Unity Software Inc

Item 1A. Risk Factors

OtTher than the risk factor listed below, there he have been no material changes from the risk factors previously described under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 and Item 1A of our Quarterly Report on Form 10-Q for the quarters ended March 31, 2025 and June 30, 2025.

Purchasing or owning Unity common stock involves investment risks including, but not limited to, the risks described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, and Item 1A of our Quarterly Report on Form 10-Q for the quarters ended March 31, 2025, and belowJune 30, 2025. Any one of those risks could harm our business, financial condition and results of operations or reputation, which could cause our stock price to decline. Additional risks, trends and uncertainties not presently known to us or that we currently believe are immaterial may also harm our business, financial condition, results of operations or reputation.

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We are increasingly building AI into certain of our offerings, and issues raised by the use of AI in our offerings may adversely affect our business, reputation, or financial results.

We are increasingly building AI into certain of our offerings, such as Vector, our new machine-learning model, our new Unity AI product line, which includes AI Assistant and AI Generators, which are currently in beta, and Unity Inference Engine (formerly Unity Sentis), which allows creators to embed an AI model in the Unity Runtime for their game or application, enhancing gameplay and other functionality. AI Generators leverage both Unity-developed and third-party models for AI-driven assistance during creation. With respect to third-party models, we do not control the data used to train such models or the specific outputs they generate; we act as a conduit for customer requests and return the responses from those third-party models. The datasets used to train third-party models may inadvertently include content that infringes intellectual property rights. Because we do not control the training data or model weights of third-party models, we may be subject to liability or reputational harm if customers use outputs generated through our offerings that are alleged to infringe third-party intellectual property rights. Unity-developed models are trained exclusively on directly-licensed or open-licensed data; however, we rely on the accuracy and scope of those licenses as represented by the licensors, and if such representations are incorrect or incomplete, we could face claims that our training data included content used without proper authorization. The outputs of both Unity-developed and third-party models may also inadvertently replicate protected content, resulting in potential claims of infringement.

We continue to advance machine learning algorithms in our Grow Solutions, which are designed to enable us to provide customers with better performance. AI technologies are complex and rapidly evolving, and we face significant competition from other companies as well as an evolving regulatory landscape. The evolving regulatory landscape and our product development efforts may result in new or enhanced governmental or regulatory scrutiny, litigation, ethical concerns, or other complications that could adversely affect our business, reputation, or financial results. For example, the use of datasets to develop and be referenced by AI models, the content generated by AI systems, or the application of AI systems may be found to be insufficient, offensive, biased, or harmful, or violate current or future laws and regulations or third-party rights. Governments are increasingly scrutinizing generative AI technologies for potential intellectual property and content-related harms, and any regulatory enforcement or litigation in this area could adversely affect our business, reputation, or financial results. In addition, AI and machine learning ("ML") models may create flawed, incomplete, or inaccurate outputs, some of which may appear correct. If our technology is used by an end user in a controversial manner due to their perceived or actual impact on society, we may experience brand or reputational harm, competitive harm or legal liability.

In addition, market acceptance of AI technologies is uncertain, and we may be unsuccessful in product development efforts. Our solutions that use AI could fail to achieve market acceptance, the performance or suitability of third-party models could change in ways that negatively affect the customer experience, or our competitors may use AI technologies more efficiently than we do. Our reliance on third-party models may also limit our ability to differentiate our offerings or control cost and performance characteristics. We may incur significant costs and may not achieve any significant revenue from these offerings. Any of these factors could adversely affect our business, reputation, or financial results.