Automatic Data Processing, Inc.
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Item 1. Business
CORPORATE BACKGROUND
General
In 1949, our founders established ADP with a simple, innovative idea: help clients focus on their business by solving their payroll challenges. In the 77 years since, we have led the Human Capital Management (“HCM”) industry in innovation. We were the first in HCM to deliver automation, move to the cloud, provide a mobile app, and create an online marketplace. Today, we continue that legacy with artificial intelligence (“AI”), building AI into the very core of how we orchestrate, govern and execute HR and pay processes for real-world outcomes.
As AI adds new layers of complexity to managing the workforce infrastructure that makes business possible, our clients need a partner they can trust. As the trusted, service-driven, and AI-enabled partner for HCM, we deliver services powered by deep domain expertise, workforce data, and global scale to help organizations manage their most critical workforce functions with precision, compliance and confidence. Today, we are a global leader in HR and payroll solutions, serving over 1.1 million clients and paying over 42 million workers in over 140 countries and territories. Our common stock is listed on the NASDAQ Global Select Market® under the symbol “ADP.”
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When we refer to “we,” “us,” “our,” “ADP,” or the “Company” in this Annual Report on Form 10-K, we mean Automatic Data Processing, Inc. and its consolidated subsidiaries.
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BUSINESS OVERVIEW
ADP’s Mission
Our mission is to help our clients manage the workforce infrastructure that makes business possible, whether they're a Fortune 500® company or a small local business.
AI is reshaping how work gets done at the task level, but that does not eliminate the need to manage it. In fact, AI has added new layers of complexity for business and ADP is purpose-built for this challenge.
ADP brings 77 years of workforce expertise and global scale to payroll, compliance, and workforce management, and these advantages set us apart. We support every HCM need of our clients from HR, payroll, time and benefits to HR outsourcing, talent, compliance and retirement, across the entire employee experience. Our industry-leading data, global scale and reach, and deep domain expertise shape our trusted service model and are at the core of our relationship with each one of our clients, which span over 140 countries and territories. Together, these strengths allow us to solve our clients' challenges with HCM solutions that reduce friction, deliver smart insights to drive decisions, and ultimately empower people at work without replacing their human judgment.
ADP’s Strategy
With a large and growing addressable market, we are focused on our core growth areas and further enhancing our market position by executing against our three strategic priorities rooted in our structural advantages:
• Lead with Best-in-Class HCM Technology. We design and develop world-class, AI-enabled HCM platforms that simplify work and help organizations manage their most critical workforce functions with precision, compliance and confidence in the AI era. Unlike generalized AI tools, our AI is built into the very core of how we orchestrate, govern, and execute HR and pay processes for real-world outcomes. Our global data platform, named “2026 Data Solution of the Year for HR” in the Data Breakthrough Awards, is the foundation of the advantage we bring to our clients. Spanning over 1.1 million clients and 42 million workers across roles, industries and geographies, we have the industry's largest workforce dataset. In the U.S., we pay one in six workers and moved $3.5 trillion in fiscal year 2026, giving us unique insights into the workforce and its emerging trends. AI is only as good as the data it is trained on, and this advantage compounds over time. Every ADP Assist AI Agent is grounded in ADP's institutional knowledge. The result is persona-based agents tailored for employees, managers, HR and payroll practitioners, all informed by ADP's data advantage.
Our approach to AI agents earned ADP recognition as one of Fast Company's 2026 “Most Innovative Companies,” with ADP earning the number one spot among HR companies for its purpose-built approach to designing AI tools that solve real client challenges and empower people at work.
• Provide Unmatched Expertise and Outsourcing Solutions. Our products, services, and solutions are built on 77 years of hands-on experience with HR processes, workflows, exceptions and regulatory nuance. Our clients look to us as a source of expertise to understand key HR trends and best practices, employment and related legislation and regulations, and to offer thoughtful strategies to utilize HCM technology to achieve their business objectives and support their workforce. Many of our clients also ask us to take on responsibility for a portion or all of their HCM workflows via one of our Human Resources Outsourcing (“HRO”) solutions. ADP pairs AI-driven efficiency with expert human judgment. Our clients have access to real experts for unique and unprecedented situations and we are designed to execute with precision when it matters most.
• Benefit our Clients with Our Global Scale. Our clients benefit from our unmatched global footprint and scale in the HCM industry. ADP serves clients in over 140 countries and territories with 67,000 associates delivering solutions for our clients' global operations. With direct integration to tens of thousands of government entities, tax authorities, and banking institutions, our global footprint provides a “final mile” ecosystem that is hard to replicate.
As AI accelerates regulatory fragmentation, our scale and compliance infrastructure become even more critical to our clients' success. We continue to build on these strengths to further improve our client experience, and to add to our global footprint to meet our clients where they choose to do business. We have strategically focused on delivering a single, unified, consistent and easy to navigate experience for our global and multinational clients, leaning into our strength in global payroll and expanding our HR and workforce management solutions. We continue to build more relationships with best-in-class providers to give clients seamless integrations and customizations that simplify their HR processes and address their unique needs, whether through embedded payroll offerings or partner solutions available through the ADP Marketplace. And we intend to continue to invest in our sales organization and best-in-class sales technology to not only optimize the purchase experience but to empower
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our sellers to provide the deep expertise and insights our clients require to ensure they have the right HCM solutions to help them achieve their objectives and make a meaningful impact for their employees.
ADP's Commitment to Responsible AI
Clients have relied on ADP through decades of change and complexity. In the AI era, our commitment to responsible AI reinforces ADP's position as the trusted partner for HCM. ADP maintains strong governance through an active AI & Data Ethics Council, comprised of both industry leaders and ADP experts, which advises on emerging industry trends and concerns and provides guidance with respect to compliance with the principles that ADP should follow while developing products, systems and applications that involve AI, machine learning (“ML”) and data.
We additionally have an interdisciplinary working group across ADP that determines governance for use cases and the set of principles and processes that govern the use of these technologies, including operational monitoring of recommendations made by AI and ML technologies. As we continue to introduce new AI tools, we aim to incorporate compliance, transparency and security into development from the start.
Reportable Segments
Our two reportable business segments are Employer Services and Professional Employer Organization (“PEO”), and are based on the way that management reviews the performance of, and makes decisions about, our businesses. For financial data by segment and by geographic area, see Note 15 to the “Consolidated Financial Statements” contained in this Annual Report on Form 10-K.
Employer Services. Our Employer Services segment serves clients ranging from single-employee small businesses to large enterprises with tens of thousands of employees around the world, offering a comprehensive range of technology-based HCM solutions, including our strategic, cloud-based platforms, and HRO (other than PEO) solutions. These solutions address critical client needs and include: Payroll Services, Benefits Administration, Talent Management, Workforce Management Solutions, Compliance Solutions, Human Resources Management, Retirement Services and Insurance Services.
Professional Employer Organization. Our PEO business, called ADP TotalSource®, is our full-service PEO that offers expert guidance, user-friendly technology, comprehensive employee benefits, and a risk management, safety, and workers’ compensation program as part of a co-employment arrangement in which employees who work for a client (referred to as “worksite employees”) are co-employed by the client and us.
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PRODUCTS AND SOLUTIONS
To help clients manage the workforce infrastructure that makes business possible, whether they’re a Fortune 500 company or a small local business, we provide a unified ecosystem of HCM solutions rooted in our industry-leading data and deep domain expertise. Our strategic cloud-based platforms, scalable by company size and location, allow clients to recruit, onboard, pay, manage and retain their people in one single space with precision, compliance and confidence. Our AI is built into the very core of how our platforms orchestrate, govern and execute HR and pay processes for real-world outcomes.
HCM Solutions
Integrated HCM Solutions. Our premier suite of HCM solutions support employers of all types and sizes across the entire employment cycle, from recruitment to retirement.
These solutions are powered by our award-winning data and AI capabilities, which are designed to reduce friction, surface actionable insights and support informed human judgment across all of our platforms, including:
• RUN Powered by ADP®, serving over 980,000 small businesses, is an all-in-one platform designed specifically for small businesses to simplify payroll, HR, and compliance. It combines easy-to-use technology with 24/7 real-person support from ADP’s team of payroll professionals. By embedding automation and AI into routine tasks, RUN helps small businesses focus on running their operations with compliance, precision and confidence. RUN also integrates with other ADP solutions, including workforce management, workers’ compensation, benefits, and retirement services.
• ADP Workforce Now® is a flexible HCM solution used by over 90,000 mid-sized and large businesses in North America to manage their employees. More businesses use ADP Workforce Now in North America than any other HCM solution designed for both mid-sized and large businesses. Workforce Now integrates payroll, HR, time, benefits and compliance on a single platform, enabling organizations to manage complex workforce requirements with confidence.
• ADP Lyric™ HCM is a global HCM for large enterprises, unifying HR management, payroll, workforce management, talent, and data analytics into a flexible, intelligent, and human-centric solution. Businesses using Lyric also benefit from comprehensive end-to-end service support, with an emphasis on global compliance support and expertise. Lyric is built for the way people actually work together, mirroring practically any structure of work groups, such as divisions, regions, or dynamic teams. Lyric integrates generative AI technology with ADP’s unmatched dataset, helping to support decision-making, drive efficiency and personalize employee experiences based on attributes of role, geographic location, typical behaviors, and
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anticipated need, all while maintaining human oversight in high-stakes outcomes such as pay, compliance and workforce decisions.
Payroll Services. We pay approximately 26 million (approximately 1 out of every 6) workers in the United States. We offer flexible payroll services to employers of all sizes, including the preparation of employee paychecks, pay statements, supporting journals, summaries, and management reports. Our payroll solutions are designed to deliver dependable execution at scale, supported by deep expertise and AI-enabled automation that helps reduce risk without removing human judgment and accountability.
We provide employers with a wide range of payroll options, including using mobile technology, connecting their major enterprise resource planning (“ERP”) applications with ADP’s payroll services or outsourcing their entire payroll process to us. Employers can choose a variety of payroll payment options including ADP’s electronic wage payment and, in the United States, payroll card solutions and digital accounts. On behalf of our clients in the United States, we prepare and file federal, state and local payroll tax returns, and quarterly and annual Social Security, Medicare, and federal, state and local income tax withholding reports.
Benefits Administration. In the United States, we provide powerful and agile solutions for employee benefits administration. These options include health and welfare administration services, leave administration services, insurance carrier enrollment services, employee communication services, and dependent verification services. In addition, ADP benefits administration solutions offer employers a simple and flexible cloud-based eligibility and enrollment system that provides their employees with tools, communications, and other resources they need to understand their benefits options and make informed choices.
Talent Management. ADP’s Talent Management solutions simplify and improve the talent acquisition, management and activation process, from recruitment to ongoing employee engagement and development. Employers can use our applicant tracking software to help manage the candidate hiring process and can outsource their internal recruitment function to ADP. Employers can also receive employer brand activation services, management of candidate advertising, talent community building services, and recruiter training services, as well as career search support and outplacement for reductions in force. Our solutions provide performance, learning, succession and compensation management tools that help employers align goals to outcomes, and enable managers to identify and mitigate potential retention risks. ADP’s compensation management solutions expanded in 2025 with the acquisition of Pequity, which supports the complex compensation planning needs of mid-size, enterprise and multinational companies with flexible configurations, AI-enhanced insights, budgeting and scenario planning tools. Our talent activation solutions provide team leaders with data and insights to drive employee engagement and leadership development, which in turn help drive employee performance.
Workforce Management Solutions.
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Tabular dollars are presented in millions, except per share amounts
The following section discusses our year ended June 30, 2026 (“fiscal 2026”), as compared to year ended June 30, 2025 (“fiscal 2025”). A detailed review of our fiscal 2025 performance compared to our fiscal 2024 performance is set forth in Part II, Item 7 of our Form 10-K for the year ended June 30, 2025.
FORWARD-LOOKING STATEMENTS
This document and other written or oral statements made from time to time by Automatic Data Processing, Inc., its subsidiaries and variable interest entity (“ADP” or the “Company”) may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like “outlook,” “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could,” “is designed to” and other words of similar meaning, are forward-looking statements. These statements are based on management’s expectations and assumptions and depend upon or refer to future events or conditions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Forward-looking statements are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements or that could contribute to such difference include: ADP's success in obtaining and retaining clients, and selling additional services to clients; the pricing of products and services; the success of our new solutions; our ability to respond successfully to changes in technology, including artificial intelligence; compliance with existing or new legislation or
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regulations; changes in, or interpretations of, existing legislation or regulations; overall market, political and economic conditions, including interest rate and foreign currency trends and inflation; competitive conditions; our ability to maintain our current credit ratings and the impact on our funding costs and profitability; security or cyber breaches, including as a result of artificial intelligence, fraudulent acts, and system interruptions and failures; employment and wage levels; availability of skilled associates; the impact of new acquisitions and divestitures; the impact of any uncertainties related to major natural disasters or catastrophic events; and supply-chain disruptions. The factors identified above are not exhaustive. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. These risks and uncertainties, along with the risk factors discussed under “Item 1A. Risk Factors”, and in other written or oral statements made from time to time by ADP, should be considered in evaluating any forward-looking statements contained herein.
NON-GAAP FINANCIAL MEASURES
In addition to our U.S. GAAP results, we use adjusted results and other non-GAAP metrics to evaluate our operating performance in the absence of certain items and for planning and forecasting of future periods. Adjusted EBIT, adjusted EBIT margin, adjusted net earnings, adjusted diluted earnings per share, adjusted effective tax rate and organic constant currency are all non-GAAP financial measures. Please refer to the accompanying financial tables in the “Non-GAAP Financial Measures” section for a discussion of why ADP believes these measures are important and for a reconciliation of non-GAAP financial measures to their nearest comparable GAAP financial measures.
EXECUTIVE OVERVIEW
As a global leader in HR and payroll solutions, ADP continuously aims to solve complex business challenges for our clients and their workers. Our Human Capital Management ("HCM") solutions, which include both software and outsourcing services, are designed to help our clients manage their workforce through a dynamic business and regulatory landscape and the changing world of work. We see tremendous opportunity ahead as we focus on our three key Strategic Priorities: Leading with Best-in-Class HCM technology, Providing Unmatched Expertise and Outsourcing Solutions, and Leveraging our Global Scale for the Benefit of our Clients.
During fiscal 2026, we made meaningful progress on our Strategic Priorities. We continued to leverage our data advantages, domain expertise, and trusted brand to lead the HCM industry's AI transformation. ADP Assist became increasingly embedded in our clients' workflows, delivering meaningful time savings and improved accuracy. Since launching ADP Assist agents in January, we steadily expanded their availability across our payroll, benefits, HR, and compliance solutions, making AI-powered HCM agents accessible to nearly all of our more than 1.1 million clients. We also launched a dedicated space within ADP Marketplace for our partners' AI agents, further expanding our AI ecosystem. Additionally, we continued deploying AI tools across our sales, service, and research and development functions to improve the client experience and drive internal productivity gains. During the year, we experienced strong enterprise sales momentum for ADP Lyric HCM and the ADP WorkForce Suite, as our unified global payroll, global HR, and global time solutions continued to resonate with clients. Finally, we remained focused on delivering value through our global scale by providing compliant HCM solutions, local expertise, and trusted relationships wherever our clients operate.
Highlights from the year ended June 30, 2026 include:
•Revenue growth of 7% to $21,947.4 million; 6% growth on an organic constant currency
•Earnings before income taxes margin expansion of 30 bps, and adjusted EBIT margin expansion of 80 bps
•Diluted and adjusted diluted earnings per share ("EPS") growth of 10% and 11%, respectively, to $10.94 and $11.12, respectively
•Cash returned via shareholder friendly actions of $4.7B, including $2.6B of dividends and $2.1B of share repurchases
For fiscal 2026, we delivered strong revenue growth of 7%, 6% growth on an organic constant currency basis. Our United States pays per control metric, which represents the approximate growth in the number of employees on ADP clients' processed payrolls in the United States when measured on a same-store-sales basis for a subset of Employer Services clients ranging from small to large businesses, grew 1% for the year ended June 30, 2026 as compared to the year ended June 30, 2025. PEO average worksite employees increased 2% for the year ended June 30, 2026, as compared to the year ended June 30, 2025. Additionally, our ES new business bookings grew 6% in fiscal 2026, and our ES client revenue retention was 92.1%. These results are a testament to the meaningful investments we have made in our solutions and the efforts of our associates to deliver exceptional levels of client service.
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We have a strong business model, generating significant cash flows with low capital intensity, and offer a suite of products that provide critical support to our clients’ HCM functions. We generate sufficient free cash flow to satisfy our cash dividend and our modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our long-term strategy and commitments to shareholder friendly actions. We are committed to building upon our past successes by investing in research and development to enhance our products and services and by driving continuous improvement in the way we operate. Our financial condition remains solid at June 30, 2026 and we remain well positioned to support our associates and our clients.
RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS
Total Revenues
For the year ended June 30:
| Years Ended | |||||||||||
| June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Total Revenues | $ | 21,947.4 | $ | 20,560.9 | |||||||
| YoY Growth | 7 | % | 7 | % | |||||||
| YoY Growth, Organic Constant Currency | 6 | % | 7 | % | |||||||
Total revenues increased in fiscal 2026 due to new business started from new business bookings, strong client revenue retention, an increase in zero-margin benefits pass-throughs of $318.3 million, an increase in pricing, a 1% year-over-year growth impact of foreign currency, and an increase in interest on funds held for clients of $165.7 million.
Total revenues for fiscal 2026 include interest on funds held for clients of $1,354.8 million, as compared to $1,189.1 million in fiscal 2025. The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 7.4% to $40.4 billion in fiscal 2026 as compared to fiscal 2025, coupled with an increase in our average interest rate earned to 3.4% in fiscal 2026, as compared to 3.2% in fiscal 2025.
Total Expenses
| Years Ended | ||||||||||||||||||||||||||||||||||||||
| June 30, | ||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | % Change | ||||||||||||||||||||||||||||||||||||
| Costs of revenues: | ||||||||||||||||||||||||||||||||||||||
| Operating expenses | $ | 10,240.6 | $ | 9,622.7 | 6 | % | ||||||||||||||||||||||||||||||||
| Research and development | 1,028.8 | 988.6 | 4 | % | ||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 490.8 | 486.0 | 1 | % | ||||||||||||||||||||||||||||||||||
| Total costs of revenues | 11,760.2 | 11,097.3 | 6 | % | ||||||||||||||||||||||||||||||||||
| Selling, general, and administrative expenses | 4,408.2 | 4,051.7 | 9 | % | ||||||||||||||||||||||||||||||||||
| Interest expense | 459.3 | 455.9 | 1 | % | ||||||||||||||||||||||||||||||||||
| Total expenses | $ | 16,627.7 | $ | 15,604.9 | 7 | % | ||||||||||||||||||||||||||||||||
For the year ended June 30:
Operating expenses increased in fiscal 2026 due to an increase of $318.3 million in PEO Services zero-margin benefits pass-through costs to $4,607.3 million in fiscal 2026 from $4,289.0 million in fiscal 2025. Additionally, operating expenses increased by $188.9 million due to higher service and implementation costs in support of our growing revenue, $74.4 million million primarily due to higher hosting, cloud-based service, and software license costs in support of our products and solutions, and by $37.1 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.
Research and development expenses increased in fiscal 2026 due to increased costs to develop, support, and maintain our new and existing products, including the integration costs associated with the WorkForce Software acquisition.
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Depreciation and amortization increased in fiscal 2026 due to the amortization of investments in internally developed software primarily for our products and solutions, intangible assets acquired in the WorkForce Software acquisition, and purchased software, partially offset by lower amortization of customer contracts and lists.
Selling, general, and administrative expenses increased in fiscal 2026 primarily due to increases in selling and marketing expenses of $241.4 million as a result of investments in our sales organization, an increase in costs related to non-recurring, broad-based, company-wide initiatives of $67.2 million and a non-recurring net legal settlement of $18.0 million.
Interest expense increased in fiscal 2026 primarily due to net increases in interest expense of $25.3 million related to the senior notes issued in fiscal 2026 and 2025, offset by the redemption of a senior note in fiscal 2025. These increases were partially offset by a decrease of $22.8 million related to commercial paper and reverse repurchase borrowings as a result of decreases in average interest rates on commercial paper issuances and reverse repurchases of 80 and 70 basis points, respectively, offset by an increase in average daily commercial paper borrowings and average reverse repurchase outstanding balances of $0.1 billion and $0.6 billion, respectively, as compared to fiscal 2025.
Other (Income)/Expense, net
| Years ended June 30, | 2026 | 2025 | $ Change | ||||||||||||||
| Interest income on corporate funds | $ | (371.0) | $ | (319.5) | $ | (51.5) | |||||||||||
| Realized (gains)/losses on available-for-sale securities, net | (2.9) | 1.7 | (4.6) | ||||||||||||||
| Gain on sale of assets | — | (5.0) | 5.0 | ||||||||||||||
| Non-service components of pension income, net | (28.3) | (31.3) | 3.0 | ||||||||||||||
| Net (gain)/loss on ADP Ventures' investments | (8.4) | — | (8.4) | ||||||||||||||
| Other income, net | $ | (410.6) | $ | (354.1) | $ | (56.5) | |||||||||||
Interest income on corporate funds increased in fiscal 2026 due to higher average investment balances of $10.4 billion as compared to $9.2 billion in fiscal 2025, coupled with an increase in average interest rates of 10 basis points, as compared to fiscal 2025.
In fiscal 2026, the Company recognized a net gain of $8.4 million related to investments made through its Corporate Venture Capital arm, ADP Ventures.
See Note 11 of our Consolidated Financial Statements for further details on non-service components of pension income, net.
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Earnings Before Income Taxes ("EBIT") and Adjusted EBIT
For the year ended June 30:
| Years Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2026 | 2025 | YoY Growth | ||||||||||||||
| EBIT | $ | 5,730.3 | $ | 5,310.1 | 8 | % | ||||||||||
| EBIT Margin | 26.1 | % | 25.8 | % | 30 bps | |||||||||||
| Adjusted EBIT | $ | 5,874.6 | $ | 5,347.1 | 10 | % | ||||||||||
| Adjusted EBIT Margin | 26.8 | % | 26.0 | % | 80 bps | |||||||||||
Earnings before income taxes increased in fiscal 2026 due to the increase in total revenues, partially offset by the increase in total expenses discussed above.
EBIT Margin increased in fiscal 2026 due to contributions from client funds interest revenues, increased interest income on corporate funds, lower amortization of client contracts and lists, and lower interest expense related to commercial paper and reverse repurchase borrowings, partially offset by increased selling and marketing expenses and costs related to non-recurring, broad-based, company-wide initiatives.
Adjusted EBIT and Adjusted EBIT margin exclude interest income and interest expense that are not related to our client funds
extended investment strategy, and net charges, including certain legal matters, non-recurring, broad-based, company-wide initiatives, gain on sale of assets, and (gains)/losses on ADP Ventures' investments, in the applicable periods.
Provision for Income Taxes
The effective tax rate in fiscal 2026 and 2025 was 23.0% and 23.2%, respectively. The decrease in the effective tax rate is primarily due to a decrease in uncertain tax positions and an increase in tax credits, partially offset by a lower benefit for adjustments to prior year tax liabilities and a lower excess tax benefit on stock-based compensation for fiscal 2026 as compared to fiscal 2025. Refer to Note 12, Income Taxes, within the Notes to the Consolidated Financial Statements for further discussion.
Adjusted Provision for Income Taxes
The adjusted effective tax rate in fiscal 2026 and 2025 was 23.0% and 23.2%, respectively. The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.
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Net Earnings and Diluted EPS, Unadjusted and Adjusted
For the year ended June 30, respectively:
| Years Ended | ||||||||||||||||||||
| June 30, | ||||||||||||||||||||
| 2026 | 2025 | YoY Growth | ||||||||||||||||||
| Net earnings | $ | 4,413.5 | $ | 4,079.7 | 8 | % | ||||||||||||||
| Diluted EPS | $ | 10.94 | $ | 9.98 | 10 | % | ||||||||||||||
| Adjusted net earnings | $ | 4,485.4 | $ | 4,092.0 | 10 | % | ||||||||||||||
| Adjusted diluted EPS | $ | 11.12 | $ | 10.01 | 11 | % | ||||||||||||||
In addition to the increase in net earnings, diluted EPS increased in fiscal 2026 as a result of the impact of fewer shares outstanding resulting from share repurchases under our authorized share repurchase program, partially offset by the issuances of shares under our employee benefit plans. The Company repurchased 8.6 million and 4.4 million shares in fiscal 2026 and 2025, respectively.
For fiscal 2026, adjusted net earnings and adjusted diluted EPS reflect the changes in the components described above.
ANALYSIS OF REPORTABLE SEGMENTS
| Revenues | |||||||||||||||||||||||||||||||||||||||||||||||||
| Years Ended June 30, | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | As Reported | Organic Constant Currency | ||||||||||||||||||||||||||||||||||||||||||||||
| Employer Services | $ | 14,831.4 | $ | 13,883.1 | 7 | % | 5 | % | |||||||||||||||||||||||||||||||||||||||||
| PEO Services | 7,128.1 | 6,690.4 | 7 | % | 7 | % | |||||||||||||||||||||||||||||||||||||||||||
| Intercompany eliminations | (12.1) | (12.6) | n/m | n/m | |||||||||||||||||||||||||||||||||||||||||||||
| $ | 21,947.4 | $ | 20,560.9 | 7 | % | 6 | % | ||||||||||||||||||||||||||||||||||||||||||
| Earnings before Income Taxes | |||||||||||||||||||||||||||||||||||||||||||||
| Years Ended June 30, | % Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | As Reported | |||||||||||||||||||||||||||||||||||||||||||
| Employer Services | $ | 5,436.8 | $ | 5,008.5 | 9 | % | |||||||||||||||||||||||||||||||||||||||
| PEO Services | 936.1 | 950.5 | (2) | % | |||||||||||||||||||||||||||||||||||||||||
| Other (a) | (642.6) | (648.9) | n/m | ||||||||||||||||||||||||||||||||||||||||||
| $ | 5,730.3 | $ | 5,310.1 | 8 | % | ||||||||||||||||||||||||||||||||||||||||
| Margin | |||||||||||||||||||||||
| Years Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | YoY Growth | |||||||||||||||||||||
| Employer Services | 36.7 | % | 36.1 | % | 60 bps | ||||||||||||||||||
| PEO Services | 13.1 | % | 14.2 | % | (110) bps | ||||||||||||||||||
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(a) Other represents certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, legal settlements, company-wide severance initiatives, non-recurring gains and losses, the elimination of intercompany transactions, and interest income and expense.
n/m - not meaningful
Employer Services
Revenues
Employer Services' revenues increased in fiscal 2026 due to new business started from new business bookings, strong client revenue retention, an increase in pricing, a 1% year-over-year growth impact of foreign currency, an increase in interest earned on funds held for clients of $164.1 million, and an increase in our pays per control when measured on a same-store-sales basis of 1%.
Earnings before Income Taxes
Employer Services' earnings before income taxes increased in fiscal 2026 due to the increase in revenues, including contributions from client funds interest, discussed above, partially offset by increases in expenses, including $188.6 million in selling and marketing expenses and $159.7 million in costs of servicing and implementing our clients on growing revenue.
Margin
Employer Services' margin increased in fiscal 2026 due to contributions from client funds interest revenues, operating efficiencies for costs of servicing and implementing our clients on growing revenue, and lower amortization of client contracts and lists, partially offset by increased selling and marketing expenses and the impact from the WorkForce Software acquisition in October 2024.
PEO Services
Revenues
| PEO Revenues | |||||||||||||||||||||||||||||||||||||||||||
| Years Ended | Change | ||||||||||||||||||||||||||||||||||||||||||
| June 30, | |||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| PEO Services' revenues | $ | 7,128.1 | $ | 6,690.4 | $ | 437.7 | 7 | % | |||||||||||||||||||||||||||||||||||
| Less: PEO zero-margin benefits pass-throughs | 4,607.3 | 4,289.0 | 318.3 | 7 | % | ||||||||||||||||||||||||||||||||||||||
| PEO Services' revenues excluding zero-margin benefits pass-throughs | $ | 2,520.8 | $ | 2,401.4 | $ | 119.4 | 5 | % | |||||||||||||||||||||||||||||||||||
PEO Services' revenues increased in fiscal 2026 due to an increase in zero-margin benefits pass-throughs of $318.3 million, and growth in average worksite employees of 2% coupled with increases in average wages and state unemployment taxes per worksite employee, as compared to fiscal 2025.
Earnings before Income Taxes
PEO Services’ earnings before income taxes decreased in fiscal 2026 due to increases in expenses, including $318.3 million in zero-margin benefits pass-through costs, $52.8 million in selling and marketing expenses, and $37.1 million in operating costs related to worker's compensation coverage and state unemployment insurance, partially offset by the increase in revenues discussed above.
Margin
PEO Services' margin decreased in fiscal 2026 due to increased selling and marketing expenses, zero-margin benefit pass through costs, an increase in the pre-tax loss from ADP Indemnity, and operating costs related to state unemployment insurance, partially offset by increased revenues discussed above.
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ADP Indemnity provides workers’ compensation deductible reimbursement insurance protection for PEO Services’ worksite employees up to $1 million per occurrence. PEO Services has secured a workers’ compensation insurance policy that caps the exposure for each claim at $1 million per occurrence and has also secured aggregate stop loss insurance that caps aggregate losses at a certain level in the year ended June 30, 2012 and prior from an admitted and licensed insurance company of AIG. We utilize historical loss experience and actuarial judgment to determine the estimated claim liability, and changes in estimated ultimate incurred losses are included in the PEO segment.
Additionally, starting in the year ended June 30, 2013, ADP Indemnity paid premiums to enter into reinsurance arrangements with ACE American Insurance Company, a wholly-owned subsidiary of Chubb Limited (“Chubb”), to cover substantially all losses incurred by the Company up to $1 million per occurrence related to the workers’ compensation deductible reimbursement insurance protection for PEO Services' worksite employees. Each of these reinsurance arrangements limits our overall exposure incurred up to a certain limit. The Company believes the likelihood of ultimate losses exceeding this limit is remote. ADP Indemnity recorded a pre-tax actuarial gain of $2.8 million in fiscal 2026, as compared to a pre-tax actuarial gain of $8.8 million in fiscal 2025, due to less favorable loss development in workers’ compensation reserves. ADP Indemnity paid a premium of $327.8 million in July 2026, to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for fiscal 2027 policy year on terms substantially similar to the fiscal 2026 reinsurance policy.
Non-GAAP Financial Measures
In addition to our GAAP results, we use the adjusted results and other non-GAAP metrics set forth in the table below to evaluate our operating performance in the absence of certain items and for planning and forecasting of future periods:
| Adjusted Financial Measures | U.S. GAAP Measures | ||||||
| Adjusted EBIT | Net earnings | ||||||
| Adjusted provision for income taxes | Provision for income taxes | ||||||
| Adjusted net earnings | Net earnings | ||||||
| Adjusted diluted earnings per share | Diluted earnings per share | ||||||
| Adjusted effective tax rate | Effective tax rate | ||||||
| Organic constant currency | Revenues | ||||||
We believe that the exclusion of the identified items helps us reflect the fundamentals of our underlying business model and analyze results against our expectations and against prior periods, and to plan for future periods by focusing on our underlying operations. We believe that the adjusted results provide relevant and useful information for investors because it allows investors to view performance in a manner similar to the method used by management and improves their ability to understand and assess our operating performance. The nature of these exclusions is for specific items that are not fundamental to our underlying business operations. Since these adjusted financial measures and other non-GAAP metrics are not measures of performance calculated in accordance with U.S. GAAP, they should not be considered in isolation from, as a substitute for, or superior to their corresponding U.S. GAAP measures, and they may not be comparable to similarly titled measures at other companies.
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| Years Ended June 30, | % Change | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | As Reported | ||||||||||||||||||||||||||||||||||||
| Net earnings | $ | 4,413.5 | $ | 4,079.7 | 8 | % | ||||||||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | 1,316.8 | 1,230.4 | ||||||||||||||||||||||||||||||||||||
| All other interest expense (a) | 141.0 | 114.8 | ||||||||||||||||||||||||||||||||||||
| All other interest income (a) | (92.9) | (94.2) | ||||||||||||||||||||||||||||||||||||
| Optimization initiatives (b) | (4.5) | 19.4 | ||||||||||||||||||||||||||||||||||||
| Business alignment program (c) | 91.1 | — | ||||||||||||||||||||||||||||||||||||
| Gain on sale of assets | — | (2.6) | ||||||||||||||||||||||||||||||||||||
| Net (gain)/loss on ADP Ventures' investments (d) | (8.4) | — | ||||||||||||||||||||||||||||||||||||
| Legal settlements (e) | 18.0 | (0.4) | ||||||||||||||||||||||||||||||||||||
| Adjusted EBIT | $ | 5,874.6 | $ | 5,347.1 | 10 | % | ||||||||||||||||||||||||||||||||
| Adjusted EBIT Margin | 26.8 | % | 26.0 | % | ||||||||||||||||||||||||||||||||||
| Provision for income taxes | $ | 1,316.8 | $ | 1,230.4 | 7 | % | ||||||||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||
| Optimization initiatives (f) | (1.2) | 4.8 | ||||||||||||||||||||||||||||||||||||
| Business alignment program (f) | 23.2 | — | ||||||||||||||||||||||||||||||||||||
| Gain on sale of assets (f) | — | (0.6) | ||||||||||||||||||||||||||||||||||||
| Net (gain)/loss on ADP Ventures' investments (f) | (2.1) | — | ||||||||||||||||||||||||||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-07-30 | Kwon David | Corp VP | Sell | -2,414 ×3 | $265.62 | -$641,207 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-10-30 10-Q expected by 2026-11-08 (in 75 days)
- ~2027-01-28 10-Q expected by 2027-02-06 (in 165 days)
- ~2027-04-29 10-Q expected by 2027-05-08 (in 256 days)
- ~2027-08-04 10-K expected by 2027-08-30 (in 353 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-08-05 10-K Annual Report
- 2026-07-29 8-K Earnings Release; Financial Statements and Exhibits
- 2026-06-26 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
- 2026-05-07 8-K Material Agreement Entered; Other Events; Financial Statements and Exhibits
- 2026-05-05 424B2 Prospectus Supplement
- 2026-04-30 10-Q Quarterly Report
- 2026-04-29 8-K Earnings Release; Financial Statements and Exhibits
- 2026-01-29 10-Q Quarterly Report
- 2026-01-28 8-K Earnings Release; Financial Statements and Exhibits
- 2025-10-31 10-Q Quarterly Report
- 2025-10-29 8-K Earnings Release; Financial Statements and Exhibits
- 2025-08-06 10-K Annual Report
- 2025-07-30 8-K Earnings Release; Financial Statements and Exhibits
- 2025-06-27 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
- 2025-05-08 8-K Material Agreement Entered; Other Events; Financial Statements and Exhibits