Hayden Capital: Unity Software ($U) Investment Case

In their Q1 2026 quarterly letter (dated May 28, 2026), Hayden Capital details Unity ($U) as one of the firm’s newer positions, one it has been adding to during the recent drawdown. Hayden, a concentrated, tech-heavy manager focused on Asian internet, fintech, and “emerging compounders,” posted a -28.3% net return in Q1 2026 versus -4.3% for the S&P 500, as internet and fintech holdings were punished on AI-disruption and slowing-growth fears. Against that backdrop, the firm frames Unity as a high-quality, sticky franchise that has been buried under years of self-inflicted operational missteps, where Hayden believes new leadership, a ramping AI ad platform, and a depressed valuation now combine to create an attractive setup.

Investment Highlight: Unity Software ($U)

Business Overview

• Hayden describes Unity as one of the two dominant 3D content-creation engines in the world, with its engine powering roughly ~70% of mobile games globally plus a meaningful share of console and PC titles
• The firm emphasizes high switching costs: developers typically stay on the chosen engine for the life of a title and its sequels, since switching means re-tooling an entire team, asset pipeline, and codebase
• Hayden characterizes the product as mission-critical and deeply embedded in customer workflows, which is why it views the installed base as historically sticky despite operational turmoil

Why the Stock Is Cheap

• The firm states plainly that Unity has been one of the most poorly run companies of the last decade, and now trades at one of its lowest valuations since IPO
• Hayden cites a botched 2022 ironSource merger, the 2023 runtime-fee debacle (a per-install charge that sparked a developer revolt and forced the CEO out), and departing engineering talent
• According to the firm, the ad business hemorrhaged share to AppLovin—a dynamic Hayden notes was actually a key thesis for its own AppLovin investment (Q2 2024 letter)
• Hayden frames this as a great business where the market has given up and stopped paying attention

New Leadership

• Hayden identifies CEO Matt Bromberg (appointed May 2024) as the first of three catalysts, calling his track record exactly what Unity needs
• The firm notes Bromberg joined Zynga as COO in August 2016 when the stock traded around ~$2.50 and mobile-gaming sentiment was at its lows, then rebuilt monetization infrastructure, data systems, and live-ops over five years
• Hayden points out Zynga was acquired by Take-Two for ~$9.86 per share shortly after he left in late 2021 (~4x his entry), and argues he did precisely the data-, ad-, and monetization-stack work that Unity has historically lacked despite owning the engine that generates the data

Vector and the Data Advantage

• The firm describes Vector as Unity’s most important strategic initiative—a next-generation, unified AI ad-targeting platform replacing the legacy Unity Ads and ironSource stacks, ramping from $0 toward a ~$1BN run-rate less than two years after launch
• Hayden argues Vector’s edge comes from engine-level, first-party signals (frame rates, session length, in-app purchases, progression, churn, load times) that competitors structurally can’t see, contrasting this with AppLovin’s view of the advertising layer alone
• The firm believes Apple’s 2021 ATT privacy changes widened this gap, since Unity’s on-device, consent-based signal doesn’t depend on the IDFA that competitors lost
• Hayden cites early evidence under Bromberg—Vector approaching ~$1BN run-rate by year-end, a re-accelerating Create segment, and free cash flow growing ~+40% y/y—while stressing Unity doesn’t need to “beat” AppLovin; in the firm’s view, simply halting share loss and re-taking a few hundred basis points (against AppLovin’s ~25-30% of spend) is an achievable bar

Valuation

• The third catalyst, per Hayden, is a cheap valuation: ~4x EV/Revenue and ~20x normalized P/E, which the firm notes sits below comparable engine, ad-tech, and platform peers and below Unity’s own post-IPO history
• At a ~$10BN valuation with Bromberg guiding Vector to a $1BN revenue run-rate by year-end, Hayden expects high ad-network margins (citing AppLovin’s 70% FCF margins) and views 50% Vector margins as achievable
• With Vector growing ~+57% y/y and an expected ~41% CAGR, the firm believes the business should reach $1BN of free cash flow within a couple of years, implying a ~10x forward FCF multiple at today’s price—lower still if Unity China is sold for a rumored $1BN and returned to shareholders (which Hayden notes would bring EV to ~$9BN)
• If Vector ramps, Create returns to consistent double-digit growth, and FCF margins expand toward ~30%, Hayden believes the stock can compound at 25%+ annualized over the next 3-5 years, with multiple expansion as additional upside

Hayden Capital views Unity as a structurally advantaged, mission-critical engine business that the market wrote off after years of self-inflicted wounds, now positioned for a turnaround the firm believes is being driven by proven leadership, a uniquely data-rich AI ad platform in Vector, and a valuation near post-IPO lows. The firm argues Unity does not need to overtake AppLovin to succeed—only to stop ceding share—and believes the stock can trade at double the current price if its scenario plays out.

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