There's a certain logic to buying the game engine after you've bought the game studio. Unity Software Inc. (U) stock rose in Friday's premarket trading after reports emerged that the gaming software company held takeover talks with an investor group that includes Silver Lake Partners and Saudi Arabia's Public Investment Fund (PIF).

The consortium discussed a potential acquisition valuing Unity at roughly $25 billion, Reuters reported Thursday, citing people familiar with the matter. The valuation discussions took place before Unity released its strong third-quarter results Thursday. Unity shares surged nearly 15% during Thursday's regular session, lifting the company's market value to $21.3 billion.

Silver Lake and the Saudi Fund Circle Unity

Silver Lake and PIF approached Unity in recent weeks, according to Reuters. The company has reportedly hired an investment bank to review its options. However, talks remain preliminary, and there is no guarantee that a deal will materialize.

Silver Lake is no stranger here. It owns about 8% of Unity after investing up to $400 million in the company in 2017. The potential deal follows the consortium's $55 billion acquisition of Electronic Arts in August 2026. That investor group also included Affinity Partners.

And there's a tidy bit of vertical integration lurking in the background: gaming companies Scopely and Niantic, which have ownership ties to the consortium, use Unity's game engine and development tools. Buy the engine, and your portfolio companies get a friendlier vendor. Or, depending on how you look at it, you just bought the vendor.

Unity's Earnings Crush Wall Street Estimates

Unity reported stronger-than-expected third-quarter results Thursday, beating earnings and revenue estimates. Revenue jumped 32.2% year over year to $622.09 million, topping Wall Street's estimate of $567.44 million. Adjusted earnings reached 44 cents per share, well above the 6-cent estimate and more than double the 20 cents reported a year earlier.

Unity expects fourth-quarter revenue of $688 million to $696 million, exceeding analysts' forecast of $603.62 million. The company also forecast adjusted EBITDA of $290 million to $295 million, representing year-over-year growth of 132% to 136%.

CEO Matt Bromberg credited growth in Unity's AI-powered Vector advertising platform for helping the company post its first quarterly GAAP profit since its 2020 initial public offering. That's a milestone worth pausing on. Unity spent years as the company that made the tools everyone used but couldn't quite make money on itself. Now it's profitable on a GAAP basis, growing revenue by a third, and fielding takeover interest at a premium. Not a bad week.

U Price Action: Unity Software shares rose 5.49% to $51.48 in Friday's premarket trading. The stock traded near its 52-week high of $52.15, according to market data.