Citizens lowered its price target on Unity Software to $37.00 from $50.00 on Thursday, while keeping a Market Outperform rating in place. At the time of the note, Unity was trading at $21.41, a level Citizens and InvestingPro data suggest implies meaningful upside relative to the firms Fair Value assessment.
The company delivered mixed fourth-quarter 2025 results. On the positive side, revenue and EBITDA both beat the high end of Unitys guidance, outpacing the top of the ranges by $13 million and $10 million, respectively. Those beats contributed to what the firm characterized as above-guidance strategic revenue outcomes and an EBITDA result that exceeded estimates.
Despite the quarters upside versus internal guidance, Unitys first-quarter 2026 outlook disappointed market expectations. Citizens noted the midpoint of Unitys Q1 revenue guidance was 1.5% below consensus, while the EBITDA midpoint was 8% under the expectations reflected in analyst models. The guidance shortfall prompted analysts and investors to reassess near-term growth assumptions.
Over the trailing twelve months, Unity generated $1.85 billion in revenue and reported a gross profit margin of 74.27%. Nonetheless, the stock has been volatile, with InvestingPro data showing a 51.53% decline year-to-date.
Citizens underscored several operational positives in its note. The Vector segment expanded by the mid-teens quarter-over-quarter, and the Create segment achieved 16% year-over-year growth when excluding non-strategic revenue. The firm highlighted a sequence of near-term product and platform catalysts that could influence performance in coming quarters - specifically, the planned infusion of runtime data into the Vector product beginning in the second quarter, the Commerce Platform moving into early access next week, and Unity 6 becoming the fastest-adopted release in the company's history.
At the same time, Citizens acknowledged uncertainty around the impact of AI on Unitys business, while affirming that the platform remains central for game developers given the inherent complexity of game creation, optimization, and operations.
Other market participants have also revised their views following Unitys recent operational shifts. Unity reported better-than-expected fourth-quarter 2025 earnings overall, with earnings per share rising 14.29% versus expectations and revenue surprising to the upside by 2.89%. In a separate development, Unity decided to shut down its ironSource ad operation. That change prompted BTIG to cut its price target for Unity from $60.00 to $41.00 while retaining a Buy rating.
Vector saw roughly 15% quarter-over-quarter growth, a healthy rate that nevertheless fell short of some buy-side expectations of 20% or higher. Those missed expectations, combined with the ironSource shutdown and softer guidance, contributed to a notable pre-market decline in the stock as investors weighed future growth prospects.
Analysts at BTIG and other firms described the post-earnings environment as more cautious, reflecting the operational changes and mixed signals between a stronger-than-guidance quarter and a softer near-term outlook. Unitys recent earnings call reiterated the quarters financial beats, while also leaving open questions about how the company will navigate the transition points flagged by management and analysts.
Summary - Citizens trimmed its price target on Unity to $37 but maintained a Market Outperform rating after Q4 results that beat internal guidance on revenue and EBITDA. Q1 guidance came in below consensus on both revenue and EBITDA midpoints. Operationally, Vector and Create showed growth and several product catalysts are upcoming, but the companys stock has been volatile and investor caution has increased following the ironSource closure.