ADP Announces Robust Fiscal 2026 Results and Strong Outlook for Fiscal 2027
Automatic Data Processing, Inc. (ADP), a global leader in HR and payroll solutions, has released its fourth quarter and fiscal year 2026 results, along with its outlook for fiscal 2027. The company has delivered solid performance across all key metrics, highlighting continued growth, margin expansion, and a clear focus on leveraging AI and enhancing client value.
Key Financial Highlights for Fiscal 2026
- Total Revenue: Increased 7% year-over-year to \$21.9 billion, with 6% growth on an organic constant currency basis.
- Employer Services New Business Bookings: Up 6% for the year, reaching \$2.2 billion.
- Net Earnings: Rose 8% to \$4.4 billion. Adjusted net earnings were up 10% to \$4.5 billion.
- Adjusted EBIT: Increased 10% to \$5.9 billion; adjusted EBIT margin expanded by 80 basis points to 26.8%.
- Diluted EPS: Up 10% to \$10.94. Adjusted diluted EPS increased 11% to \$11.12.
- Effective Tax Rate: For the year, stood at 23.0% on both reported and adjusted basis.
- Client Funds Interest Revenue: Increased 14% to \$1.4 billion, driven by a 7% rise in average client funds balances (\$40.4 billion average, with a yield increase to 3.4%).
Fourth Quarter 2026 Performance
- Revenue: \$5.5 billion, up 7% year-over-year (6% organic constant currency).
- Net Earnings: \$1.0 billion, up 7%; Adjusted Net Earnings: \$1.1 billion, up 14%.
- Adjusted EBIT: \$1.4 billion, up 13%; margin up 140 bps to 25.1%.
- Adjusted Diluted EPS: \$2.64, up 17%.
Segment Performance
Employer Services
- Revenue Growth: 7% for both Q4 and FY26 (reported); 6% organic constant currency for Q4, 5% for FY26.
- New Business Bookings: Up 6% to \$2.2 billion.
- Client Revenue Retention: Flat at 92.1%.
- U.S. Pays Per Control: Up 1% for both Q4 and FY26.
- Segment Margin: Up 90 bps for Q4, 60 bps for FY26.
PEO Services
- Revenue Growth: 7% for both Q4 and FY26.
- Revenues Excluding Zero-Margin Benefits Pass-Throughs: Up 5% for Q4 and FY26.
- Average Worksite Employees: Increased 2% (775,000 for Q4; 762,000 for FY26).
- Segment Margin: Decreased 100 bps for Q4, 110 bps for FY26.
Interest on Funds Held for Clients
- Interest Income: Up 15% in Q4 to \$355 million; up 14% in FY26 to \$1.4 billion.
- Average Client Funds Balances: Up 8% in Q4, 7% in FY26.
- Average Yield: Increased 20 bps to 3.5% in Q4, 3.4% for FY26.
Fiscal 2027 Outlook
- Revenue Growth: 5% to 6%.
- Adjusted EBIT Margin Expansion: 70–90 basis points.
- Adjusted Effective Tax Rate: ~23%.
- Diluted EPS Growth: 11% to 13% (adjusted diluted EPS growth of 9% to 11%).
- Employer Services:
- Revenue growth of 5%–6%.
- New business bookings growth of 4%–7%.
- Client revenue retention expected to decrease by 10–30 bps.
- Increase in U.S. pays per control of 0%–1%.
- PEO Services:
- Revenue growth of 5%–7%.
- Revenues excluding zero-margin pass-throughs to grow 3%–5%.
- Average worksite employee count growth of about 2%.
- Client Funds Extended Investment Strategy:
- Interest on funds held for clients expected at \$1.54–\$1.56 billion, based on 3%–4% growth in client funds balances and a yield rising to ~3.7%.
- Total contribution from extended investment strategy projected at \$1.545–\$1.565 billion.
Management Commentary
Maria Black, President & CEO: “ADP’s strong fiscal 2026 performance is founded in the long-term value that matters most to our clients: trust. AI is reshaping how work gets done, what roles look like, and how teams are organized. This is making HCM more critical than ever and companies need a partner they can trust to help navigate this shift. Our impressive financial results, strong Employer Services retention, and record client satisfaction scores are evidence that ADP is purpose-built for this, and we’ve never been better positioned to deliver for our clients.”
Peter Hadley, CFO: “With AI tools now being embedded across our product, service and sales teams in ways that are enhancing quality and productivity, we enter fiscal 2027 in a strong position to drive growth in our business and deliver value for our clients and healthy returns for our shareholders.”
Non-GAAP Adjustments & Notable Items
- Workforce Optimization Initiatives: Partial reversal in FY26, resulting in a \$5 million pre-tax gain.
- Business Alignment Program: FY26 included \$91 million in pre-tax charges, primarily severance and strategic project costs, aimed at streamlining and aligning the company’s structure with strategic priorities.
- ADP Ventures: FY26 saw an \$8 million pre-tax gain on investments via the corporate venture arm.
- Legal Settlement: FY26 included \$18 million in pre-tax net charges related to a legal matter.
These items are excluded from adjusted results to provide a clearer view of underlying operations and improve period-over-period comparability.
Balance Sheet & Cash Flow
- Total Assets: \$63.2 billion as of June 30, 2026, up from \$53.4 billion in 2025.
- Cash & Equivalents: \$4.2 billion; total cash, cash equivalents, and restricted equivalents at \$10.6 billion.
- Client Funds Held: \$44.0 billion, up from \$31.0 billion year-over-year.
- Stockholders’ Equity: \$6.0 billion, slightly down from \$6.2 billion in 2025.
- Net Cash Flows Provided by Operating Activities: \$5.4 billion.
- Net Cash Flows Used in Investing Activities: (\$4.7 billion).
- Net Cash Flows Provided by Financing Activities: \$4.9 billion.
Potential Price-Sensitive Items for Investors
- Continued Double-Digit Growth in Adjusted EPS and EBIT: May positively impact investor sentiment and share price.
- Strong Outlook for Fiscal 2027: Guidance for revenue, margin, and EPS growth signals confidence in future performance.
- AI Adoption: Company’s integration of AI in products, services, and operations is highlighted as a driver for quality, productivity, and competitive advantage.
- Business Alignment Charges: The \$91 million charge for FY26 is a one-off, but investors should monitor its impact on future cost structure and margins.
- Client Funds Investment Strategy: Increasing yields and balances could further boost earnings, but depends on interest rate environment.
- Legal Settlement: \$18 million net charge in FY26 may be relevant for assessing ongoing legal risks.
- Share Repurchases and Dividends: \$2.1 billion repurchased shares and \$2.6 billion paid in dividends in FY26, indicating shareholder returns remain a priority.
Investor Communications
ADP will host an investor webcast and conference call for financial analysts. The webcast and a detailed slide presentation are available on ADP’s Investor Relations website.
Company Overview
ADP has been shaping the world of work for over 75 years, offering HR, Talent, Time Management, Benefits, Compliance, and Payroll solutions to over 1.1 million clients in 140+ countries. The company’s focus remains on people-centric innovation, leveraging AI-driven insights and expertise to design solutions that drive workforce success.
Disclaimer
This article contains forward-looking statements based on ADP management’s expectations and assumptions. Actual results may differ materially due to various risks and uncertainties, including but not limited to market conditions, interest rates, competitive factors, technology changes (including AI), and legal/regulatory changes. Investors should review ADP’s filings with the SEC and consult professional advisors before making investment decisions. The information herein is for informative purposes only and does not constitute investment advice.
