ULS Q3 Deep Dive: Broad-Based Growth, Cost Actions, and Software Momentum

Safety certification company UL Solutions (NYSE:ULS) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 7.1% year on year to $783 million. Its GAAP profit of $0.49 per share was 10.5% above analysts’ consensus estimates.

Is now the time to buy ULS? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

UL Solutions delivered a well-received third quarter, with management attributing the positive results to strong execution across all segments and the benefits of ongoing investment in growth initiatives. CEO Jennifer Scanlon pointed to balanced contributions from the industrial, consumer, and software segments, highlighting resilient demand even amid a dynamic regulatory environment. The company’s ULTRUS software platform and expansion into industrial software verification also supported results, while a focus on operational efficiency helped drive margin improvement. As Scanlon noted, “This broad-based performance demonstrates sustained customer demand and the resilience of our business model.”

Looking ahead, management expects continued growth from investments in energy transition, electrification, and digital transformation, as well as targeted restructuring to streamline operations and focus on core opportunities. The company is increasing its full-year outlook based on current customer pipelines and sees its new AI safety certification testing as a strategic growth lever. CFO Ryan Robinson emphasized that cost actions, including exiting nonstrategic service lines, are expected to support higher margins and free up resources for key priorities. Scanlon stated, “We are focused on what we believe to be the most attractive megatrends in the product tech industry to drive above-market growth while delivering superior margins.”

Key Insights from Management’s Remarks

Management attributed third quarter growth to strong demand for core services, expanding software offerings, and an ongoing focus on operational efficiency, which together drove both top-line and margin improvement.

• Balanced segment contributions: All three segments—Industrial, Consumer, and Software & Advisory—showed year-over-year growth, with Industrial particularly strong due to energy and automation demand and Consumer benefiting from increased non-certification testing in electronics.
• ULTRUS platform expansion: The company launched new features in its ULTRUS software platform, including enhanced PFOS identification and AI-powered tools, aimed at helping customers meet compliance and sustainability requirements. Management expects these enhancements to grow recurring software revenue.
• Industrial software verification: UL Solutions extended its marketing claim verification to the industrial software sector, with Siemens as an inaugural customer. This move positions the company in the emerging “industrial metaverse” and opens new revenue streams.
• Fire Science Center investment: UL Solutions began construction on a major Fire Science Center of Excellence in Illinois, which will expand testing capabilities for products like PFAS-free foams and energy-efficient designs. This initiative reinforces the company’s leadership in fire safety science.
• Restructuring for focus and efficiency: A new restructuring program will streamline the operating model, reduce expenses, and exit certain nonstrategic service lines. Management expects this to generate meaningful annual cost savings and margin expansion once completed.

Drivers of Future Performance

Management expects continued growth driven by investments in digital transformation, operational efficiency, and new service offerings, while restructuring should enhance margin performance.

• Focus on growth markets: The company is prioritizing investments in energy transition, electrification, and digital transformation—areas management views as megatrends within the product technology sector. These are expected to drive above-market revenue growth for the foreseeable future.
• Restructuring to boost margins: Exiting nonstrategic service lines and streamlining operations will create a short-term revenue headwind but are expected to improve annual operating income by $25-$30 million once fully implemented, with most benefits realized by 2027.
• Expansion in AI and software: The launch of AI safety certification testing and continued enhancement of the ULTRUS software suite are anticipated to open new markets and support recurring revenue growth, helping offset headwinds from macroeconomic or regulatory changes.

Catalysts in Upcoming Quarters

Looking forward, our analysts will watch (1) the impact of restructuring on cost savings and margin expansion, (2) continued growth in the ULTRUS software and AI safety certification offerings, and (3) sustained demand for industrial and consumer testing services, especially in energy storage and data center markets. The company’s ability to execute on new product launches and successfully reallocate resources away from nonstrategic activities will be important markers of future performance.

UL Solutions currently trades at $86.20, up from $78.57 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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