Recore is a good 3d game.
A big budget game in unity could be better.

It's absolutely possible for unity games to have stunning visual.
The problem, like others pointed at, is that it is more used with Indie than AAA.
From my experience 3 main issue come to mind as to why that is. (this maybe a little dated mind you)
1) Unity have frequent update which add/update/remove feature which does not help for stability. So if you develop an AAA stability of the engine is important.
2) The way unity save scenes is not trivial to use with source control and merge tool for code sharing.
3) Unity use C# (which is awesome) but the vast majority of AAA dev still use C++/Unreal. Even tough C# is way more user friendly and readable than C++/unreal dev teams skills and experience would have to completely be renewed which would be both costly and time consumming.

I remember using Unity back in 2012. Not sure what it is like nowadays, however back when I used it, it was a bunch of fun, and a cool tool to create some pretty looking environments easily.

AAA visuals simply aren't the point of Unity. As its name implies, Unity is about game design for everybody. Its core goal is to make game development more accessible than other engines.

As you may be able to figure based on that goal, their focus is on less experienced developers, indies, and lower budget studios. Technically impressive visuals simply should not be expected from any of those populations.

That said, as has been stated before, that doesn't mean Unity can't produce good graphics. I'm 100% certain that, with the right team and right budget behind it, it's possible to create incredible visuals using Unity. But typically the studios with those resources go with other engines.

Ori and the Blind Forest, Hollow Knight, Aragami, Firewatch, Night in the Woods, Tacoma, Torment: Tides of Numenera, Forgotten Anne, Ghost of a Tale, Gris, Return of the Obra Dinn, Subnautica, The Messenger, Outer Wilds, and Ori and the Will of the Wisps were made in Unity. It's not a matter of what engine is being used, but what developer is using it.

It has nothing to do with the Engine itself.

The reason is that it is available to practically everyone, and of course not everybody is a perfect 2D/3D artist. As a result, the art suffers quite a bit in most cases.

My guess is that indies use it because it's so easy, and for games that really want to push graphics, Unreal Engine is chosen instead because it's probably more capable and is probably easier to squeeze that extra bit of performance with. As a result, most not-so-great games get made using Unity, whereas most really great-looking games get made using Unreal Engine or something else instead despite Unity possibly being suitable for the job as well.

Ah, Unity has dealt with all of these issues but game development takes many many years for big budget games so we probably won't see anything signifigant for another two or so years.
The issue is that Unity doesn't ussually develop it's own AAA games to show off it's tech like Epic does with Fortnite and it used to do with Gears of War.
Unity does develop VR,AR and CGI animated films to show their tech instead.
I suppose Iron Man VR would be the first big game made since Unity fixed the 3 issues that you mentioned. (Actually that might be COD Mobile).

Issue 1 and 2 may have been dealt with by Unity, number 3 thought may only be deal with by devs themselves through business decision, investment in formation,smaller project to get used to and/or hiring. The bigger the studio is the harder it is to make the switch.

On the other side c# development should result in cost reduction which is the main benefits of Unity but it has yet to convince most big studios.

1. The updates are not mandatory, so not sure what the issue is.
2. This might indeed be somewhat problematic. I don't know how other engines handle it though, so can't say whether other engines have it better, but this certainly seems like it could be better.
3. I'm not sure how much of a problem this really is. Lots of devs hate C++ because of how bloated the language has become, although I'm sure sure how widespread this hate exactly is among game devs. That said, picking up a language such as C# shouldn't be much of a hindrance for anyone who knows C++, so it's hard to imagine the cost of picking up a new language being a major factor here. That said, C# might have one issue for performance-critical software such as many games: the garbage collector and the pauses it causes. I would expect the garbage collector to be more of an issue compared to the time it takes to learn a new programming language such as C#.

I'm not sure how much experience you have with these things of course (you were a bit vague), so if I'm wrong, I'd certainly like to hear about it.