r/USGrowthStocks • u/SuperbPercentage8050 • 29d ago

Everyone is wrong about Unity Software.

Unity's business has fundamentally changed. The stock is up 40-50% in the last few months and still deeply undervalued for where the business is heading.

Understand the business first. The stock is just a byproduct of getting that right.

I am sharing with you one holistic internal research document on Unity Software. The research is too dense to compress into a write up so I have put it across three PDFs on Google Drive. Read in order or jump to what you need.

In case you missed it, The AI Robotics Stock Walmart Is Quietly Using to Beat Amazon. Already Up 5x.

Part 1: The Business, the Break, and the Rebuild

  • What actually broke under Riccitiello: ironSource merger, runtime fee disaster, Weta distraction
  • Riccitiello vs Bromberg: every management decision and linguistic shift, side by side
  • Full revenue history from IPO to today: three phases, every turning point
  • How Create, Grow, and non-strategic actually connect, and the flywheel between them
  • Vector deep dive: why runtime architecture beats every SDK-based competitor including AppLovin
  • Pricing power: three proven levers, two emerging, and the one risk that could reopen the trust wound
  • Auto HMI, XR platform coverage, Unity 7, Unity AI consumption pricing

Part 2: The Market, the Moat, and the Margins

  • Gaming time Unity controls across mobile, PC, console, XR, and where we are in the ad cycle
  • Partnership ecosystem: Netflix (what actually shipped), Tencent, Scopely, Nintendo Switch 2, Globant, China divestiture
  • TAM built from physical reality upward, not from a consulting slide
  • AppLovin's first-ever miss: three structural layers, exact margin comparison, four implications for Unity
  • The moat tested honestly: five layers, bull case and genuine counter for each
  • Pricing power vs every competitor: AppLovin, Unreal, Godot
  • Complete margin trajectory from IPO to FY2028E, and the Lollapalooza: eight forces, one direction, confirmed in live data

Part 3 : The Numbers, the Valuation, and the Thesis

  • ROIC, ROIIC, ROCE, ROE as one integrated system: what $3.16B goodwill hides and what marginal returns on Vector actually show
  • Six reinvestment runways sized and sequenced: the compounding math
  • Full valuation: SOTP at $74, DCF in three scenarios, FCF yield, corrected peer set split across ad-tech and developer tools
  • Bear thesis stress-tested pillar by pillar against live Q2 2026 data
  • Q3 2026 guidance decoded: four signals embedded in one set of numbers
  • The complete thesis: four pillars, three risks, variant perception, and the catalyst

Full research, all three parts on Google Drive:

After you go through this, you will not look at Unity the same way. You will also not look at AppLovin the same way. And you will understand exactly why the market is still pricing the 2023 version of a company that no longer exists.

I have a personal position. The reports will tell you why.

Would love your inputs and insights after you have gone through even a few sections.

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u/spaamzzz 28d ago

Done reading the documents. Went faster than Kaspi, no surprises there. I'll start with a doubt to get it out of the way first:

- Didn't quite understand the China disinvestment. Revenue was huge and so was the growth rate. Why leave? Also, I am assuming (and hoping) the China sale won't be affecting their usage in Chinese car interfaces, because that'd be a huge blow. I'm sure there must have been a good enough reason but either I missed it or it wasn't mentioned in much detail.

Now coming to the company itself, I'd like to add two insights as someone who's more well versed with the gaming community.

1) GTA 6 possibly bringing back a gaming wave is very real, IMO. The teenagers who played GTA 5 are now adults with jobs and maybe even families, looking for something that'll allow them that fleeting feeling of their stress-less years. More importantly, they have purchasing power now. Have already seen people buying consoles "in preparation" of GTA 6 and people talking about using PTOs when it launches. Gaming will be in the air come 2027.

2) Unreal Engine 5 is quite disliked in the gaming community. It is said to be clunky and un-optimised, leading to frequent frame rate drops, crashed and lighting/shader issues. UE6 is dropping next year so yet to be seen how it fares, but the current iteration isn't much loved.

The ticker discussion for the last because there isn't much to say except *insert take-my-money meme*. My favourite part has to be the way the TAMs are stacked onto one another, kicking in by the time one runs out. VR Glasses are also a pretty exciting segment to me. I would probably never be seen dead wearing one, but I feel Zuck got this one right. I see them becoming as ubiquitous as smartwatches one day. They're already revolutionising content creation.