Safety certification company UL Solutions (NYSE: ULS) reported Q3 2026 results topping the market’s revenue expectations, with revenue up 5.1% year on year to $823 million. Its non-GAAP profit of $0.62 per share was in line with analysts’ consensus estimates.

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“This quarter’s record revenue and excellent margin expansion reflect our strategic focus and investments aligned to the megatrends including the global energy transition and electrification of everything,” said President and CEO Jennifer Scanlon. “We are at the forefront of innovation and work alongside our customers as increasingly digital, interconnected products and supply chains drive demand for our trusted services and software. I’m very pleased with our solid year-to-date performance and we continue to see many opportunities for growth and ongoing strategic, disciplined capital allocation.”

Revenue growth

A company’s long-term revenue performance can indicate its overall quality. Any business can report a good quarter or two, but many enduring ones grow for years.

With $3.19 billion in revenue over the past 12 months, UL Solutions is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the positive side, it can still achieve high growth rates because it’s working from a smaller revenue base.

UL Solutions’s 5.8% annualized revenue growth over the last four years was decent. This shows its offerings generated slightly more demand than the average business services company.

Long-term growth is the most important, but within business services, a stretched historical view may miss new innovations or demand cycles. UL Solutions’s annualized revenue growth of 6.4% over the last two years aligns with its four-year trend, suggesting its demand was stable.

This quarter, UL Solutions reported year-on-year revenue growth of 5.1%, and its $823 million of revenue exceeded Wall Street’s consensus estimates by 1%.

Looking ahead, sell-side analysts expect revenue to grow 5.6% over the next 12 months, according to S&P, similar to its two-year rate. This projection is above the sector average and suggests its newer products and services will help support its recent top-line performance.

Adjusted operating margin

Adjusted operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses, from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies because it excludes non-recurring expenses, interest on debt and taxes.

UL Solutions’s adjusted operating margin has been trending up over the last 12 months and averaged 18.5% over the last five years. Its profitability was also high for a business services company thanks to its efficient cost structure and economies of scale.

UL Solutions’s adjusted operating margin may have fluctuated slightly, but it has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, UL Solutions generated an adjusted operating margin of 22.5%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Free cash flow

Free cash flow matters because accounting profits alone cannot pay the bills.

UL Solutions has shown strong cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 11.4% over the last five years, an impressive level for a business services company.

UL Solutions’s margin expanded by 5.7 percentage points during that time. This improvement is a positive sign, indicating it became a less capital-intensive business as its free cash flow profitability rose while its operating profitability was flat.

UL Solutions’s free cash flow came in at $154 million in Q3, equivalent to an 18.7% margin. This was a good result, as its margin was 4.8 percentage points higher than in the same quarter last year, building on its favorable historical trend.

Key takeaways from UL Solutions’s Q3 results

UL Solutions delivered some key positives in Q3, including revenue that narrowly beat analysts’ consensus estimates. Investors were likely hoping for more: shares edged lower 1.8% to $73.75 immediately after the report.

To assess UL Solutions at its current price, consider its valuation and business quality as well as the latest earnings. Read our full research report here (it’s free).