UL Solutions Q3 Organic Revenue Rises 7% as Margin Expands Despite Software Divestiture

UL Solutions Inc. (NYSE: ULS) reported 7.0% organic revenue growth for the third quarter of 2026, while productivity gains and operating leverage lifted its adjusted EBITDA margin by 90 basis points. Overall revenue grew more slowly because the sale of the company’s environmental, health and safety software business reduced reported growth.

Revenue for the three months ended Sept. 30 rose 5.1% to $823 million from $783 million a year earlier. Organic growth contributed $55 million, more than offsetting a $14 million reduction from acquisition and divestiture activity and a $1 million foreign-exchange headwind.

Adjusted EBITDA increased to $235 million from $217 million, with the corresponding margin rising to 28.6% from 27.7%. The improvement reflected revenue growth, operating leverage and productivity initiatives, partly offset by the effect of the software divestiture and higher transaction costs. Acquisition and divestiture transaction and integration costs were $6 million, compared with $3 million in the prior-year quarter.

GAAP net income rose to $117 million from $106 million, and net income margin increased to 14.2% from 13.5%. Diluted earnings per share were $0.53, up from $0.49. Adjusted net income increased to $135 million from $119 million, while adjusted diluted earnings per share rose 10.7% to $0.62.

Industrial and Consumer segments drive growth

Industrial remained the company’s largest contributor to quarterly growth. Segment revenue increased 8.2% to $410 million, including 8.4% organic growth, supported by energy and automation, materials, ongoing certification services and certification testing. Excluding the Advisory business, Industrial grew about 9.0% organically.

Industrial adjusted EBITDA advanced 13.0% to $148 million, and its adjusted EBITDA margin expanded to 36.1% from 34.6%. UL Solutions attributed the improvement to operating leverage and higher employee productivity.

Consumer revenue rose 5.9% on both a reported and organic basis to $360 million. Consumer technology and retail led the increase, with strength in non-certification testing and services as well as certification testing. Previously announced business exits reduced the segment’s growth by about 150 basis points.

Consumer adjusted EBITDA increased 14.9% to $77 million, while adjusted EBITDA margin improved to 21.4% from 19.7%. The company cited operating leverage, employee productivity and benefits from restructuring actions.

Risk & Compliance Software revenue declined 17.2% to $53 million because of the EHS software sale completed on April 1. On an organic basis, the segment grew 4.7%, supported by demand for supply-chain insights. Adjusted EBITDA fell to $10 million from $19 million, and adjusted EBITDA margin contracted to 18.9% from 29.7%, reflecting the divestiture and resulting deleveraging of fixed costs. The segment recorded a $3 million operating loss, compared with operating income of $7 million a year earlier.

Nine-month results and cash generation

For the first nine months of 2026, revenue increased 5.9% to $2.40 billion, with organic growth of 6.4%. Adjusted EBITDA rose to $651 million from $575 million, and adjusted EBITDA margin expanded by 180 basis points to 27.2%.

Nine-month net income was $469 million, compared with $274 million a year earlier, and included a $191 million gain on divestiture. Adjusted net income, which excludes that gain and other specified items, increased to $372 million from $309 million. Adjusted diluted earnings per share rose to $1.72 from $1.44.

Free cash flow for the nine-month period increased to $395 million from $317 million. On a last-12-month basis, free cash flow reached $481 million, up $92 million, or 23.7%, as operating cash flow of $738 million more than covered $257 million of capital expenditures. The last-12-month free cash flow margin was 15.1%, compared with 13.0% a year earlier.

Full-year outlook and E&E integration

UL Solutions’ 2026 outlook calls for constant-currency organic revenue growth of approximately 6.5%, including an estimated 70-basis-point reduction from business exits announced under its restructuring plan. The company expects an adjusted EBITDA margin of approximately 27.0%, incorporating about 200 basis points of underlying margin expansion, partly offset by roughly 90 basis points of incremental transaction costs compared with 2025.

Management also expects an effective tax rate of about 26% and capital expenditures equal to approximately 8.5% of revenue. Full-year acquisition and divestiture transaction costs are estimated at $37 million to $40 million, compared with $10 million in 2025. The company said it will continue pursuing acquisitions and other portfolio refinements.

UL Solutions completed its acquisition of Electrical and Electronics Testing on Oct. 1, after the end of the quarter. The acquired business has approximately $200 million of estimated annualized 2026 revenue, 44 laboratories and about 1,400 employees. Back-office integration is expected to be substantially complete by the end of 2027, while go-to-market and laboratory-utilization synergies are expected to be largely realized by the end of 2028.

The outlook remains subject to integration and restructuring execution, transaction costs and geopolitical and macroeconomic uncertainty. UL Solutions said customers could modify, delay or cancel purchases of testing and product-development services. Other disclosed risks include foreign-exchange movements, trade restrictions, cybersecurity incidents, technological disruption, regulatory changes, competition and uncertainties surrounding the company’s operations in China.