Paychex Reports Second Quarter Results

Core Insights - Paychex, Inc. reported strong second quarter results for fiscal 2026, with total revenue increasing by 18% year-over-year to $1.56 billion and adjusted operating income growing by 21% to $649 million [1][4][3] Financial Performance - Total revenue for the second quarter reached $1,557.6 million, up from $1,316.9 million in the same period last year, marking an 18% increase [1][4] - Operating income increased by 6% to $571.9 million, while adjusted operating income rose by 21% to $649 million [1][5] - Diluted earnings per share decreased by 4% to $1.10, whereas adjusted diluted earnings per share increased by 11% to $1.26 [1][6] Revenue Breakdown - Management Solutions revenue grew by 21% to $1.2 billion, with the acquisition of Paycor contributing approximately 17% to this growth [4][3] - Professional Employer Organization (PEO) and Insurance Solutions revenue increased by 6% to $336.9 million, driven by growth in average PEO worksite employees [4] - Interest on funds held for clients surged by 51% to $54.3 million, attributed to higher average investment balances and realized gains from portfolio repositioning [4] Expense Overview - Total expenses rose by 27% to $985.7 million, primarily due to increased compensation-related expenses and amortization of intangible assets from the Paycor acquisition [5][10] - Operating margin for the second quarter was 36.7%, down from 40.9% in the prior year, while adjusted operating margin improved to 41.7% from 40.9% [5][11] Strategic Initiatives - The company emphasized disciplined cost management and productivity improvements, partly driven by expanding AI capabilities [3] - Innovation is central to the company's strategy, focusing on AI-powered technologies to enhance workforce management and client satisfaction [3] Business Outlook - The company anticipates adjusted diluted earnings per share growth in the range of 10% to 11% for fiscal 2026, maintaining other aspects of its guidance unchanged [21][15]