Unity 3Q26 Preview: Size of beat in focus; Create strategy clarity key to next leg up

We reiterate our Buy rating on Unity despite the high valuation, because we believe our CY27 estimates are well anchored. Our Street-high CY27 EBITDA assumes deceleration in UnityAds (driven by the Vector model) from +100% Y/Y in 27Q1 to 57% Y/Y in 27Q4, based on a fixed $55mn sequential increase, and we model 85% EBITDA margin on incremental revenue. We see upside risk to our 3Q Grow forecast of $383mn (+20% Q/Q, in line with guidance), with management expected to focus on the integration of Game Engine run-time data with the Vector model as the main driver of acceleration; we would be surprised by significantly better Create monetization or profitability on this call. We see upside risk to our 4Q Grow forecast of $447mn, and clear articulation of a durable long-term runway for Vector could bring Street and buyside CY27 estimates closer to Street-high numbers. We maintain our $50 PO based on 18x FY27E EBITDA.