US real-time 3D technology company Unity Software is exploring a potential sale of its China business, targeting a valuation above $1 billion, sources familiar with the matter told Bloomberg. The company has hired advisers to approach potential buyers, but discussions are at an early stage and no deal has been reached.
Unity, a major player in game engines, has held a dominant position in China’s game development sector since entering the market in 2012. Popular titles such as Tencent’s Honor of Kings have been developed using Unity’s engine. Its China operations generate annual revenue in the hundreds of millions of dollars. Rising pressures in recent years may have prompted the firm to reconsider its global strategy.
Unity Software shares have dropped more than 60% since the start of 2026, despite Q4 2025 revenue rising sequentially to $503.1 million, according to Sina Finance. The company’s management remains cautious on growth and market conditions.
Its Chinese joint venture, Unity China, has secured investment from Alibaba Group, China Mobile, and ByteDance, among others. Some investors hold share redemption rights if certain conditions are not met, highlighting lingering uncertainty over the venture’s prospects. Analysts say a potential divestment could help Unity mitigate capital pressures and remove a looming liquidity risk.
Last year, Google’s DeepMind released its AI world model, Genie 3, sending ripples through the market. The technology can instantly generate interactive 3D virtual worlds from a single image or text description, and is seen as a disruptive challenge to traditional game engine models.
Market participants are concerned that these AI tools may significantly reduce the barriers to game development, which could weaken Unity’s core competitive edge. In response, shares of Unity, along with competitors including Roblox and Ubisoft, declined, dragging down the broader video game sector.
Unity had planned as early as 2022 to spin off its China business, with the goal of giving local teams more autonomy and expanding into non-gaming markets such as smart cities and industrial design. In the same year, it established a joint venture in China with strategic partners.
Now, if the potential sale goes ahead, it could mark Unity’s complete exit from direct operations in China. Unity has not yet commented on the sale.
