Unity Software Inc. (U): A Bull Case Theory

We came across a bullish thesis on Unity Software Inc. (U) on @AlphaSenseInc on X(Twitter). In this article, we will summarize the bulls’ thesis on zzzz. Unity Software Inc. (U)’s share was trading at $21.81 as of 27^th May.

Unity (U) remains the dominant force in mobile gaming, holding over 70% market share in a segment that continues to grow faster than its console or PC counterparts. Despite ongoing comparisons with Unreal Engine, which is better suited for AAA titles, Unity’s mobile-first orientation, intuitive design, and embedded presence among developers underscore its resilience and relevance. The recent hiring of Matthew Bromberg is viewed not as a pivot to high-end gaming but as a reinforcement of its mobile-centric strategy.

This focus aligns with current industry trends, reinforcing Unity’s position as the foundational layer of mobile game development. Simultaneously, Unity has been broadening its footprint beyond gaming, penetrating sectors such as automotive, architecture, construction, and energy. The shift toward a more diversified revenue mix, particularly with meaningful adoption in automotive manufacturing, points to long-term potential that extends well beyond entertainment. Churn, the expert notes, is largely confined to indie developers and smaller studios impacted by internal disruptions rather than competition, while net revenue retention remains robust above 100%, driven by studio growth and increased usage.

Though recent market sentiment reflects disappointment over strategic overreach, layoffs, and leadership churn, these developments are framed more as necessary recalibrations than systemic issues. Unity’s realigned focus on mobile, paired with disciplined expansion into high-value enterprise sectors, suggests a leaner and more strategically coherent organization. At current valuations, the stock offers asymmetric upside potential as the market begins to reappreciate Unity’s core strength and expanding utility, both of which are underpinned by a sticky user base and strong industry tailwinds.

Previously, we have covered Unity Software Inc. (U) in April 2025, wherein we summarized a bullish thesis from AlphaSenseInc. on Twitter. The author highlighted Unity’s dominant position in the mobile gaming engine market with over 70% market share, its strategic refocus on mobile under new leadership, and its successful diversification into industries like automotive, architecture, and oil & gas. Despite past challenges such as layoffs and management changes, Unity’s resilient core business, high-margin mobile dominance, and growing enterprise footprint position it well for a turnaround. The stock has risen by 13.25% since then.

Unity Software Inc. (U) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 52 hedge fund portfolios held U at the end of the first quarter which was 48 in the previous quarter. While we acknowledge the risk and potential of U as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than U but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.