Latest quarter
ADP reported Q4 FY2026 revenue of $5.5 billion, up 6.77% from $5.1 billion a year earlier and above the consensus of $5.4 billion. The company reported adjusted EPS, as the consensus counts it, of $2.64, above the $2.59 consensus; diluted EPS was $2.45, up 9.87% from $2.23 in Q4 FY2025.
On the earnings call, ADP said Employer Services revenue rose 7% in the quarter, including 6% organic constant-currency growth, while PEO revenue increased 7%; PEO revenue excluding zero-margin pass-throughs rose 5%. ADP said average PEO worksite employees increased 2% to 775,000, and Employer Services pays per control grew 1%.
The company reported gross margin of 45.9%, compared with 45.1% a year earlier, while operating margin was 23.0%, compared with 23.5%. ADP reported free cash flow of $1.2 billion, compared with $1.3 billion in Q4 FY2025. Peter Hadley said PEO margin contracted 100 basis points, mainly because zero-margin pass-through revenue grew faster and workers’ compensation and selling expenses increased.
| Q4 FY2026 | Q4 FY2025 | Change | |
|---|---|---|---|
| Revenue | $5.5 billion | $5.1 billion | 6.77% |
| Diluted EPS | $2.45 | $2.23 | 9.87% |
| Gross margin | 45.9% | 45.1% | 0.8 percentage points |
| Operating margin | 23.0% | 23.5% | −0.5 percentage points |
| Free cash flow | $1.2 billion | $1.3 billion | −5.49% |
| Against the consensus | Reported | Consensus | Result |
|---|---|---|---|
| Adjusted EPS | $2.64 | $2.59 | Beat by 1.93% |
| Revenue | $5.5 billion | $5.4 billion | Beat by 0.87% |
Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.
What management said on the call
Maria Black said demand for Employer Services and PEO outsourcing remained strong during fiscal 2026 as employers sought support in a complex operating environment. She said Employer Services produced more than $2.2 billion of new-business bookings, up 6%, with contributions from its small-business portfolio, Employer Services, HR Outsourcing, enterprise and international businesses. Black said Employer Services retention was 92.1% and that ADP entered fiscal 2027 with healthy new-business pipelines.
Black said ADP had expanded availability of its ADP Assist agents across payroll, benefits, HR and compliance, and that 3.1 million unique active users had 12 million conversations with the service in fiscal 2026. She also said live Lyric clients increased 94% from a year earlier and its Lyric pipeline grew 50%. Black said 48% of the service population had access to the Zone platform at year-end, compared with 10% at the start of fiscal 2026, and said contacts per client declined 4% as the platform scaled.
Hadley said Employer Services margin expanded 90 basis points in Q4, citing operational productivity improvements and client-funds interest revenue. He said ADP expected further Employer Services margin expansion in fiscal 2027 from those factors, while PEO margin was expected to contract further as zero-margin pass-throughs grow faster than overall PEO revenue.
On pricing, Hadley said fiscal 2026’s contribution from price was slightly above 130 basis points and that ADP’s fiscal 2027 outlook contemplated a similar contribution. He said the company uses value-based pricing, prioritizing the lifetime value of client relationships.
Analysts asked about the bookings outlook, international win rates, pricing and the factors underlying the revenue outlook. Black said ADP was winning more business than with its prior platform but did not provide product-by-product win-rate figures. Hadley said large Lyric, Workforce Suite and global-payroll opportunities could affect where bookings fall within the company’s guidance range. He said the fiscal 2027 outlook did not anticipate a meaningful change in underlying drivers such as bookings, retention, pays per control and price.
Guidance
ADP’s fiscal 2027 outlook assumes a broadly stable macroeconomic environment. The company expects revenue growth of 5% to 6%, Employer Services revenue growth of 5% to 6%, and PEO Services revenue growth of 5% to 7%, including 3% to 5% growth excluding zero-margin benefits pass-throughs. ADP expects adjusted EPS growth of 9% to 11%, diluted EPS growth of 11% to 13%, and an effective tax rate of around 23%. The company expects Employer Services bookings growth of 4% to 7% and U.S. pays-per-control growth of 0% to 1%.
| Metric | For | Guide | Previous guide | Change |
|---|---|---|---|---|
| Revenue, Client Funds Extended Investment Strategy | FY2027 | $1.5 billion–$1.6 billion | — | New |
| Cash, Client Funds Average Yield | FY2027 | ADP expects the average yield on client funds to increase to approximately 3.7% in fiscal 2027. | — | New |
| Cash, Client Funds Balances | FY2027 | ADP expects client funds balances to grow 3% to 4% in fiscal 2027. | — | New |
| Revenue, Client Funds Interest | FY2027 | $1.5 billion–$1.6 billion | — | New |
| Customers growth, Peo Services Average Worksite Employee Count | FY2027 | 2.00% | — | New |
| Revenue growth, Peo Services Excluding Zero Margin Benefits Pass Throughs | FY2027 | 3.00%–5.00% | — | New |
| Revenue growth, Peo Services | FY2027 | 5.00%–7.00% | — | New |
| Units growth, Employer Services US Pays Per Control | FY2027 | 0.00%–1.00% | — | New |
| Bookings growth, Employer Services | FY2027 | 4.00%–7.00% | — | New |
| Revenue growth, Employer Services | FY2027 | 5.00%–6.00% | — | New |
| EPS growth, non-GAAP | FY2027 | $0.09–$0.11 | — | New |
| EPS growth, GAAP | FY2027 | $0.11–$0.13 | — | New |
| Tax rate, non-GAAP | FY2027 | 23.0% | — | New |
| Revenue growth | FY2027 | 5.00%–6.00% | — | New |
| Tax rate | FY2027 | 23.0% | — | New |
| Units growth, Peo Average Worksite Employees | FY2027 | 2.00% | — | New |
| Revenue growth, Peo Excluding Zero Margin Pass Throughs | FY2027 | 3.00%–5.00% | — | New |
| Revenue growth, Peo | FY2027 | 5.00%–7.00% | — | New |
| Cash, Client Funds Average Balances | FY2027 | ADP expects average client-funds balances to grow 3% to 4% in fiscal 2027. | — | New |
| EPS growth, Adjusted | FY2027 | $0.09–$0.11 | — | New |