TLDR
Unity Software collapsed 26% in premarket trading Wednesday after issuing Q1 2026 revenue guidance of $480-$490 million, missing the $492 million analyst estimate.
The company posted Q4 adjusted earnings of 24 cents per share, beating the 21-cent consensus, with revenue rising 10% to $503.1 million.
Q1 EBITDA guidance of $105-$110 million disappointed against Wall Street’s $116.9 million expectation.
The stock had already lost 34% in 2026 before earnings as concerns grow about Google’s AI-powered Project Genie disrupting game development.
Unity faces questions about whether generative AI tools will reduce demand for traditional game-development software platforms.
Unity Software shares cratered in premarket trading Wednesday following a quarterly report that raised more questions than answers about the company’s near-term prospects.
$U (Unity Software) #earnings are out: pic.twitter.com/G6WZ7FjcBL
— The Earnings Correspondent (@earnings_guy) February 11, 2026
The stock dropped 26% before the opening bell. Shares closed Tuesday at $29.06, already down 34% for the year.
Unity beat fourth-quarter expectations on the bottom line. Adjusted earnings came in at 24 cents per share versus the 21-cent consensus. Revenue climbed 10% from last year to $503.1 million, topping Wall Street’s $492.8 million target.
The numbers that mattered came in the guidance. Unity forecast first-quarter revenue of $480 million to $490 million. Analysts wanted $492 million.
The revenue miss tells only part of the story. Unity’s EBITDA projection for the current quarter landed well below expectations at $105 million to $110 million. Wall Street had penciled in $116.9 million.
Guidance Signals Trouble Ahead
The weak outlook suggests Unity faces operational challenges beyond normal quarterly fluctuations. The midpoint of revenue guidance implies sequential contraction from the $503.1 million reported in Q4.
Software companies typically demonstrate sequential growth patterns. Unity’s forecast breaks that trend. The deviation raises questions about demand trends and competitive pressures.
Management hasn’t provided extensive commentary on the factors driving the conservative numbers. The forecast could reflect multiple variables including seasonal gaming patterns or shifting customer behavior.
Google’s AI Tool Adds Pressure
Unity’s stock troubles predated this earnings report. Shares started sliding last month when Google unveiled Project Genie, an AI tool that generates 3D game environments from text descriptions.
The technology remains primitive compared to established development platforms. But investors see the writing on the wall. Generative AI could eventually automate tasks that currently require specialized software like Unity’s platform.
Project Genie doesn’t pose an immediate existential threat. The tool has limited functionality and can’t replicate the full capabilities of mature game engines. However, the rapid pace of AI advancement suggests more disruption ahead.
Unity serves game developers ranging from indie creators to major studios. The platform enables cross-platform game development and provides tools for graphics, physics, and monetization.
The company’s business model relies on recurring revenue streams. Subscriptions and usage-based fees generate predictable income when customer retention remains strong. Weak guidance indicates potential softness in one or both areas.
Analyst sentiment had been relatively positive before the report. Unity received two upward earnings estimate revisions and zero downward revisions in the 90 days prior to results. The guidance quickly reversed that momentum.
The stock gained 49.5% over the trailing 12 months before this week’s destruction. The three-month performance showed a 20.9% decline heading into earnings. Wednesday’s premarket action accelerated the downtrend dramatically.
Unity’s financial health rates as “fair performance” according to investment research metrics. That assessment may deteriorate if first-quarter results match the subdued guidance.
The company projects first-quarter EBITDA of $105-$110 million compared to analyst estimates of $116.9 million, representing a gap of roughly $7-$12 million at the midpoint.
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