Jefferies has cut its price target on Unity Software (NYSE: U) to $30.00 from $55.00 but left its rating on the stock at Buy. The revised target implies upside from Unity’s most recent share price of $21.41, a level that reflects a 51.53% year-to-date drop.
The brokerage pointed to Unity’s Grow revenue in the fourth quarter, which rose 6% sequentially but failed to meet more optimistic forecasts that had expected growth north of 10%. Jefferies described the miss as difficult to defend in light of what it characterized as perceived terminal value risk, even as it said it remained "constructive on U's underlying trends." InvestingPro data cited by the firm also noted the stock has weakened materially over the past three months.
Unity’s outlook for the first quarter calls for Grow revenue to be flat versus the prior quarter. The company continues to contend with headwinds tied to depreciation stemming from its ironSource ad operation, a factor Jefferies and other analysts cited when reassessing valuations.
There was some brighter news within Unity’s product stack. Jefferies pointed to momentum in the Vector business, which delivered its third straight quarter of mid-teens quarter-over-quarter growth in Q4 and is expected to expand about 10% quarter-over-quarter in Q1, according to company guidance.
Unity’s reported fourth-quarter 2025 results were mixed. The company beat expectations on the top and bottom lines, posting a 14.29% upside on earnings per share and a 2.89% revenue surprise versus forecasts. Despite those beats, the company’s guidance for the first quarter of 2026 landed below market expectation: the midpoint of Unity’s revenue and EBITDA guidance were 1.5% and 8% under consensus estimates, respectively.
The guidance and related developments prompted other sell-side moves. Barclays trimmed its target to $28 from $35 and maintained an Equalweight rating. Citizens cut its price target to $37 from $50 and kept a Market Outperform stance. BTIG lowered its target to $41 from $60, tying part of its reassessment to Unity’s decision to shutter the ironSource ad operation.
Unity’s Vector platform recorded 15% quarter-over-quarter growth in Q4, though that performance fell short of buy-side expectations, according to analysts. The aggregate reaction from investors and brokers captured a mixed picture: operational pockets of growth within the business contrasted with guidance and asset-related headwinds that pressured valuation assumptions.
Summary
Jefferies lowered its Unity Software price target to $30 while keeping a Buy rating after Grow revenue missed bullish forecasts and first-quarter guidance came in below expectations. Positive trends in the Vector business were noted but did not offset concerns tied to ironSource-related depreciation and softer guidance.
Key points
- Jefferies cut its price target on Unity to $30 from $55 and maintained a Buy rating; the stock traded at $21.41, down 51.53% year-to-date.
- Q4 Grow revenue rose 6% quarter-over-quarter but missed expectations of greater than 10%; Q1 Grow revenue is guided to be flat quarter-over-quarter. Sectors affected include software, gaming platform services, and ad technology.
- Unity beat Q4 2025 EPS and revenue forecasts but issued Q1 2026 guidance with midpoint revenue and EBITDA estimates 1.5% and 8% below consensus, prompting several firms to lower price targets.
Risks and uncertainties
- Continued downward pressure from ironSource depreciation could impair perceived terminal value and valuation assumptions - relevant to adtech and digital advertising revenue streams.
- Revenue guidance that comes in below consensus, as seen for Q1 2026, creates short-term earnings and cash-flow uncertainty across software and gaming-platform exposure.
- Persistent misses relative to buy-side expectations for growth initiatives such as Vector could weigh on investor sentiment and analyst price targets for the broader software sector.