Unity Software's (U) Q3 financial results showed the benefits of a "true" business transformation currently underway at the company, Morgan Stanley analysts said in a Thursday note.

Analysts said that for the first time in nearly four years, both of Unity's Create Solutions and Grow Solutions business segments registered positive organic growth year-on-year.

Q3 revenue from the Create segment accelerated, as the benefits of the subscription price increases began to shine through. The Grow segment posted 11% quarter-on-quarter growth as its new Vector AI model drove stronger returns for advertisers at scale, analysts said.

"If Vector continues improving at this pace, we expect U to be a fundamentally more competitive advertising business going forward," analysts said.

Morgan Stanley raised the price target on the stock to $48 from $44 and retained an overweight rating.

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