require notifications to individuals or government authorities are reported 38 Table of Contents Unity Software Inc. to relevant members of our executive team.
Unity personnel are provided annual privacy training, with additional targeted training for key participants in our privacy program. We have procedures in place to address suspected security breaches and notify users determined to be affected and applicable regulators of a breach where we are legally required to do so.
Item 1C. Cybersecurity We are committed to our privacy and security programs, and our security team strives to protect our customer and employee data from cybersecurity risks. We have procedures in place to address suspected security breaches and notify users determined to be affected and applicable regulators of a breach where we are legally required to do so.
Item 1C. Cybersecurity We are committed to our privacy and security programs, and our security team strives to protect our customer and employee data from cybersecurity risks. From time to time, and at least annually, we review and update if necessary our privacy standards and policies in response to evolving regulatory requirements and internal Unity requirements.
From time to time, and at least annually, we review and update if necessary our privacy standards and policies in response to evolving regulatory requirements and internal Unity requirements. Unity personnel are provided annual privacy training, with additional targeted training for key participants in our privacy program.
Our Deputy Chief Security Officer Security has over 25 years of experience in multiple business verticals and has led security organizations and managed global practices for Fortune 500 technology companies. He became our Deputy Chief Security Officer after previously serving in that role at ironSource, prior to its merger with us.
Our Interim Chief Information Security Officer has over 30 years of experience in multiple business verticals and has led security organizations and managed global practices for Fortune 500 technology companies. Our security team follows a documented incident response process, which we are continuing to evaluate and enhance.
Added
Our approach to cybersecurity is integrated into our overall company-wide approach to risk management, including regular consultations between our Data Privacy Officer and Interim Chief Information Security Officer and our internal audit team.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changeOur next largest office is located in Shanghai, China, with approximately 146,000 square feet under a lease that expires in July 2027. In addition, we maintain offices in various states in the United States, across Europe, Asia and Latin America. Item 3.
Biggest changeOur next largest office is located in Montreal, Canada, with approximately 137,283 square feet under a lease that expires in June 2030. In addition, we maintain offices in various states in the United States, and in various countries in Europe and Asia. Item 3.
Item 2. Properties Our corporate headquarters are located in San Francisco, California, where we lease approximately 53,000 square feet of space under a lease that expires in August 2025. Currently, our largest office is located in Montreal, Canada, with approximately 188,000 square feet under a lease that expires in June 2030.
Item 2. Properties Our corporate headquarters are located in San Francisco, California, where we lease approximately 15,576 square feet of space under a lease that expires in May 2032. Currently, our largest office is located in Tel Aviv, Israel, with approximately 138,693 square feet under a lease that expires in June 2027.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed4 unchanged
Biggest changeThe performance graph below compares (i) the cumulative total return on our common stock from September 18, 2020 (the date our common stock commenced trading on the New York Stock Exchange) through December 31, 2024 with (ii) the cumulative total return of the S&P 500 Information Technology Index ("SP500-45") and the Nasdaq 100 Technology Sector ("NDXT") Index over the same period, assuming the investment of $100 in our common stock and in both of the other indices on September 18, 2020 and the reinvestment of dividends.
Biggest changeThe performance graph below compares (i) the cumulative total return on our common stock from December 31, 2020 through December 31, 2025 with (ii) the cumulative total return of the S&P 500 Information Technology Index ("SP500-45") and the Nasdaq 100 Technology Sector ("NDXT") Index over the same period, assuming the investment of $100 in our common stock and in both of the other indices on December 31, 2020 and the reinvestment of dividends.
Holders of Record As of December 31, 2024, we had 384 stockholders of record of our common stock, including brokers and other institutions, which hold shares of our common stock on behalf of an indeterminate number of beneficial holders. Dividend Policy We have never declared or paid any cash dividends on our capital stock.
Holders of Record As of December 31, 2025, we had 339 stockholders of record of our common stock, including brokers and other institutions, which hold shares of our common stock on behalf of an indeterminate number of beneficial holders. Dividend Policy We have never declared or paid any cash dividends on our capital stock.
The performance graph uses the closing market price on September 18, 2020 of $68.35 per share as the initial value of our common stock. The stock price performance on this performance graph is not necessarily indicative of future stock price performance. 39 Table of Contents Unity Software Inc.
The performance graph uses the closing market price on December 31, 2020 of $153.47 per share as the initial value of our common stock. The stock price performance on this performance graph is not necessarily indicative of future stock price performance. 40 Table of Contents Unity Software Inc.
Company/Index 9/18/2020 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Unity Software Inc. $ 100 $ 225 $ 209 $ 42 $ 60 $ 33 S&P 500 Information Technology Index $ 100 $ 117 $ 156 $ 111 $ 173 $ 235 Nasdaq 100 Technology Sector $ 100 $ 116 $ 155 $ 93 $ 156 $ 167 Item 6. [RESERVED]
Company/Index 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Unity Software Inc. $ 100 $ 93 $ 19 $ 27 $ 15 $ 29 S&P 500 Information Technology Index $ 100 $ 133 $ 95 $ 148 $ 201 $ 250 Nasdaq 100 Technology Sector $ 100 $ 127 $ 76 $ 127 $ 136 $ 169 Item 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

48 edited+16 added−32 removed39 unchanged
Biggest changeThe 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): Year Ended December 31, 2024 2023 GAAP gross profit $ 1,332,402 $ 1,453,595 Add: Stock-based compensation expense 43,566 80,213 Amortization of intangible assets expense 108,580 243,690 Depreciation expense 9,613 10,480 Restructuring and reorganization costs 15,154 13,510 Adjusted gross profit $ 1,509,315 $ 1,801,488 GAAP gross margin 73 % 66 % Adjusted gross margin 83 % 82 % 48 Table of Contents Unity Software Inc.
Biggest changeThe 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): Year Ended December 31, 2025 2024 GAAP gross profit $ 1,371,909 $ 1,332,402 Add: Stock-based compensation expense 39,103 43,566 Amortization of intangible assets expense 108,399 108,580 Depreciation expense 6,941 9,613 Restructuring and reorganization costs 1,787 15,154 Adjusted gross profit $ 1,528,139 $ 1,509,315 GAAP gross margin 74 % 73 % Adjusted gross margin 83 % 83 % 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): Year Ended December 31, 2025 2024 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 Interest expense 24,007 23,542 Interest income and other income (expense), net (107,862) (111,558) Provision for (benefit from) income taxes 6,295 (2,846) Adjusted EBITDA $ 408,831 $ 389,814 48 Table of Contents Unity Software Inc.
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.
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 and Adjusted EBITDA 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.
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.
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.
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.
We use adjusted gross profit and adjusted EBITDA in conjunction with traditional GAAP measures to evaluate our financial performance.
We use adjusted gross profit, adjusted EBITDA, and adjusted EPS, in conjunction with traditional GAAP measures to evaluate our financial performance.
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.
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, 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. 47 Table of Contents Unity Software Inc.
Some of these limitations are: • it is not a substitute for net cash provided by operating activities ; • 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; and • 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.
Some of these limitations are: • it is not a substitute for net cash provided by operating activities ; • 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; and 49 Table of Contents 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.
Discussion of 2022 and year-over-year comparisons between 40 Table of Contents Unity Software Inc. fiscal 2023 and 2022 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, 2023, that was filed with the SEC on February 29, 2024, and are incorporated by reference herein.
Discussion of 2023 and year-over-year comparisons between 41 Table of Contents Unity Software Inc. 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.
This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.
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 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.
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. 51 Table of Contents Unity Software Inc.
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.
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.
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 direct costs associated with our advertising offerings.
We define adjusted EBITDA as net income or loss excluding benefits or expenses associated with stock- 47 Table of Contents 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 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 46 Table of Contents Unity Software Inc. reorganizations, interest, income tax, and other non-operating activities, which primarily consist of foreign exchange rate gains or losses.
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. 50 Table of Contents Unity Software Inc.
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.
Operating Expenses Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. 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. 45 Table of Contents Unity Software Inc.
Operating Expenses Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. 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.
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 general and administrative expenses to fluctuate as a percentage of revenue from period to period.
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.
The following table sets forth the components of our consolidated statements of operations data as a percentage of revenue for the periods indicated: Year Ended December 31, 2024 2023 2022 Revenue 100 % 100 % 100 % Cost of revenue 27 34 32 Gross profit 73 66 68 Operating expenses Research and development 51 48 69 Sales and marketing 41 38 36 General and administrative 23 18 27 Total operating expenses 115 104 132 Loss from operations (42) (38) (63) Interest expense (1) (1) (1) Interest income and other income (expense), net 6 2 1 Loss before income taxes (37) (37) (63) Provision for (benefit from) Income taxes — 1 3 Net loss (37) % (38) % (66) % Revenue Create Solutions We generate Create Solutions revenue primarily through our suite of Create Solutions subscriptions inclusive of enterprise support, professional services, and consumption services.
The following table sets forth the components of our consolidated statements of operations data as a percentage of revenue for the periods indicated: Year Ended December 31, 2025 2024 2023 Revenue 100 % 100 % 100 % Cost of revenue 26 27 34 Gross profit 74 73 66 Operating expenses Research and development 50 51 48 Sales and marketing 35 41 38 General and administrative 15 23 18 Total operating expenses 100 115 104 Loss from operations (26) (42) (38) Interest expense (1) (1) (1) Interest income and other income (expense), net 6 6 2 Loss before income taxes (21) (37) (37) Provision for (benefit from) Income taxes 1 0 1 Net loss (22) % (37) % (38) % Revenue Create Solutions We generate Create Solutions revenue primarily through our suite of Create Solutions subscriptions inclusive of enterprise support, professional services, and consumption services.
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 Investing Activities During the year ended December 31, 2025, net cash used in investing activities consisted primarily of purchases of property and equipment.
The critical accounting estimates, assumptions and judgements that we believe have the most significant impact on our consolidated financial statements are described below. Revenue Recognition Subscriptions to our Create Solutions provide customers with software, embedded cloud functionality, and software updates.
The critical accounting estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below. 51 Table of Contents Unity Software Inc. Revenue Recognition Subscriptions to our Create Solutions provide customers with software, embedded cloud functionality, and software updates.
Our changes in cash flows were as follows (in thousands): Year Ended December 31, 2024 2023 2022 Net cash provided by (used in) operating activities $ 315,553 $ 234,700 $ (59,431) Net cash provided by (used in) investing activities (42,409) 44,040 723,228 Net cash used in financing activities (338,307) (174,015) (226,634) Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash (11,223) (6,146) 1,926 Net change in cash, cash equivalents, and restricted cash $ (76,386) $ 98,579 $ 439,089 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.
Our changes in cash flows were as follows (in thousands): Year Ended December 31, 2025 2024 2023 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 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) Net change in cash, cash equivalents, and restricted cash $ 536,420 $ (76,386) $ 98,579 Cash Provided by Operating Activities 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.
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.
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.
Overview 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). 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.
Overview 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.
Recent Developments in Our Business 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.
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": primarily, the Unity Engine and related consumption services, and monetization solutions.
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. See Note 9, "Borrowings," for additional discussion of the 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.
Results of Operations The following table summarizes our consolidated statements of operations data for the periods indicated (in thousands): Year Ended December 31, 2024 2023 2022 Revenue $ 1,813,255 $ 2,187,317 $ 1,391,024 Cost of revenue 480,853 733,722 442,500 Gross profit 1,332,402 1,453,595 948,524 Operating expenses Research and development 924,830 1,053,588 959,491 Sales and marketing 752,649 834,625 497,956 General and administrative 410,072 398,176 373,290 Total operating expenses 2,087,551 2,286,389 1,830,737 Loss from operations (755,149) (832,794) (882,213) Interest expense (23,542) (24,580) (7,404) Interest income and other income (expense), net 111,558 59,529 7,192 Loss before income taxes (667,133) (797,845) (882,425) Provision for (benefit from) Income taxes (2,846) 28,477 37,063 Net loss $ (664,287) $ (826,322) $ (919,488) 43 Table of Contents Unity Software Inc.
For additional details, refer to the section titled "Risk Factors." Results of Operations The following table summarizes our consolidated statements of operations data for the periods indicated (in thousands): Year Ended December 31, 2025 2024 2023 Revenue $ 1,849,648 $ 1,813,255 $ 2,187,317 Cost of revenue 477,739 480,853 733,722 Gross profit 1,371,909 1,332,402 1,453,595 Operating expenses Research and development 929,516 924,830 1,053,588 Sales and marketing 652,907 752,649 834,625 General and administrative 268,539 410,072 398,176 Total operating expenses 1,850,962 2,087,551 2,286,389 Loss from operations (479,053) (755,149) (832,794) Interest expense (24,007) (23,542) (24,580) Interest income and other income (expense), net 107,862 111,558 59,529 Loss before income taxes (395,198) (667,133) (797,845) Provision for (benefit from) Income taxes 6,295 (2,846) 28,477 Net loss $ (401,493) $ (664,287) $ (826,322) 42 Table of Contents Unity Software Inc.
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.
Grow Solutions We generate Grow Solutions revenue primarily through our monetization solutions and game publishing services. 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.
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. Grow Solutions We generate Grow Solutions revenue primarily through our monetization solutions and game publishing services.
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.
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 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.
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.
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.
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.
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, we may enter into additional strategic partnerships as well as agreements to acquire or invest in complementary offerings, teams and 50 Table of Contents Unity Software Inc. technologies, including intellectual property rights, which could increase our cash requirements.
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.
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.
The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands): Year Ended December 31, 2024 2023 Net cash provided by operating activities $ 315,553 $ 234,700 Less: Purchases of property and equipment (29,549) (55,921) Free cash flow $ 286,004 $ 178,779 Net cash provided by (used in) investing activities $ (42,409) $ 44,040 Net cash used in financing activities $ (338,307) $ (174,015) 49 Table of Contents Unity Software Inc.
The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands): Year Ended December 31, 2025 2024 Net cash provided by operating activities $ 422,955 $ 315,553 Less: Purchases of property and equipment (19,024) (29,549) Free cash flow $ 403,931 $ 286,004 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.
Through these publishing services, we generate revenue from in-app advertising in published games and in some cases, in-app purchase revenue.
Through these publishing services, we generate revenue from in-app advertising and related purchases in published games. 43 Table of Contents Unity Software Inc.
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.
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.
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.
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.
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.
In addition, we incurred approximately $53 million of non-employee charges associated with this restructuring in 2024, largely within 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.
Research and Development 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.
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. 46 Table of Contents 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.
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.
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.
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.
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, 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.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
Our total revenue is summarized as follows (in thousands): Year Ended December 31, 2024 2023 2022 Create Solutions $ 613,966 $ 859,174 $ 716,078 Grow Solutions 1,199,289 1,328,143 674,946 Total revenue $ 1,813,255 $ 2,187,317 $ 1,391,024 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.
Our total revenue is summarized as follows (in thousands): Year Ended December 31, 2025 2024 2023 Create Solutions $ 621,409 $ 613,966 $ 859,174 Grow Solutions 1,228,239 1,199,289 1,328,143 Total revenue $ 1,849,648 $ 1,813,255 $ 2,187,317 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".
Removed
We also exited businesses where we do not believe that we can provide unique value to customers or generate a sound return to investors.
Added
Our revenue represents the amount we retain from the transaction we are facilitating through our auction and mediation platform.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
In addition, we incurred approximately $53 million of non-employee charges associated with this restructuring in 2024, largely within research and development expense. 44 Table of Contents Unity Software Inc. Further, during 2025 we had additional workforce reductions.
Removed
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.
Added
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.
Removed
For additional details, refer to the section titled "Risk Factors." Key Metrics 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.
Added
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.
Removed
In light of our portfolio reset, we have revised and restated these metrics to include inputs from our Strategic Portfolio only.
Added
Interest Expense Interest expense consists primarily of interest expense associated with our convertible debt and amortization of debt issuance costs. 45 Table of Contents Unity Software Inc.
Removed
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.
Added
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.
Removed
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 41 Table of Contents Unity Software Inc. as of December 31, 2024, 2023, and 2022, respectively.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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): Year Ended December 31, 2025 2024 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 ESPP 138 214 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 We define free cash flow as net cash provided by operating activities less cash used for purchases of property and equipment.
Removed
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.
Added
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 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.
Removed
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.
Added
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. 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.
Removed
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.
Added
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.
Removed
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.
Added
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.

… 16 more changes not shown on this page.

Other U 10-K year-over-year comparisons