Snapshot
- Ticker: U (NYSE)
- Bucket: Game Engines & Consumer Internet
- Q1 2026 position: 32.9M notional, 0.66%) — the #3 equity position in the book
- HQ: San Francisco, CA
- Business: Real-time 3D engine (Create) plus a mobile advertising and monetization stack (Grow), now centered on the Vector AI ad model
Business Overview
Unity sells the most widely used game engine in the world — roughly 70% of top mobile games are built on it — and monetizes that footprint twice: through Create Solutions (engine subscriptions, industry licensing, professional services) and Grow Solutions (the Unity Ads network, user acquisition, and in-game monetization). The Grow side absorbed the 2022 ironSource merger, went through a painful “portfolio reset” in 2024 under new CEO Matt Bromberg, and was rebuilt around Vector, a self-learning AI model for ad targeting launched in early 2025.
Vector is the story. After roughly two years of declining ad revenue, Vector delivered a fourth consecutive quarter of ~15% sequential growth in Q1 2026 and is now ~80% larger than a year ago, driven by better predicted returns for advertisers. The legacy ironSource network was formally shut down in March 2026, completing the transition. On the Create side, Unity 6 adoption is running at the fastest rate in company history, and the engine is increasingly pitched beyond games — simulation, digital twins, and synthetic-data generation for robotics and AI training.
Financially, Unity is exiting its reset: FY2025 revenue was 508M grew 17% YoY and beat guidance (Create +4% to 347M net loss in Q1 2026, inflated by restructuring and the ironSource shutdown — but management guides to GAAP profitability by Q4 2026.
Financial Trajectory
| Period | Revenue | Growth | Notes |
|---|---|---|---|
| FY2023 | ~$2.19B | +57% | ironSource consolidation year |
| FY2024 | ~$1.81B | -17% | portfolio reset, exited non-core lines |
| FY2025 | $1.85B | +2% | Vector launched; Q4 revenue $503M |
| Q1 2026 | $508M | +17% YoY | Vector +80% YoY; GAAP net loss $347M; GAAP profitability guided by Q4 2026 |
Why Atreides Owns It
Unity is Baker’s flagship expression of the game-engines-as-AI-winners thesis, and the sizing shows it: the share count has nearly quadrupled from 3.8M (Q4 2024) to 12.4M (Q1 2026), with call options stacked on top of the common in both Q4 2025 and Q1 2026.
The thesis has two legs. First, the engine as a world model: Unity encodes physics, lighting, and material behavior, which makes it core infrastructure for simulating environments and generating synthetic data to train robots and embodied AI — a point Baker has made publicly since his August 2024 Invest Like the Best appearance (“AI, Semiconductors, and the Robotic Frontier”). Second, AI-leverage on both sides of the P&L: generative tools collapse the cost of content creation (more games, more developers on the engine), while Vector demonstrates that Unity’s runtime data advantage — the engine sees in-game behavior advertisers can’t — converts directly into ad-model performance, the same self-learning-model playbook that worked for AppLovin.
In Baker’s December 2025 framing, most SaaS faces a “life or death decision” on AI; Unity sits on the other side of that ledger — a company whose data position and runtime install base make it a beneficiary of falling AI costs rather than a casualty. The whipsaw history (trimmed through mid-2025, then aggressively rebuilt with leverage) suggests Atreides trades around the position but has treated the core thesis as settled since Vector’s first results.
Position History
| Quarter | Type | Shares/Notional | Value | % of 13F |
|---|---|---|---|---|
| Q4 2024 | Common | 3,823,383 | $85,911,416 | 1.88% |
| Q1 2025 | Common | 9,430,955 | $184,752,408 | 5.61% |
| Q2 2025 | Common | 6,171,155 | $149,341,951 | 4.14% |
| Q3 2025 | Common | 6,111,553 | $244,706,582 | 4.77% |
| Q4 2025 | Call | 3,700,000 | $163,429,000 | 2.00% |
| Q4 2025 | Common | 6,625,439 | $292,645,641 | 3.58% |
| Q1 2026 | Call | 1,500,000 | $32,910,000 | 0.66% |
| Q1 2026 | Common | 12,385,322 | $271,733,965 | 5.43% |
Atreides nearly tripled the position into Vector’s launch (Q1 2025), trimmed through mid-2025, then re-levered: Q4 2025 added calls on 3.7M underlying shares alongside 6.6M common — peak exposure of ~305M makes this the largest conviction long outside Astera Labs.
Risks
- Vector’s growth is measured off a depressed base after two years of ad-revenue decline; sequential momentum could stall as easy optimization gains are exhausted, and AppLovin remains a structurally stronger competitor in mobile ads.
- Still GAAP-unprofitable with a $347M quarterly net loss; the Q4 2026 profitability target leaves little room for execution slippage.
- The robotics/simulation leg of the thesis is mostly narrative today — NVIDIA Omniverse/Isaac and open-source alternatives compete directly for the synthetic-data workload, and Unity’s industry segment revenue is small.
- Create growth of 4% is anemic; the 2023 runtime-fee debacle damaged developer trust that Unity 6’s licensing reversal is still repairing.
- Atreides’ use of calls adds path-dependency: a flat-to-down stock destroys the options overlay even if the long-term thesis holds.
Sources
- Unity Q4/FY2025 results (8-K exhibit, SEC)
- Unity Reports Q4 and FY2025 Financial Results (Nasdaq, Feb 11, 2026)
- Unity Q1 2026: revenue +17%, AI pivot (Outlook Respawn)
- Unity revenue history (stockanalysis.com)
- Gavin Baker — “AI, Semiconductors, and the Robotic Frontier,” Invest Like the Best EP.385 (Aug 2024)
- Gavin Baker — Invest Like the Best EP.451 (Dec 9, 2025)