Last night, Unity surged by 14%, and over the past month, it has risen by 40%, with its market capitalization reaching 14 billion, surpassing Dolphin Research's Q1 neutral target of 12 billion. So what exactly happened to $Unity Software(U.US)?

Undoubtedly, the only factor currently driving Unity's strong rise is the incremental information from Vector. The rise last night and over the past month is due to this. However, the incremental information is not officially disclosed and mainly comes from customer surveys conducted by different channels/institutions.

Therefore, before official confirmation and clear quantitative figures are released, the stock price will remain highly volatile. However, as we mentioned in previous comments, besides the Vector logic, Unity also has the Unity 6 and "price increase" logic, which means that investor confidence is significantly higher than last year, and the lower bound of the volatility range will continue to rise.

Yesterday's surge was triggered by Jefferies' regular (quarterly) research report on the mobile gaming advertising platform.

Dolphin Research briefly reviews the core points of the report:

1. The growth expectation for the mobile gaming advertising scale in 2025 has been revised up by 1 point compared to Q1, from 2.8% growth to 3.8% growth.

2. Besides Applovin maintaining its leading share and continuing to increase, the report highlights changes in Unity Vector—among the specific surveyed customer group, the number of customers providing positive feedback increased from 7 to 9 compared to the previous quarter, and customer evaluation of ROAS improved from 5-7% last quarter to 10-20% this quarter.

3. Although Jefferies emphasizes that Unity Vector is still in its early stages, it has raised its revenue and profit expectations for 2025 and 2026, following a trend of quarterly improvement—revenue expectations are up by 2% and 3%, and adjusted EBITDA is up by 11% and 9%. Jefferies' previous expectations were slightly higher than the BBG consensus.

According to Jefferies' latest performance forecasts for 2025 and 2026, Unity's current market cap of 14 billion translates to valuations of 33x and 27x EV/EBITDA, with a CAGR of 16% for profit growth over these two years. As a reference, corresponding to the current market cap of 120 billion, $AppLovin(APP.US) has valuations of 28x and 22x, with a two-year CAGR of 40%.

Comparing App and U horizontally, it is clear that App has a lower valuation, but this may be due to changes in trends. After all, Vector is still in its early stages, and its impact on performance cannot be fully demonstrated this year. A higher valuation represents more room for imagination for U's future.