Unity Software (U) FY2025 10-K Risk Factors: 8 New, 11 Dropped

What the changes say

Unity expanded risk disclosures around AI integration, international trade, enterprise sales, and data security compliance.
The company highlights risks from third-party AI training data, stricter SLA liabilities, and ongoing workforce reductions.

What changed since the prior 10-K

New

NewRisks Related to Our Business, Operations, and Industry
will vary from period to period, which will impact our costs and ability to achieve and maintain profitability
Cost-cutting measures like workforce reductions and office footprint cuts may fail to offset operating expenses or achieve profitability.
NewRisks Related to Our Business, Operations, and Industry
Our direct sales force targets larger customers, and sales to these customers involve risks that may not be present or that are present to a lesser extent with respect to sales to smaller customers
Expanding direct sales to larger enterprise customers involves longer sales cycles, complex requirements, and substantial upfront costs.
NewRisks Related to Our Business, Operations, and Industry
We invest substantial time and resources to grow our business in markets outside the U.S. and if we are unable to do so successfully and in a timely manner, our business and results of operations will suffer
Agreements with international customers and third parties expose Unity to uncapped intellectual property and data protection indemnification liabilities.
NewRisks Related to Our Platform and Technology
customers and their end users, our proprietary and confidential information and the confidential information and confidential intellectual property we collect from our partners, customers and creators
Geopolitical conflicts heighten the risk of sophisticated cyber-attacks disrupting information technology systems and operations.
NewRisks Related to Our Platform and Technology
We may also incur significant costs for using alternative providers or taking other actions in preparation for, or in response to, events that damage the third-party hosting services we use
Interruptions or terminations of third-party data center and cloud infrastructure services could cause platform downtime and expensive re-architecting.
NewRisks Related to Laws, Regulations, and the Global Economy
Regulation of data security programs is creating new and additional audit and operational burdens. Laws such as the Cyber Resilience Act in the EU and audit requirements found in California’s CCPA regulations may increase our costs of compliance
New data security regulations like the EU Cyber Resilience Act and California CCPA audit requirements increase compliance burdens and costs.
NewRisks Related to Laws, Regulations, and the Global Economy
International trade policies, including tariffs, sanctions and trade barriers may adversely affect our business, financial condition, results of operations and prospects
Volatile international trade policies and hardware tariffs could raise infrastructure costs and reduce customer demand.
NewRisks Related to Laws, Regulations, and the Global Economy
If we, or our resellers, are found to be in violation of U.S. sanctions or export control regulations, significant fines or penalties and possible incarceration for responsible employees and managers, as well as reputational harm and loss of business, could result
Violations of U.S. export controls or sanctions could result in significant fines, managerial incarceration, and reputational harm.

Dropped

DroppedRisks Related to Our Business, Operations, and Industry
that customer may choose to adopt different solutions or to continue to employ internally-developed solutions
DroppedRisks Related to Our Business, Operations, and Industry
Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at a similar rate, if at all
DroppedRisks Related to Our Business, Operations, and Industry
customers fail to create or operate popular games using our platform, and we are not able to maintain a diversified portfolio of "winners and losers," our results of operations may be adversely affected
DroppedRisks Related to Our Business, Operations, and Industry
Indemnity provisions in various agreements to which we are a party potentially expose us to substantial liability for infringement, misappropriation or other violation of intellectual property rights, data protection and other losses
DroppedRisks Related to Our Business, Operations, and Industry
Conditions in Israel, including political unrest, militarization and war, have impacted and may further adversely affect our operations
DroppedRisks Related to Our Business, Operations, and Industry
Adverse developments affecting the financial services industry, such as actual events or perceived concerns involving liquidity, defaults or non-performance by financial institutions could adversely affect our financial condition and results of operations
Risks related to cross-selling Create and Grow solutions to existing customers.
DroppedRisks Related to Our Platform and Technology
our services, or otherwise experience their own vulnerabilities, policy violations, credential exposure or security breaches, even if we are not the cause of a resulting customer security issue or incident, our customer relationships reputation, and revenue may be adversely impacted
DroppedRisks Related to Our Platform and Technology
impair the functionality of our platform, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our offerings, or injure our reputation
DroppedRisks Related to Laws, Regulations, and the Global Economy
As we embark on a comprehensive rebuild of our machine learning stack and data infrastructure, we may encounter challenges in complying with data privacy and similar laws aimed at regulating technology
Inaccuracies in market opportunity estimates and growth forecasts.
DroppedRisks Related to Laws, Regulations, and the Global Economy
us to target advertisements. Other browsers, such as Firefox and Safari, have already adopted similar measures
DroppedRisks Related to Laws, Regulations, and the Global Economy
and regulations of the United States and potentially other jurisdictions in which we have operations. Compliance with such laws and regulations can be time-consuming and may result in the delay or loss of sales opportunities

Reworded

91% rewrittenRisks Related to Our Business, Operations, and Industry
We are increasingly building AI into certain of our offerings, and issues raised by the use of, or failure to successfully use, AI in our offerings, or the use of AI by our customers and competitors may adversely affect our business, reputation, or financial results
Added specific mention of third-party AI models in Unity AI and Unity Inference Engine, noting lack of control over training data and potential IP infringement.
Was: 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
83% rewrittenRisks Related to Our Business, Operations, and Industry
We may fail to realize the possible platform advantages between our Create and Grow Solutions, or those advantages may take longer to realize than expected
Retained core risk regarding platform advantages between Create and Grow Solutions with minor phrasing refinements.
70% rewrittenRisks Related to Our Business, Operations, and Industry
Our future success depends on our ability to retain our existing customers, expand their use of our platform and attract new customers. Our marketing efforts may not be successful despite the resources we devote to them
Expanded on Grow Solutions reliance on Unity Ads, noting advertisers may shift to competitors if their needs are unmet.
65% rewrittenRisks Related to Our Business, Operations, and Industry
We provide service-level agreement commitments related to certain of our customers. If we fail to meet these contractual commitments, our business could be harmed
Specified that failing service-level agreements can trigger significant financial liabilities, refunds, and service credits rendering deals unprofitable.
Was: We provide service-level agreement commitments related to certain of our Create and Grow Solutions customers. If we fail to meet these contractual commitments, our business could be harmed
63% rewrittenRisks Related to Our Business, Operations, and Industry
If we fail to timely release updates and new features to our platform, develop successful new products, or adapt and respond effectively to rapidly changing technology, or to changing customer needs, requirements, or preferences, our platform may become less competitive
Updated to reflect the 2025 rollout of Unity Vector and emphasized ongoing necessity to improve AI capabilities and data infrastructure.
Was: If we fail to timely release updates and new features to our platform and adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, or changing customer needs, requirements, or preferences, our platform may become less competitive
62% rewrittenRisks Related to Our Business, Operations, and Industry
If we fail to successfully execute our plans to reset our portfolio to focus on our Strategic Portfolio and to right-size our investments, our business will be harmed
Added details on 2025 workforce reductions and wind-down of non-strategic businesses alongside legacy product support limitations.
61% rewrittenRisks Related to Our Business, Operations, and Industry
The markets in which we participate are highly competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed
Broadened competitive landscape to include ad-tech companies and refined impacts of evolving privacy regulations on ad targeting.
Was: The markets in which we participate are competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed
61% rewrittenRisks Related to Our Business, Operations, and Industry
If we are unable to further expand into adjacent business areas or new industries, or if our solutions for any new business area or industry fail to achieve market acceptance, our growth and operating results could be adversely affected, and we may be required to reconsider our growth strategy
Expanded growth strategy risks to explicitly include adjacent product expansion alongside entering non-gaming industries.
Was: If we are unable to further expand into new industries, or if our solutions for any new industry fail to achieve market acceptance, our growth and operating results could be adversely affected, and we may be required to reconsider our growth strategy
56% rewrittenRisks Related to Our Platform and Technology
If we do not make our platform, including new versions or technology advancements, easier to use or properly train customers on how to use our platform, our ability to broaden the appeal of our platform and solutions and to increase our revenue could suffer
55% rewrittenRisks Related to Our Business, Operations, and Industry
We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all
53% rewrittenRisks Related to Our Business, Operations, and Industry
Our past results may not be indicative of future operating performance
Was: We have a limited history operating our business at its current scale, and as a result, our past results may not be indicative of future operating performance
53% rewrittenRisks Related to Our Business, Operations, and Industry
Operating system platform providers or application stores may change terms of service, policies or technical requirements applicable to us or our customers, which could adversely impact our business
50% rewrittenRisks Related to Our Business, Operations, and Industry
We have a history of losses and may not achieve or sustain profitability on a GAAP basis in the future
49% rewrittenRisks Related to Our Management, Talent, and Brand
Attracting, managing, and retaining our talent is critical to our success
46% rewrittenRisks Related to Our Business, Operations, and Industry
If we are not able to grow efficiently, and manage our costs, we may not achieve profitability on a GAAP basis
43% rewrittenRisks Related to Our Platform and Technology
We use open source software in our solutions, which could negatively affect our ability to sell our services or subject us to litigation or other actions
43% rewrittenRisks Related to Our Convertible Notes
The conditional conversion features of the 2030 Notes and 2026 Notes, if triggered, and the conversion feature of the 2027 Notes may adversely affect our financial condition and operating results
Was: The conditional conversion feature of the 2026 Notes, if triggered, and the conversion feature of the 2027 Notes may adversely affect our financial condition and operating results
42% rewrittenRisks Related to Our Business, Operations, and Industry
We use resellers and other third parties to sell, market, and deploy our solutions to a variety of customers, and our failure to effectively develop, manage, and maintain our indirect sales channels would harm our business
42% rewrittenRisks Related to Our Management, Talent, and Brand
If we fail to maintain and enhance our brand, our ability to expand our customer base will be impaired and our business, financial condition, and results of operations may suffer
40% rewrittenRisks Related to Laws, Regulations, and the Global Economy
We are subject to governmental export and import controls and economic sanctions laws that could impair our ability to compete in global markets or subject us to liability if we violate the controls
38% rewrittenRisks Related to Laws, Regulations, and the Global Economy
Any legal proceedings, claims against us, or other disputes could be costly and time-consuming to defend and could harm our reputation regardless of the outcome
38% rewrittenRisks Related to Our Business, Operations, and Industry
Our business could be disrupted by catastrophic events, including natural disasters, health pandemics, militarization, or war
Was: Our business could be disrupted by catastrophic events, including health pandemics, militarization, or war
37% rewrittenRisks Related to Our Business, Operations, and Industry
The actions of third parties with whom we do business may put our business and results of operations at risk
Was: Third parties with whom we do business may be unable to honor their obligations to us or their actions may put us at risk
34% rewrittenRisks Related to Our Platform and Technology
Interruptions, performance problems, or defects associated with our platform may adversely affect our business, financial condition, and results of operations
33% rewrittenRisks Related to Our Platform and Technology
We rely upon third-party data centers and providers of cloud-based infrastructure to host our platform. Any disruption in the operations of these third-party providers, limitations on capacity or interference with our use could adversely affect our business, financial condition, and results of operations
32% rewrittenRisks Related to Laws, Regulations, and the Global Economy
Companies and governmental agencies may restrict access to our platforms, website, mobile applications, application stores or the Internet generally, which could lead to the loss or slower growth of our customers' end users and negatively impact our operations
31% rewrittenRisks Related to Our Convertible Notes
The capped call transactions may affect the value of the 2030 Notes or 2026 Notes and our common stock
Was: The capped call transactions may affect the value of the 2026 Notes and our common stock
29% rewrittenRisks Related to Ownership of Our Common Stock
Our stock price has been and may continue to be volatile, and the value of our common stock may decline
23% rewrittenRisks Related to Our Platform and Technology
Any failure to obtain, maintain, protect or enforce our intellectual property and proprietary rights could impair our ability to protect our proprietary technology and our brand
22% rewrittenRisks Related to Our Convertible Notes
Our Notes and the issuance of shares of our common stock upon conversion of the Notes, if any, may impact our financial results, result in dilution to our stockholders, create downward pressure on the price of our common stock, and restrict our ability to raise additional capital or to engage in a beneficial takeover
22% rewrittenRisks Related to Laws, Regulations, and the Global Economy
Adverse changes in the geopolitical relationship between the U.S. and China or changes in China's economic and regulatory landscape could have an adverse effect on business conditions
21% rewrittenRisks Related to Our Business, Operations, and Industry
We are dependent on the success of our customers in the gaming market. Adverse events relating to our customers or their games could have a negative impact on our business
21% rewrittenRisks Related to Our Business, Operations, and Industry
Our current operations are and will continue to be global in scope, creating a variety of operational challenges

All 63 risk factors

Headings as the filing states them, in filing order.

Risks Related to Our Business, Operations, and Industry

01We have a history of losses and may not achieve or sustain profitability on a GAAP basis in the future50% rewritten
02will vary from period to period, which will impact our costs and ability to achieve and maintain profitabilityNew
03Our past results may not be indicative of future operating performance53% rewritten
04If we are not able to grow efficiently, and manage our costs, we may not achieve profitability on a GAAP basis46% rewritten
05If we fail to timely release updates and new features to our platform, develop successful new products, or adapt and respond effectively to rapidly changing technology, or to changing customer needs, requirements, or preferences, our platform may become less competitive63% rewritten
06We are increasingly building AI into certain of our offerings, and issues raised by the use of, or failure to successfully use, AI in our offerings, or the use of AI by our customers and competitors may adversely affect our business, reputation, or financial results91% rewritten
07Our future success depends on our ability to retain our existing customers, expand their use of our platform and attract new customers. Our marketing efforts may not be successful despite the resources we devote to them70% rewritten
08If we fail to successfully execute our plans to reset our portfolio to focus on our Strategic Portfolio and to right-size our investments, our business will be harmed62% rewritten
09The markets in which we participate are highly competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed61% rewritten
10If we are unable to further expand into adjacent business areas or new industries, or if our solutions for any new business area or industry fail to achieve market acceptance, our growth and operating results could be adversely affected, and we may be required to reconsider our growth strategy61% rewritten
11Our business relies in part on strategic relationships. If we are unable to maintain favorable terms and conditions and business relations with respect to our strategic relationships, our business could be harmed
12We are dependent on the success of our customers in the gaming market. Adverse events relating to our customers or their games could have a negative impact on our business21% rewritten
13We may fail to realize the possible platform advantages between our Create and Grow Solutions, or those advantages may take longer to realize than expected83% rewritten
14Operating system platform providers or application stores may change terms of service, policies or technical requirements applicable to us or our customers, which could adversely impact our business53% rewritten
15The actions of third parties with whom we do business may put our business and results of operations at risk37% rewritten
16We use resellers and other third parties to sell, market, and deploy our solutions to a variety of customers, and our failure to effectively develop, manage, and maintain our indirect sales channels would harm our business42% rewritten
17Our direct sales force targets larger customers, and sales to these customers involve risks that may not be present or that are present to a lesser extent with respect to sales to smaller customersNew
18We provide service-level agreement commitments related to certain of our customers. If we fail to meet these contractual commitments, our business could be harmed65% rewritten
19If we fail to offer high-quality support, our ability to retain and attract customers could suffer
20Our business could be disrupted by catastrophic events, including natural disasters, health pandemics, militarization, or war38% rewritten
21Our current operations are and will continue to be global in scope, creating a variety of operational challenges21% rewritten
22We invest substantial time and resources to grow our business in markets outside the U.S. and if we are unable to do so successfully and in a timely manner, our business and results of operations will sufferNew
23We are exposed to collection and credit risks, which could impact our operating results
24Fluctuations in currency exchange rates could harm our operating results and financial condition
25We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all55% rewritten

Risks Related to Our Platform and Technology

26If we do not make our platform, including new versions or technology advancements, easier to use or properly train customers on how to use our platform, our ability to broaden the appeal of our platform and solutions and to increase our revenue could suffer56% rewritten
27customers and their end users, our proprietary and confidential information and the confidential information and confidential intellectual property we collect from our partners, customers and creatorsNew
28Interruptions, performance problems, or defects associated with our platform may adversely affect our business, financial condition, and results of operations34% rewritten
29Any failure to obtain, maintain, protect or enforce our intellectual property and proprietary rights could impair our ability to protect our proprietary technology and our brand23% rewritten
30While most of the intellectual property we use is created by us, we have also acquired rights to proprietary intellectual property that provide key features and functionality in our solutions. We have also obtained rights to use intellectual property through licenses and service agreements with third parties
31We have been and may in the future become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business
32We use open source software in our solutions, which could negatively affect our ability to sell our services or subject us to litigation or other actions43% rewritten
33We rely upon third-party data centers and providers of cloud-based infrastructure to host our platform. Any disruption in the operations of these third-party providers, limitations on capacity or interference with our use could adversely affect our business, financial condition, and results of operations33% rewritten
34We may also incur significant costs for using alternative providers or taking other actions in preparation for, or in response to, events that damage the third-party hosting services we useNew

Risks Related to Our Management, Talent, and Brand

35Attracting, managing, and retaining our talent is critical to our success49% rewritten
36If we fail to maintain and enhance our brand, our ability to expand our customer base will be impaired and our business, financial condition, and results of operations may suffer42% rewritten

Risks Related to Laws, Regulations, and the Global Economy

37Regulation of data security programs is creating new and additional audit and operational burdens. Laws such as the Cyber Resilience Act in the EU and audit requirements found in California’s CCPA regulations may increase our costs of complianceNew
38Our customers have sought increasingly stringent contractual obligations regarding privacy and data security. These contractual obligations, and our efforts to comply with them, could be costly and harm our business
39Adverse changes in the geopolitical relationship between the U.S. and China or changes in China's economic and regulatory landscape could have an adverse effect on business conditions22% rewritten
40International trade policies, including tariffs, sanctions and trade barriers may adversely affect our business, financial condition, results of operations and prospectsNew
41We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with such laws can subject us to criminal or civil liability and harm our business, financial condition and results of operations
42Compliance with such laws is costly, we cannot assure you that none of our employees and agents will take actions in violation of our policies and applicable law, for which we may be ultimately held responsible
43We are subject to governmental export and import controls and economic sanctions laws that could impair our ability to compete in global markets or subject us to liability if we violate the controls40% rewritten
44If we, or our resellers, are found to be in violation of U.S. sanctions or export control regulations, significant fines or penalties and possible incarceration for responsible employees and managers, as well as reputational harm and loss of business, could resultNew
45Companies and governmental agencies may restrict access to our platforms, website, mobile applications, application stores or the Internet generally, which could lead to the loss or slower growth of our customers' end users and negatively impact our operations32% rewritten
46Sales to government entities and highly regulated organizations are subject to a number of challenges and risks
47We could be required to collect additional sales, value added or similar taxes or be subject to other tax liabilities that may increase the costs our clients would have to pay for our solutions and adversely affect our results of operations
48Changes in our effective tax rate or tax liability may have an adverse effect on our results of operations
49Uncertainties in the interpretation and application of existing, new and proposed tax laws and regulations could materially affect our tax obligations and effective tax rate
50Our ability to use our net operating losses, credits, and certain other tax attributes to offset future taxable income or taxes may be subject to certain limitations
51The tax benefits that are available to us require us to continue to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes
52Any legal proceedings, claims against us, or other disputes could be costly and time-consuming to defend and could harm our reputation regardless of the outcome38% rewritten
53We are subject to laws and regulations worldwide, many of which are unsettled and still developing and which could increase our costs or adversely affect our business

Risks Related to Our Convertible Notes

54Our Notes and the issuance of shares of our common stock upon conversion of the Notes, if any, may impact our financial results, result in dilution to our stockholders, create downward pressure on the price of our common stock, and restrict our ability to raise additional capital or to engage in a beneficial takeover22% rewritten
55The conditional conversion features of the 2030 Notes and 2026 Notes, if triggered, and the conversion feature of the 2027 Notes may adversely affect our financial condition and operating results43% rewritten
56The capped call transactions may affect the value of the 2030 Notes or 2026 Notes and our common stock31% rewritten
57We are subject to counterparty risk with respect to the Capped Call Transactions

Risks Related to Ownership of Our Common Stock

58Our stock price has been and may continue to be volatile, and the value of our common stock may decline29% rewritten
59Future sales of our common stock in the public market could cause the market price of our common stock to decline
60Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other stockholders
61We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock
62If we are unable to maintain proper and effective internal controls over financial reporting, investor confidence in our company may be adversely affected and, as a result, the value of our common stock may be impacted
63Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock

Other Unity Software 10-Ks

FY2024 10-K risk factors
66 risks
Unity Software faces profitability and scaling risks while executing a portfolio reset and rebuilding its machine learning stack. The business depends heavily on gaming customers, app store policies, and maintaining international operations including in Israel.
Filed Feb 21, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.