TLDR
- Unity Software stock crashed 26% in premarket trading Wednesday after issuing disappointing first-quarter 2026 revenue guidance of $480-$490 million, below Wall Street’s $492 million estimate.
- The company beat fourth-quarter earnings expectations with adjusted EPS of 24 cents versus the 21-cent consensus, while revenue climbed 10% to $503.1 million.
- First-quarter EBITDA guidance of $105-$110 million came in well below analyst estimates of $116.9 million.
- Unity shares had already fallen 34% year-to-date before the earnings report as investors worry about AI competition from Google’s Project Genie.
- The stock’s recent decline reflects growing concerns that generative AI tools could reduce demand for traditional game-development software platforms.
Unity Software stock collapsed in premarket trading Wednesday after the game-development software company delivered mixed quarterly results that failed to ease investor concerns about artificial intelligence competition.
The stock plunged 26% before the opening bell. Shares had already been struggling, down 34% year-to-date through Tuesday’s close.
Unity reported fourth-quarter adjusted earnings of 24 cents per share. That beat the analyst consensus of 21 cents by three cents. Revenue reached $503.1 million, representing a 10% increase from the prior year and topping Wall Street’s expectation of $492.8 million.
But investors focused on the guidance. Unity projected first-quarter 2026 revenue between $480 million and $490 million. Wall Street had been expecting $492 million.
The EBITDA guidance disappointed even more. Unity forecast earnings before interest, taxes, depreciation, and amortization of $105 million to $110 million for the current quarter. Analysts had penciled in $116.9 million.
AI Competition Weighs on Sentiment
The weak guidance adds to mounting pressure on Unity from artificial intelligence developments. Investors have been selling game-development stocks since last month when Alphabet’s Google unveiled Project Genie.
The AI-powered virtual world creation tool remains early-stage. But the announcement sparked fears that generative AI could eventually replace traditional game-development software. Unity’s platform helps developers create and operate games across multiple devices.
Project Genie represents a new category of competition. The tool uses AI to generate interactive 3D environments from text prompts or images. While still limited in capabilities, the technology showcases how AI might streamline game creation in the future.
Unity had already lost significant value before Tuesday’s earnings report. The stock closed at $29.06 on Tuesday. That marked a steep decline from its 52-week high.
The company’s fourth-quarter performance showed continued growth. Revenue rose 10% year-over-year to $503.1 million. The top-line beat came as Unity expanded its customer base and improved monetization.
Guidance Raises Questions
The disappointing forecast for the current quarter suggests Unity faces near-term headwinds. The midpoint of the revenue guidance implies flat to slightly declining sequential growth. EBITDA guidance points to margin pressure in the first quarter.
Management has not provided detailed commentary on the factors driving the conservative outlook. The guidance could reflect seasonal patterns in the gaming industry or specific challenges in Unity’s business. It may also indicate caution about AI-related disruption to customer behavior.
Unity saw two positive earnings estimate revisions and zero negative revisions in the 90 days before the report. That suggests analysts had been optimistic heading into the quarter. The actual guidance reset those expectations sharply lower.
The stock gained 49.5% over the past 12 months before this week’s selloff. But the recent three-month performance shows a 20.9% decline. The company’s financial health score rates as “fair performance” according to investment research platforms.
Unity’s first-quarter revenue guidance of $480-$490 million compares to the $503.1 million reported in the fourth quarter.
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