ADP reported second‑quarter fiscal 2026 revenue of $5.36 billion, up 6.0% from $5.05 billion in the same period a year earlier, and an adjusted earnings per share of $2.62, beating the consensus estimate of $2.57–$2.60 by $0.02–$0.05. The company’s earnings beat was driven by a 6.5% year‑over‑year increase in Employer Services revenue to $3.61 billion and a 5.5% rise in PEO Services revenue to $1.76 billion, while client‑funds interest income grew as average balances and yields expanded.
The adjusted EBIT margin expanded to 26.0%, an 80‑basis‑point lift from the prior quarter, largely due to a higher mix of high‑margin AI‑powered Lyric contracts and the continued contribution of client‑funds interest revenue. Operational leverage also played a role, as the company scaled its payroll and HCM solutions without a proportional rise in operating costs.
Management raised its full‑year guidance, projecting revenue growth of more than 6% versus the previous 5–6% range and adjusted diluted EPS growth of 9–10% versus the prior 8–10% range. The upward revision reflects confidence in sustained demand for payroll and AI‑enabled HCM services, but the guidance midpoint remains slightly below analyst consensus, which tempered investor enthusiasm.
Headwinds noted in the earnings call include a modest decline in client revenue retention, a flat U.S. pays‑per‑control forecast, and moderated growth in the PEO segment due to higher zero‑margin pass‑throughs and increased selling expenses. Flat hiring trends also weigh on future revenue growth, as ADP’s business model is sensitive to employment levels.
"ADP’s strong second‑quarter results reflect the breadth of our innovative products, differentiated service, and exceptional client experience," said Maria Black, President and CEO. "Powered by the industry’s largest HCM dataset, we combine proprietary workforce insights with advanced automation to solve real workforce challenges and build a smarter, more human world of work.”
Peter Hadley, Chief Financial Officer, added, "Our focus on execution and new business bookings has delivered strong revenue and earnings growth. The updated guidance demonstrates our confidence in meeting financial commitments while investing strategically for long‑term growth."
In pre‑market trading, the stock slipped between 0.8% and 2.95%, a reaction driven by the guidance midpoint falling short of consensus, concerns over flat hiring trends, and the moderated performance of the PEO segment.
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