Core Insights - Automatic Data Processing Inc. (ADP) reported fiscal first-quarter 2026 results that surpassed Wall Street expectations, yet shares declined over 5% during intra-day trading [1] Financial Performance - Adjusted earnings per share were $2.49, exceeding the analyst estimate of $2.44 [2] - Revenue increased by 7% year-over-year to $5.2 billion, surpassing the consensus forecast of $5.14 billion [2] - Net earnings rose by 6% to $1.0 billion, while adjusted EBIT increased by 7% to $1.3 billion, maintaining margins at 25.5% [2] Segment Performance - Employer Services revenue grew by 7% to $3.49 billion [3] - PEO Services revenue also saw a 7% increase to $1.69 billion [3] - The average number of worksite employees paid through PEO Services rose by 2% to approximately 754,000 [3] - Interest on funds held for clients increased by 13% to $287 million, supported by a 7% rise in average client fund balances to $34.9 billion [3] Future Outlook - ADP reaffirmed its fiscal 2026 outlook, projecting revenue growth of 5% to 6% [4] - Expected adjusted EBIT margin expansion of 50 to 70 basis points [4] - Anticipated adjusted EPS growth of 8% to 10% [4]

ADP delivered a strong FY 2026 Q1 earnings beat, but investors responded with caution. ...

Core Insights - Automatic Data Processing (ADP) reported a revenue of $5.18 billion for the quarter ended September 2025, reflecting a year-over-year increase of 7.1% [1] - Earnings per share (EPS) for the quarter was $2.49, up from $2.33 in the same quarter last year, exceeding the consensus estimate of $2.44 [1] Financial Performance - The reported revenue of $5.18 billion surpassed the Zacks Consensus Estimate of $5.13 billion, resulting in a surprise of +0.95% [1] - EPS also exceeded expectations with a surprise of +2.05% compared to the consensus estimate [1] - Average paid PEO worksite employees during the period was 754, slightly below the two-analyst average estimate of 757 [4] Segment Revenue Breakdown - Employer Services revenue was $3.49 billion, exceeding the average estimate of $3.45 billion, marking a +7.1% change year-over-year [4] - Interest on funds held for clients generated $286.8 million, surpassing the average estimate of $281.99 million, with a year-over-year increase of +13.2% [4] - Other revenues, excluding interest and PEO revenues, totaled $3.2 billion, exceeding the three-analyst average estimate of $3.17 billion, representing a +6.5% change year-over-year [4] - PEO revenues reached $1.68 billion, slightly above the average estimate of $1.67 billion, with a +7.2% year-over-year change [4] - PEO Services revenue was $1.69 billion, also exceeding the average estimate of $1.68 billion, reflecting a +7.2% change year-over-year [4] - Other segment revenues reported a loss of $-3.5 million, which was worse than the estimated loss of $-3.05 million, but showed a significant year-over-year improvement of +25% [4] Stock Performance - ADP shares have returned -4.7% over the past month, contrasting with the Zacks S&P 500 composite's +3.8% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Core Insights - Automatic Data Processing Inc. (ADP) reported fiscal first-quarter results with revenues of $5.18 billion, exceeding analyst expectations of $5.14 billion, marking a 7% year-over-year increase [1][2] - The company’s adjusted EPS was $2.49, surpassing the consensus estimate of $2.44 [2] - ADP's Employer Services and PEO segments both saw a 7% revenue increase, with Employer Services at $3.49 billion and PEO Services at $1.69 billion [2] Financial Performance - Adjusted EBIT rose 7% to $1.3 billion, maintaining an adjusted EBIT margin of 25.5% [3] - Net earnings increased by 6% year-over-year to $1.01 billion [3] - As of September 30, ADP held $7.94 billion in cash and equivalents [3] Strategic Developments - ADP acquired Pequity, a compensation management software company, although financial terms were not disclosed [3] - The integration of Pequity's platform aims to enhance ADP's compensation management capabilities through AI-driven insights and budgeting tools [4] Management Commentary - CEO Maria Black highlighted record client satisfaction and high retention rates, alongside the expansion of AI in products and operations [5] - CFO Peter Hadley noted that first-quarter revenue and margins exceeded expectations due to strong new business bookings and client retention [5] Future Outlook - ADP maintained its revenue growth outlook for FY26 at 5%-6%, equating to $21.6 billion-$21.8 billion, aligning with the analyst consensus estimate of $21.8 billion [5] - The adjusted diluted EPS growth forecast is set at 8%-10%, or $10.81-$11.01, compared to the analyst consensus estimate of $10.92 [5] Stock Performance - ADP's stock price decreased by 5.19% to $265.12 following the earnings report [6]

Company Overview - Automatic Data Processing (ADP) provides payroll and HR services to over 1.1 million clients globally, including corporations, government entities, and small businesses [4] - The company has demonstrated strong client retention with a rate of 92.1%, close to its all-time high of 92.2% [1] Financial Performance - In the last quarter, ADP reported a 9.8% increase in earnings and a 7.5% rise in revenues [1] - Over the past decade, ADP has returned $30 billion to shareholders through dividends and share repurchases, while nearly tripling its dividend [2] - Revenue has nearly doubled from $10.9 billion to $20.6 billion over the last 10 fiscal years [3] Investment Appeal - ADP is recognized as a "Dividend King" with 50 consecutive years of dividend increases, indicating a strong commitment to returning value to shareholders [2] - The company’s business model is characterized as stable and essential, making it less susceptible to market volatility [10] - The current price-to-earnings ratio of ADP is competitive compared to the S&P 500 average, suggesting it may be an attractive investment opportunity [13]

Financial Data and Key Metrics Changes - The company reported a 7% revenue growth and a 7% adjusted EPS growth for the first quarter of fiscal 2026 [5][16] - Employer Services segment revenue increased by 7% on a reported basis and 5% on an organic constant currency basis [16] - Client funds interest revenue increased more than anticipated, leading to an increase in the full-year forecast for client funds interest revenue by $10 million to a range of $1.30 billion to $1.32 billion [17][19] Business Line Data and Key Metrics Changes - Employer Services new business bookings showed solid growth, resulting in record sales volume for a first quarter [5] - PEO revenue growth of 7% exceeded expectations, driven by growth in zero margin pass-throughs and higher wages [7][18] - Employer Services pays per control growth rounded down to 0% for the first quarter, reflecting client caution around adding headcount [6][16] Market Data and Key Metrics Changes - Overall client satisfaction score reached a new all-time high for a first quarter, indicating improvements across business units [6] - The company experienced specific strength in ADP Lyric HCM, with new business bookings exceeding expectations [9][10] - International market performance was described as "lumpy," with a solid pipeline but some softness in the first quarter [68] Company Strategy and Development Direction - The company is focused on leading with best-in-class HCM technology, including the scaling of Embedded Payroll Solutions for small businesses [8][11] - Continued investment in AI initiatives aims to enhance operational efficiency and client engagement [12][14] - The acquisition of Pequity is expected to broaden the company's capabilities in compensation management, aligning with its strategic priorities [10][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the relatively stable HCM demand backdrop and maintained full-year growth guidance of 4%-7% for Employer Services [16][24] - The company anticipates a slight decline in Employer Services retention but remains optimistic about achieving its growth targets [16][18] - Management highlighted the importance of ongoing investments in technology and client services to drive future growth [14][19] Other Important Information - The company announced the acquisition of Pequity, which is expected to enhance its compensation management offerings [10][62] - The company was recognized as a leader in multi-country payroll solutions, underscoring its global capabilities [15] Q&A Session Summary Question: Update on deal cycles and time to close - Management indicated that the demand backdrop remains stable, with no significant changes observed in deal cycles during Q1 [24] Question: Confidence in Employer Services guidance amid slight downticks - Management expressed confidence in the guidance, noting that movements in pays per control and retention are relatively small and offsetting [26][28] Question: Surprising areas of new bookings growth - Management highlighted strong growth in small business services, particularly in retirement services and HR outsourcing [32] Question: Performance of PEO enrollment period - Management reported the highest participation rates in four years, indicating strong demand for health benefits among targeted industries [57] Question: Insights on the recent acquisition - Management emphasized the strategic importance of the acquisition for enhancing compensation management capabilities, although its financial impact is currently minimal [62][64] Question: Differences between U.S. and international markets - Management described international performance as "lumpy," with solid execution expected to drive growth in the future [68] Question: Impact of recent layoffs in the market - Management stated that recent layoffs are not expected to significantly impact guidance, as hiring levels remain static [99]

Financial Data and Key Metrics Changes - The company reported a 7% revenue growth and a 7% adjusted EPS growth for the first quarter of fiscal 2026 [5][16] - Employer Services segment revenue increased by 7% on a reported basis and 5% on an organic constant currency basis [16] - Client funds interest revenue increased more than anticipated, leading to an increase in the full-year forecast by $10 million to a range of $1.30 to $1.32 billion [17][19] Business Line Data and Key Metrics Changes - Employer Services new business bookings showed solid growth, resulting in record sales volume for a first quarter [5] - PEO revenue growth of 7% exceeded expectations, driven by growth in zero margin pass-throughs and higher wages [7][18] - Employer Services pays per control growth rounded down to 0% for the first quarter, reflecting client caution around adding headcount [6][16] Market Data and Key Metrics Changes - Overall client satisfaction score reached a new all-time high for a first quarter, indicating improvements across business units [6] - The company experienced specific strength in ADP® Lyric HCM, with new business bookings exceeding expectations [9][10] Company Strategy and Development Direction - The company is focused on leading with best-in-class HCM technology, including scaling embedded payroll solutions for small businesses [7][8] - The acquisition of Pequity aims to enhance capabilities in compensation management, supporting complex planning needs for clients [11][62] - The company continues to advance AI initiatives to improve operational efficiency and client engagement [12][13] Management's Comments on Operating Environment and Future Outlook - Management described the HCM demand backdrop as relatively stable, with no significant changes observed in deal cycles [24][25] - The company maintains its full-year growth guidance for Employer Services at 4% to 7% and PEO revenue growth at 5% to 7% [16][18] - Management expressed confidence in achieving strategic goals and delivering strong financial results despite slight declines in retention rates [15][19] Other Important Information - The company announced the acquisition of Pequity, which is expected to enhance its compensation management offerings [11][62] - The company was recognized as a leader in multi-country payroll solutions by industry analysts [15] Q&A Session Summary Question: Update on deal cycles and time to close - Management indicated that the HCM demand backdrop remains stable, with no meaningful changes in deal cycles observed in Q1 [24][25] Question: Confidence in Employer Services guidance amid slight downticks - Management expressed confidence in the guidance, noting that movements are relatively small and offsetting each other [26][28] Question: Surprising areas of new bookings growth - Management highlighted growth in small business services, particularly in retirement services and HR outsourcing [32] Question: Performance of PEO during enrollment period - Management reported the highest participation rates in four years, indicating strong demand for health benefits among targeted industries [57][58] Question: Insights on international market performance - Management described the international market as "lumpy," with solid execution expected to drive growth in the future [68] Question: Impact of processing days on revenue growth - Management noted a modest impact of around $10 million due to one less processing day compared to the previous year [85][89]

Financial Data and Key Metrics Changes - The company reported a 7% revenue growth and a 7% adjusted EPS growth for Q1 2026 [4][14] - Employer Services segment revenue increased by 7% on a reported basis and 5% on an organic constant currency basis [14][15] - Client funds interest revenue increased more than anticipated, leading to an increase in the full-year forecast by $10 million to a range of $1.30 to $1.32 billion [16][18] Business Line Data and Key Metrics Changes - Employer Services new business bookings showed solid growth, resulting in record sales volume for a first quarter [4][5] - PEO revenue growth of 7% exceeded expectations, driven by growth in zero margin pass-throughs and higher wages [5][17] - Employer Services pays per control growth rounded down to 0% for the first quarter, reflecting client caution in adding headcount [5][15] Market Data and Key Metrics Changes - Overall client satisfaction score reached a new all-time high for a first quarter, indicating improvements across business units [5] - The company experienced specific strength in ADP® Lyric HCM, with new business bookings exceeding expectations [8][9] - International markets showed a bit of softness in Q1, attributed to the lumpy nature of large, complex deals [87] Company Strategy and Development Direction - The company is focused on leading with best-in-class HCM technology, including the deployment of ADP Workforce Now® NextGen [7][10] - The acquisition of Pequody aims to enhance capabilities in compensation management, supporting complex planning needs [10][78] - AI initiatives are being advanced to improve client engagement and operational efficiency, with a focus on generative AI [11][12] Management's Comments on Operating Environment and Future Outlook - Management described the HCM demand backdrop as relatively stable, with no significant changes observed in deal cycles [23][24] - The company maintains its full-year growth guidance for Employer Services at 4% to 7% and PEO revenue growth at 5% to 7% [15][17] - Management expressed confidence in achieving the fiscal 2026 consolidated revenue outlook of 5% to 6% growth [18] Other Important Information - The company announced the acquisition of Pequody, which will broaden its capabilities in compensation management [10][78] - The company is committed to expanding its global capabilities, having recently gone live with its first GlobalView client in Costa Rica [13] Q&A Session Summary Question: Update on deal cycles and time to close - Management indicated that the HCM demand backdrop remains stable, with no meaningful changes in deal cycles observed in Q1 [23][24] Question: Confidence in Employer Services guidance amid slight downticks - Management expressed confidence in the guidance, noting that movements are relatively small and offsetting each other [25][27] Question: Surprising areas of new bookings growth - Management highlighted growth in small business services, particularly in retirement services and insurance, as well as continued interest in ADP® Lyric HCM [34] Question: Performance of the PEO and participation rates - Management reported the highest participation rates in four years during the recent enrollment period, indicating strong demand for health benefits [71] Question: Impact of recent layoffs in the market - Management stated that the hiring situation is static, with reduced layoff levels, and these factors are contemplated in their guidance [120]

Core Insights - The ADP employment data indicates a strong job growth in the U.S., with an average weekly increase of 14,250 jobs over the last four weeks, totaling approximately 57,000 jobs [1] - This job growth significantly exceeds the Dallas Fed's estimated breakeven point of 30,000 jobs per month, suggesting a robust labor market [1] - The strong ADP data may lead Federal Reserve Chairman Jerome Powell to adopt a more cautious stance regarding potential interest rate cuts in December, which could be perceived as a hawkish surprise affecting the market [1] - Federal Reserve's most dovish member, Waller, has previously supported rate cuts based on ADP data but emphasizes the need for caution [1]

Core Insights - Automatic Data Processing (ADP) reported quarterly earnings of $2.49 per share, exceeding the Zacks Consensus Estimate of $2.44 per share, and up from $2.33 per share a year ago, representing an earnings surprise of +2.05% [1][2] - The company achieved revenues of $5.18 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.95% and increasing from $4.83 billion year-over-year [2] - ADP has consistently surpassed consensus EPS and revenue estimates over the last four quarters [2] Earnings Outlook - The sustainability of ADP's stock price movement will largely depend on management's commentary during the earnings call and future earnings expectations [3][4] - Current consensus EPS estimate for the upcoming quarter is $2.61 on revenues of $5.33 billion, and for the current fiscal year, it is $10.92 on revenues of $21.73 billion [7] Industry Context - The Internet - Software industry, to which ADP belongs, is currently ranked in the top 30% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact ADP's stock performance [5][6]