Morgan Stanley lifts Unity target to $50 after Vector posts strongest quarter
Unity Software’s (U.UN) second-quarter 2026 revenue and EBITDA came in 7% and 19% above expectations, respectively.
Unity Software’s (U.UN) second-quarter 2026 revenue and EBITDA came in 7% and 19% above expectations, respectively. The main highlight was its Vector advertising business, which grew 23% quarter over quarter and 92% year over year, marking its strongest quarter on record.
Launched only 18 months ago, Vector has reached a scale approaching the size of AppLovin’s advertising network when the company launched AXON 2.0. The new D28 ROAS tool was the primary driver of the upside surprise. The integration of Runtime data has not yet fully released its benefits and remains a future catalyst.
Unity expects to achieve GAAP profitability in the third quarter of 2026. The note describes this as the first time the company is expected to reach a significant level of GAAP profitability. With Unity shares at about $40, that implies roughly 25% upside. The bank also set a bull-case target of $80 and raised its 2026 and 2027 EBITDA estimates by 15% and 20%, respectively.
The note’s one-line conclusion is that Vector has demonstrated competitive strength comparable with industry leaders in just 18 months, while Unity’s GAAP profitability inflection point is approaching. It identifies Runtime data integration and monetization of the Create business as the company’s core growth engines for the next two years and says the current valuation remains at an early stage of the company’s long-term growth runway.
The note is positive on Unity Software. It says the current share price has already partly reflected Vector’s strong performance, but that the approaching GAAP profitability inflection point and the continued release of benefits from the Runtime data catalyst have not been fully priced in. It sees substantial potential for 2027 GAAP earnings per share.
The listed catalysts are: confirmation of GAAP profitability in the third quarter of 2026; data showing Runtime data integration’s incremental contribution to Vector’s advertising business; the results of ecosystem expansion with partners such as Netflix; progress at the Chinese joint venture; and the formal launch of the browser-based game engine.
Launched only 18 months ago, Vector has reached a scale approaching the size of AppLovin’s advertising network when the company launched AXON 2.0. The new D28 ROAS tool was the primary driver of the upside surprise. The integration of Runtime data has not yet fully released its benefits and remains a future catalyst.
Unity expects to achieve GAAP profitability in the third quarter of 2026. The note describes this as the first time the company is expected to reach a significant level of GAAP profitability. With Unity shares at about $40, that implies roughly 25% upside. The bank also set a bull-case target of $80 and raised its 2026 and 2027 EBITDA estimates by 15% and 20%, respectively.
The note’s one-line conclusion is that Vector has demonstrated competitive strength comparable with industry leaders in just 18 months, while Unity’s GAAP profitability inflection point is approaching. It identifies Runtime data integration and monetization of the Create business as the company’s core growth engines for the next two years and says the current valuation remains at an early stage of the company’s long-term growth runway.
The note is positive on Unity Software. It says the current share price has already partly reflected Vector’s strong performance, but that the approaching GAAP profitability inflection point and the continued release of benefits from the Runtime data catalyst have not been fully priced in. It sees substantial potential for 2027 GAAP earnings per share.
The listed catalysts are: confirmation of GAAP profitability in the third quarter of 2026; data showing Runtime data integration’s incremental contribution to Vector’s advertising business; the results of ecosystem expansion with partners such as Netflix; progress at the Chinese joint venture; and the formal launch of the browser-based game engine.