11:18 AM EDT, 03/27/2026 (MT Newswires) -- Unity Software ( U ) pre-reported "strong" Q1 results and plans to exit underperforming businesses, moves that are likely to boost growth and margins, Morgan Stanley said in a report Friday.

Preliminary results showed revenue and EBITDA coming in about 3% and 24% above expectations, respectively, driven by continued "strength" in the company's "Vector" segment, which grew 78% year over year and 15% sequentially, with record EBITDA margins of 26%, the report said.

The company plans to "sunset" its ironSource Ad Network by April 30 and pursue a divestiture of its Supersonic game publishing business, both of which are declining and generating "near zero" EBITDA, the investment bank said.

The firm raised 2026 and 2027 revenue forecasts by 3% and 6%, respectively, and increased EBITDA estimates by 16% and 26%, citing stronger Vector growth and margin expansion. The firm now expects EBITDA margins to exceed 32% by 2027, according to the report.

Morgan Stanley maintained an overweight rating on Unity Software ( U ) and lifted the price target to $32 from $30.

Price: 19.03, Change: +1.90, Percent Change: +11.09