Unity Software (U Quick QuoteU - Free Report) shares have plunged 36.3% in the trailing 12 months, underperforming the Zacks Internet – Software industry, Zacks Computer and Technology sector and the S&P 500 index’s decline of 5%, 7.6% and 2.2%, respectively.

The company’s underperformance can be attributed to several external factors like macroeconomic headwinds and intense competition that are affecting investor confidence. Despite the market's negative reaction, U’s strategic initiatives reveal promising future growth potential. Let’s take a closer look at why the stock presents a strong buy opportunity in 2025.

Platform Expansion and Unity 6 Drive Growth

Unity Software is well ahead of the game with players like AppLovin (APP Quick QuoteAPP - Free Report) , Digital Turbine (APPS Quick QuoteAPPS - Free Report) and Alphabet’s (GOOGL Quick QuoteGOOGL - Free Report) AdMob, among others. Shares of AppLovin and Digital Turbine have gained 203.5% and 5.1%, respectively, in the trailing 12 months, while Alphabet has lost 5.7%. In the game development market, Unity Software faces competition from Chukong Technologies, Godot and Epic Games. U is facing the competition head-on with continuous expansion and innovations. 

The company recently announced that it will provide game developers with official support for Nintendo Switch 2. By being able to seamlessly build, port, optimize and deploy projects for Nintendo Switch 2 on Unity’s platform, developers will increasingly opt for the company’s products, expanding Unity’s developer base. This move strengthens Unity’s market share, as it positions itself favorably among developers seeking to create or port games.

Additionally, the launch of Unity 6 has resulted in multiple gains for the company. As reported in the company’s fourth-quarter 2024 earnings call, Unity 6 had been downloaded 2.8 million times since its launch. It also led to a high number of new deals and booking renewals, which was reflected in the 15% year-over-year increase in subscription revenues in the fourth quarter. 

Unity Software’s Estimate Revisions Show Upward Trend

For the first quarter of 2025, Unity Software expects revenues in the band of $405-$415 million. The Zacks Consensus Estimate for revenues is pegged at $412.05 million, suggesting a 10.5% year-over-year decline.

The consensus mark for first-quarter 2025 loss is pegged at 35 cents per share, which has narrowed by a penny over the past 30 days, indicating a 333.33% year-over-year decline. Conversely, competitors like AppLovin and Alphabet’s earnings for the first quarter of 2025 are likely to witness growth of 116.42% and 6.88%, year over year, respectively. Digital Turbine’s earnings for the fourth quarter of fiscal 2025 are likely to decline 58.33% year over year.

Unity Software’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 65.52%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Conclusion: Buy U Stock Now

With strong adoption of Unity 6, rising subscription revenues, and the launch of its Vector platform targeting a lucrative ad market, the company is rebuilding investor confidence. Its strategic move to support Nintendo Switch 2 further strengthens its competitive position and expands its developer base. Unity Software is also outpacing rivals in key growth areas, and its customer-focused product improvements are gaining traction. As the company continues to recover and strengthen its market position, investors looking for long-term growth potential should consider buying the stock now.

U currently sports a Zacks Rank #1 (Strong Buy) and has a Growth Score of B, a favorable combination that offers a strong investment opportunity, per the Zacks proprietary methodology. You can see the complete list of today’s Zacks #1 Rank stocks here.