Ladies and gentlemen, thank you for joining us, and welcome to the Unity Technologies Q4 Earnings Call. [Operator Instructions] I will now hand the conference over to Alex Giaimo, Head of Investor Relations. Alex, please go ahead.

Thank you. Good morning, everyone. Welcome to Unity's Fourth Quarter 2025 Earnings Call. Today, I'm joined by our CEO, Matt Bromberg; and our CFO, Jarrod Yahes. Before we begin, I want to note that today's discussion contains forward-looking statements, including statements about goals, business outlook, industry trends and expectations for future financial performance, all of which are subject to risks, uncertainties and assumptions. You can find more information about these risks and uncertainties in the Risk Factors section of our filings at sec.gov. Actual results may differ, and we take no obligation to revise or update any forward-looking statements. Finally, during today's meeting, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A full reconciliation of GAAP to non-GAAP is available in our press release and on the sec.gov website. And with that, I'll turn it over to Matt.

Thank you, Alex. Good morning, everyone. On behalf of all of us at Unity from across the globe, I'd like to thank each of you for joining us today. When the environment gets noisy, it's always clarifying to tune back into performance and the underlying product and market dynamics that produce it. It's in that spirit that I'll begin this morning by offering some broader context for why we've never been more excited about Unity's future. Our fourth quarter results once again comfortably exceeded the high end of our guidance, led by exceptional performance from Vector, which experienced its third consecutive quarter of mid-teens sequential revenue growth. Vector revenue has grown 53% in the first 3 quarters since its launch, and we believe we are still very much at the beginning of its trajectory. This January was Vector's best revenue month ever, larger even than the holiday record set in December and 72% larger than January of last year. By the end of 2026, we expect the quarterly revenue run rate for Vector to be comfortably more than $1 billion a year. We could not be more optimistic about how this business is scaling and the value it is delivering to our customers. Throughout 2025 and into the first quarter of '26, the sharp decline in the IronSource Ad Network has at times masked this incredible growth in Vector. That dynamic, however, is swiftly drawing to a close, which will materially enhance growth rates and profitability in our advertising business as a whole in the years ahead. The IronSource Ad Network will represent less than 6% of total Unity revenue in the first quarter and will become an even smaller component of our financial profile over time. And this isn't just a shift in revenue, it's a shift in quality.…

Thanks, Matt, and good morning, everyone. Unity had exceptional momentum in the fourth quarter, which translated into the fastest growth and the highest margin we've experienced in the past 2 years. Our execution and ability to hit our targets is improving and becoming more consistent. And as expected, that accelerating organic growth paired with high contribution margins is enabling operating leverage and driving free cash flows. In the fourth quarter, we had strong performance across both Grow and Create. Grow revenue in the fourth quarter was $338 million, up 6% sequentially and up 11% year-over-year. Revenue upside compared to our guidance was driven by the exceptional performance of Vector. Vector experienced yet another quarter of mid-teens sequential growth. Its third in a row, driven in part by a robust holiday season. As a point of context, Vector added more incremental dollars in the fourth quarter than in any prior quarter. January was Vector's best month ever, and we remain extremely confident that our ad business remains in the early innings of a multiyear growth story. In the fourth quarter, Vector represented 56% of Grow revenue, up from 49% just 2 quarters ago. Grow results in the fourth quarter were impacted by a $7 million sequential revenue decline in the IronSource Ad Network, which represented 11% of Grow revenue for the quarter. Our internal analysis shows that Vector's ongoing strength is almost entirely coming from incremental advertiser demand and improved conversion performance rather than a shift over from customers who have been reducing spend with IronSource. In Create, revenue was $165 million, up 8% year-over-year. As a reminder, we lapped $10 million in non-strategic Create revenue from the fourth quarter of 2024. Excluding the impact of non-strategic revenue, our Create business grew an extremely healthy 16% year-over-year, powered by strength in…

Thanks, Jarrod. Nicole, we are ready for questions.

[Operator Instructions] Your first question comes from the line of Matthew Cost with Morgan Stanley.

So I guess Grow grew double digits organically for the first time in 4 years. You mentioned kind of the consistent mid-teens sequential growth in Vector over the course of the past couple of quarters. So a really meaningful improvement in the trajectory of this business. I think what the market is wondering this morning is where are we in the process of kind of harvesting the low-hanging fruit for Vector? And how many significant ongoing breakthroughs are there still ahead for Unity ads? And then how much of a drag is IronSource going to be as we move through the rest of 2026? And then I'll follow-up on commerce after we touch on that.

Matt, thanks very much for the question. Guys, as we laid out during our prepared remarks, we are just thrilled with the continued strong growth of Vector. It continues to meet and exceed our expectations. As I mentioned, January, January, this is a business up more than 70%. So it's extraordinarily exciting for us. And as we've indicated before, all of this growth predates any of the impact, which we believe will be substantial over the long term of including our runtime data in our models. I know that there appears to be some consternation in the market about the long-term ability for us to grow this business. I honestly have a difficult time understanding why. As you can see, quarter after quarter, this business is growing and delivering not just in the quality of the model, in the quality of the signal, and the amount of return we are offering to customers, both in the volume of new installs, but also on the ROAS of their spend. And we feel like there is no natural ceiling to what this business can do in the future, and we're incredibly excited about it. I called out at the top of my remarks, the trajectory of the IronSource business only because my sense is that investors are overly focused on the performance of that business, which is a legacy business for us. And as I indicated that it will get smaller and smaller over time and won't be material to our overall picture, which was really the reason why I highlighted it. So I would just say that going forward, it's not going to be an important component of our revenue and that's really strongly and completely been driven by the growth of Vector. And so that's not -- it's just a statement of the obvious.

Great. And then just on commerce, as you kind of head towards a GA launch it sounds like in 2Q, what are you seeing so far in terms of demand and uptake of that business? Is it in certain segments of your client base that are interested in potentially testing it? And how broadly do you think you might see your commerce tools adopted as you go into GA?

We've been extremely pleased by customer reaction to our product. As I think I mentioned, we're moving into early access next week, and the product will be generally available by Q2. We've been talking to a very wide range of customers, and the interest is extremely strong. And the 3 primary benefits that we're hearing from customers that they're taking from this product. The first one is it dramatically accelerates the pace in which they are able to take advantage of sort of the changes of the regulatory environment related to storefronts and that enable them to control their own payment layer in their own storefronts. We're also really excited about the potential -- continue to be excited about the potential for the purchase behavior to enhance Vector models over time, which is going to be great for customers. And because this product is organically integrated into our platform, it's extremely easy for our current and future customers to use in a way which is really streamlined. So we're super happy by the initial response we're getting, and we're really looking forward to the launch.

Your next question comes from the line of Alec Brondolo with Wells Fargo.

Maybe 2 for me. First, could you help us understand what you've seen in the market from Meta so far in the first quarter? Have they become meaningfully more competitive on iOS inventory? And has that impacted the growth of Vector at all? That's the first question. The second question, could you maybe talk about CloudX's entrance to the mediation market? How do you think about the trade-off between LevelPlay potentially losing share relative to the ability to partner with CloudX and have an independent platform to bid through over time?

Thanks so much, Alec, for the question. Let me take them in reverse order and start with CloudX. As I think everyone is aware, we are partnering with that team as one of their demand partners. As I think you also know, the founder of that business working with us. So we have a close relationship and are wishing him and his team all the best. As you've heard me say many, many times before in this call, we are supporters of any platform that desires to open up mediation and making it more transparent and effective for customers. We think this is going to be good for the industry and the mobile ecosystem, and that's the direction we want to see this go. You've also heard me say many times on this call that mediation is not a central piece of our strategy going forward because we feel comfortable that the first-party connections we have to our customers through our engine and the runtime is all that we need in that regard. As an ad network bidder, we are completely agnostic in terms of what mediation platforms exist and which ones we're bidding into so long as they're fair and transparent. So that's the short answer there. Our mediation business is not in any way material to the overall results of Unity, not in any way. Second, Meta. I know there was a lot of consternation over the course of the quarter, which as far as I can tell, was kicked off by a LinkedIn post. Let me just say this. Unity has and always will compete with some of the largest, most sophisticated companies in the world. It's our advertising business. We do that every day. We always have. Meta, Google, AppLovin and many others. We have nothing but respect and admiration for all our competitors. Meta has been competitive on iOS traffic for quite some time. This wasn't a new dynamic. It did not have a meaningful impact on us in any way. We are laser-focused on the games industry in our business, not e-commerce. Given our strength through Vector and the engine, the understanding we have in that segment, we feel very, very good about our ability to compete with anyone. And as I say, we've seen no -- essentially no impact. And I would, in general, caution investors from overreacting to LinkedIn posts.

Your next question comes from the line of Brent Thill with Jefferies.

Matt, I think everyone would love to hear your thoughts on Google Genie and what that means going forward. And that was my question.

Thank you so much for the question. Let me start at a macro level. At a macro level, it's our belief that AI is going to be a massive tailwind for the video game industry. The first reason that's true is that leisure time is going to increase massively over time, and that's going to lead to an explosion of time spent in video games. The second thing is that AI is going to make the creation of video games much more efficient and less expensive. And as you've heard -- I think you guys have heard me say before, our bet is that the impact is going to be much more about what I would call the time to innovation than the time to market. And what I mean by that is the vast majority of time spent building games is building out the really complicated, sophisticated systems that power these games as live services and as features, but many of which are at the base layer, very common game to game. And so to the extent that AI helps to build those underlying systems more quickly and to kind of remove some of the drudgery from the work, it will allow creators, which we believe will be -- continue to be human in the loop creators, more time to focus on differentiation and innovation and building new things. And we believe that's going to have an extraordinarily positive impact on our industry over time. As I said about 10 days ago and I made a public post about this, I think it's just important for folks to understand what world models are and what they are. We believe world models are going to be a source of inspiration and assets for creators, but that they are not in…

Your next question comes from the line of Vasily Karasyov with Cannonball.

I wanted to follow up on what you said earlier on cross-platform commerce management solution. Would you mind giving us more details on a couple of points here. Number one, how does the economics in general terms works for you with this solution? And for example, your partnership with Stripe. And number two, how should we think about potential tangible and intangible benefits to other business lines within Unity from this solution?

Yes. We participate in the economics of the commerce transactions at an extremely high margin but very modest. And so our goal here is not to make massive dollars on these transactions. It's really to deliver value to customers and to ensure that their commerce experiences can be built natively in a tightly integrated way with all the rest of the systems that they're building on Unity. But to your point, we believe that over time, processing and helping customers, most importantly, optimize and improve their commerce capabilities and optimize and improve the engagement in their games, which leads downstream to more revenue is going to both fundamentally enhance the operation of Unity itself will make it more valuable to our customers and also fundamentally enhance the value of Vector because optimization around engagement and the experiences which lead downstream ultimately to transactions and revenue growth are a really important part of building a game and a really important part of forming a complete picture of the video game consumer. And as you guys know, our primary strategy here is to be -- is to have the deepest and clearest and most accurate sense of every one of the billions of gamers globally that move through our product. At last count, more than about 3.5 billion every month are in a made with Unity game. And the clearer we can understand those consumers and their behavior both with respect to commerce but also more generally, the more value we're going to be able to deliver to our customers.

Your next question comes from the line of Eric Sheridan with Goldman Sachs.

Maybe one follow-up and then one more bigger picture. But on the follow-up, I think you gave a number for January growth relative to Q4 growth. And then you also talked about the quarterly growth of the Grow business that you would expect. Can you talk a little bit about what you're seeing in January relative to what you saw in Q4 and how it sort of informs your broader view for the Grow business in the whole of Q1 relative to January? Just want to make sure we sort of got the right messaging on that. And then I had a quick follow-up, if that's okay.

Sure. So Eric, at the highest level, Vector as a business grew mid-teens in the fourth quarter, which is the third sequential quarter of that kind of growth. So we're extremely pleased about that. January was a record for Vector. That is to say that our January revenues were higher than December, which was also a record revenues for Vector. And we expect the first quarter of 2026 to be an incremental 10% growth sequentially for Unity Vector on top of the 3 quarters of mid-teens growth that we've experienced, such that January on a year-over-year basis is growing in excess of 70%. Suffice it to say, we're elated that our largest business is growing at those extraordinarily rapid growth rates. We knew Unity was going to transform. We knew the underlying growth profile of the business was going to accelerate. I think we just are continually impressed by the success that we're seeing in the market, and we're thrilled with the investment that we're making.

Great. And then just on the Create business, really building on Brent's question and sort of the way you framed Genie going forward. I think there's a lot of investor concern about the long-term strategic positioning of Create. Maybe you just want to address a little bit what you're seeing across the base of customers in Create today relative to the broader narrative that maybe has sort of made its way into the investor conversations, just to sort of tee up your view broadly over the longer term. Maybe not just about Genie, but just about what you're seeing across the customer base.

Yes. Thanks, Eric, for the question. We are seeing incredible strength in our Create business. As Jarrod mentioned, it's really important to remember that just a few quarters ago both Create and Grow segments were shrinking. And a year down the line -- a little bit more than a year down the line, our largest ad business is growing 70% and the Create business is up 16%. So the strength in the business is obvious to us. The quality -- the improvements in quality and stability and the clarification we are making around our investments and our road map for our customers has been extremely well received. We are delivering more value more consistently. We still have work to do, but our interactions with our customers and the time we spend with them is just radically more positive than it was when I arrived. It has really been a pleasure. And we're seeing strength across that business and as I called out, not just in the West but also in China. The time we spent -- I spent answering the Genie question, it's really nothing to do with Genie, right? The reason I spent the time was to try to explain the depth that -- of value that our software provides to makers of interactive entertainment. These are -- and the distinctions are meaningful and important. So we are -- and I also -- as I called out, Unity 6, which is our most recent release, is being downloaded and adopted faster than any release ever. So it's -- we're seeing really positive results, and we're getting really positive feedback on that business in general. I also called out in my prepared remarks that we're incredibly excited about the opportunity that our collaboration-centric enhancements to [ Unity ] are going…

Your next question comes from the line of Clark Lampen with BTIG.

I have 2 as well. Maybe the first one, I guess, to sort of draw this Genie point out a little bit more. Matt, I think one of the things that the market is sort of wrestling with right now is what the end state of a lot of this ends up being kind of as Eric alluded to, one of those things, I think, is also what happens from a pricing standpoint. And I'm curious if there is potentially an outcome where tens of millions more individuals are essentially creators here, is there potential in a world where you have a much larger potential customer base that we either need to have more tiers of the product to appeal to a lower end of that potential new community? Or does this -- if we also see the commerce business start to take shape and take flight, does that enable you potentially over time to be more competitive from a pricing standpoint? I have a quick follow-up after this, too.

Great. That's -- thank you for your question very much. Yes, let me try to answer that in 2 ways. We do believe that the greater accessibility of our product that is being driven by AI is going to open up opportunities for us to monetize much more effectively the 90-ish percent of users that we have that don't pay us because we'll be able to deliver some value-added services to them, whether that be consumption-based or otherwise. And as I said, we also expect the addressable market to grow much larger, which makes that opportunity even greater. The other thing in your question, I think, is a really important point is that we are extraordinarily flexible and open-minded about business model here. We are not dug in around a seat-based SaaS model. There's no reason for us to be dug in around it because, as I said, first of all, we have a very large freemium motion. Second of all, to your point, we have in commerce an AI enhancement in our advertising business in Vector. Lots of really interesting ways to offer really high value-add products to customers that we can then generate meaningful business around. One of the things that's really interesting, if you step back for a minute and think about -- just think about the tension that exists in our model as it exists right now. We charge for the engine. But the truth is, especially with respect to our commerce products and our ad products, mostly, we just want more people to use the engine. The more people that use the engine, the bigger our ad business is. The bigger our commerce products are, the more value we can deliver around a lot of the individual products we're building. So this is not a transition we're afraid of in any way. And by the way, our advertising business is also significantly larger than our Create business. So when we start to see moves and opportunities to evolve business model, we will take them. And I think you've seen with us, we're not afraid of making fundamental shifts, which is one of the reasons why we see this landscape is so incredibly interesting for us going forward.

That is very helpful. And maybe if I could just sort of follow-up quickly on IronSource. As part of some of the headwinds sort of drawing to a close, I'm curious if you could help us understand maybe what the derivative consequences might be to direct cost of operation for the ad networks that you're managing right now or sort of other segments of the enterprise right now? Is that an opportunity? Or how should we, I guess, in general, think about that and maybe what's baked into guidance?

Yes. Sure, Clark. I think Matt partially addressed this in his prepared remarks where he spoke about displacing commoditized lower-margin ad network revenue for deeply differentiated AI platform revenue. We strongly believe that this is ultimately an opportunity over time for simplification of our business, streamlining of our business. And ultimately, this is going to result in a higher-margin business with greater scalability and leverageability. Today, we are spreading resources across multiple networks. As our business evolves and changes, we'll be able to ultimately concentrate those resources, leading to greater operating leverage and ultimately greater gross margins in our business. So I think we feel really good about that. The commentary on EBITDA margins for 2026 should reflect that. We spoke about operating margins improving over the course of the year. We spoke about 300 basis points of margin expansion year-over-year in the first quarter, and that's up to and including some of the changes that we expect in the mix of our business over time as Vector becomes a much larger piece of the overall portfolio. And really, we're getting to the core growth engines of our business by the end of this year.

Your next question comes from the line of Andrew Boone with Citizens.

Matt, you talked about the Developer Data Framework and kind of layering that into the model in 2026. Is there any additional help you can provide us in terms of the contribution from that or maybe a little bit more on the timing as we think about what that could mean for the ad model? And then you talked a little bit about increasing the collaboration tools across the platform and including more types of developers that come and utilize Unity. Can you talk about the opportunity there and the potential monetization as you bring on different types of developers and creators onto the platform?

Absolutely. Thank you so much for the question. So on runtime, just as a reminder for everybody, we rolled out the Developer Data Framework first in August. Then we began collecting data on new games that were built with our 6.2 release. We've been really thrilled with the uptake. We've had opt-in rates in excess of 90%, and there are a lot of applications being created there. We also more recently rolled out a streamlined self-service feature that allows customers that are operating games using older versions of Unity to also take advantage of the Developer Data Framework, which is critical. So in terms of testing, we are feeling now that we're reaching a critical mass, and we feel comfortable that this robust testing that we're seeing is ultimately going to yield meaningful results for us, which is a part of why we've -- we are kind of moving into Q2 release of the runtime data into our models. So again, we plan to do that integration in the second quarter. The precise time will depend on the testing and ramping, but we're feeling really good about that. As it relates to your question on collaboration and model, our current -- there's a couple of things going on. So we believe we'll have the opportunity to sell in a more traditional seat model of the, we call, sort of, collaborator licenses to folks who are not our core software developer customer, but sit around that customer. So in the initial instance, that is most likely the way we'll monetize that additional consumer base. And around our AI products, we'll expect to -- especially for our enterprise customers who are paying us already, they will likely get an allocation of tokens and consumption as part of their offering and then be able to buy additional tokens on top of that to use our product. So we're really excited about dimensionalizing kind of the connects we have with our customers and providing more opportunities for monetization and diversification of those revenue streams. And then we'll see ultimately over the years what model takes root. But in the near term, we see real opportunity in those 2 areas.

Your next question comes from the line of Dylan Becker with William Blair.

Gentlemen, really appreciate all the detail here. Maybe, Matt, just kind of touching on the aggregate Grow business. I think you made some important comments here. I think you said that you're going to exit fiscal '26 at $1 billion plus run rate within Vector. You gave us the 11% moving to 6% on IronSource. So maybe that natural attrition will allow Grow to properly reflect the recent Vector momentum. I guess, is that a fair characterization? Just making sure I heard that correctly first? And then second, as we think about kind of the third piece of the pie, the other non-Vector components outside of IronSource and the ability to layer in AI and see improvements in some of those assets, I guess, where we sit kind of on that adoption curve as well, too?

Yes. So thanks, Dylan. The answer to your first question is yes, you understood precisely what we were talking about. And the description you had of the growth of Vector and the sort of concomitant smaller piece that IronSource will comprise of the total is exactly right. And as Jarrod mentioned a little bit earlier, not only will that lift growth rates, it will increase profitability because taken as a whole, Vector is a more profitable product and business for us. We will also drive additional efficiencies. To take your second point, outside of the IronSource Ad Network, all other Grow businesses actually showcased sequential growth in the fourth quarter and remain meaningful drivers of revenue and profit. So in fact, excluding IronSource, the Grow segment was up double digits sequentially in the fourth quarter. So we feel really well poised for sustained growth as this business develops.

Your final question comes from the line of Martin Yang with Oppenheimer.

I want to touch on your observation on the mini apps growth in China. Can you articulate how Unity can benefit from the growth, both on the Create and the Grow side of it?

Yes, thank you so much for your call. I'm sorry, for your question. As I said upfront, we're really excited about the position we have in China, which is the fastest -- which is the largest and probably fastest-growing game market in the world. Unity is fully compatible with all the local platforms in that region, and we have really deep and long-standing relationships with that developer community. So we're seeing a lot of growth and expansion of customer revenue there on the Create side. And by the way, that is not just games related. Our industry business is particularly strong in Asia. We are particularly well penetrated, for example, in the auto industry in Asia where the vast majority of companies use Unity for their in-dash display and other things as well as more deeply across that region. So we're feeling very optimistic about that business. The growth of Chinese-built games that are then released in the West, just like with any other game that gets created on Unity, that is also an opportunity to have additional customers for our Vector product and additional opportunities for us to integrate other tools, technologies and products into those games.

This concludes the question-and-answer session. I will now turn the call back to Alex for closing remarks.

Thanks, everyone, for joining this morning, and we look forward to connecting throughout the quarter. Have a great day.