Unity Software Inc reported a 38% year-over-year increase in strategic revenue for the second quarter, driven by robust performance in its Vector segment.

Adjusted EBITDA grew 77% to $160 million, with margins expanding 800 basis points to 29%. The company also flipped from a net debt position to net cash, holding $2.36 billion in cash after generating $202 million in free cash flow.

Segment performance

The Vector segment delivered exceptional growth, rising 23% quarter-over-quarter. This acceleration pushed Strategic Grow revenue to $329 million, up 63% year-over-year. The Unity Vector product reached an annual run rate of over $1 billion, two quarters ahead of expectations.

In the Create business, strategic revenue stood at $157 million, up 14% year-over-year excluding prior-year one-time items. Growth was supported by ARPU increases and strength in China.

Balance sheet and cash flow

Unity’s financial position strengthened significantly during the quarter. Free cash flow increased 59% year-over-year to $202 million. This inflow enabled the company to move into a net cash position, with plans to pay off its 2026 convertible notes in November.

Stock compensation expense fell 25% year-over-year to 14% of revenues, marking the lowest level ever recorded by the company.

Guidance outlook

For the third quarter, Unity guided strategic revenue to $540 million–$550 million, implying 44%–47% year-over-year growth. Adjusted EBITDA is expected to reach $185 million–$190 million, representing margins of 33%.

The company also pulled forward its expectation for GAAP net income profitability from the fourth quarter to the third quarter of 2026.

What the numbers show

The divergence between revenue growth (38%) and adjusted EBITDA growth (77%) highlights significant operating leverage. Adjusted sales and marketing and G&A expenses declined in dollar terms, allowing the company to expand margins while investing heavily in product velocity. The Vector segment’s contribution to this leverage is critical, as it now operates at a scale where incremental revenue converts disproportionately to profit.

Unity Software (NYSE: U) shares climbed 6.52% to $43.60 on Thursday, moving in sympathy with Accenture (NYSE: ACN) after the consulting giant posted better-than-expected fourth-quarter results.

Accenture’s fiscal fourth quarter exceeded Wall Street estimates, with per-share profit of $3.29 against a modeled $3.18. Sales rose 6% year-over-year to $18.70 billion, surpassing the $18.03 billion consensus. The strong performance helped alleviate broader market concerns that artificial intelligence might disrupt traditional software and technology-services companies, a sentiment that had pressured sector stocks earlier in the year.

Accenture’s guidance lifts software sector

Accenture issued fiscal 2027 sales guidance between $76.43 billion and $78.65 billion, edging past the $76.41 billion consensus. Adjusted profit guidance of $14.39 to $14.81 per share aligned closely with the $14.63 estimate. The company also committed to returning at least $9.5 billion to shareholders next fiscal year.

CEO Julie Sweet highlighted that new business signings grew 4% year-over-year to $22.2 billion, driven by 141 client contracts worth $100 million or more, a quarterly high for the company.

What the numbers show

The divergence between Accenture’s robust order inflow and Unity’s lack of direct operational linkage highlights a sentiment-driven rally rather than a fundamental revaluation of Unity’s specific business model. While Accenture’s revenue beat consensus by $670 million and its guidance surpassed expectations, Unity’s move appears tied to the broader de-risking of the IT services sector following these results, despite Unity’s distinct position in game development and advertising technology compared to Accenture’s consulting-heavy model.

Unity faces separate legal challenge

Separately, Unity remains in a legal dispute with AppLovin (NASDAQ: APP). AppLovin filed for a temporary restraining order, alleging Unity’s Ad Quality software improperly collected data to compete in ad auctions. Unity disputes these claims, calling the lawsuit an attempt by a larger rival to hinder competition. AppLovin has also initiated arbitration alleging breach of contract and trade-secret misappropriation. This dispute is unrelated to Thursday’s price action.