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 more than 75 years since, we have shaped the world of work with innovation and expertise, transforming Human Capital Management (“HCM”) from an administrative challenge to a strategic business advantage. We continuously aim to solve complex business challenges for our clients and their workers, helping them work smarter today so they can have more success tomorrow. Always Designing for People means ADP focuses on people, leveraging our unparalleled data insights and innovative technology to elevate human potential. 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.”
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 businesses make meaningful change in the world of work by providing insightful HCM solutions that meet the evolving needs of our clients and their workers.
As new technologies and shifting workplace dynamics continuously reshape the way people work, we support every HCM need of our clients whether that client is a small, local business or a large, global enterprise operating around the world. From HR, payroll, time and benefits to HR outsourcing, talent, compliance and retirement, our solutions span the entire employee experience from hire to retire. Our leading technology and commitment to service excellence are at the core of our relationship with each one of our clients, which span over 140 countries and territories. We are always designing better ways to work through industry leading products, premium services and exceptional experiences that enable people to reach their full potential all around the world.
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 on our three strategic priorities:
• Lead with Best-in-Class HCM Technology. We design and develop world-class HCM platforms that simplify work and utilize enabling technologies such as artificial intelligence (“AI”) and modern cloud architecture. We aim to solve the needs of our clients and their workers today by making HCM transactions compliant and effortless, while anticipating their needs of tomorrow by incorporating valuable data insights and guidance into our solutions to help them better understand their workforce and position them to make better decisions.
• Provide Unmatched Expertise and Outsourcing Solutions. 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. We continue to build on our deep expertise and make it readily available to our clients through a variety of channels, ranging from traditional call and chat options to self-guided and AI-powered options. We will continue to leverage our significant data insights and investments in AI and other technologies to further enable and effectively apply our decades of knowledge and experience to help our clients and their workers navigate the ever-changing world of work.
• Benefit our Clients with Our Global Scale. Our clients benefit from our unmatched global footprint and scale in the HCM industry. We will continue to build on these strengths to further improve our client experience, and to add to our global footprint to further meet our clients where they choose to do business and address their needs for a distributed and flexible workforce. We see meaningful opportunities to leverage our strength in global payroll and expand our HR and workforce management
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solutions to support our global and multinational clients. We continue to build more relationships with partners, such as through the ADP Marketplace, in order to provide clients with seamless integrations and customizations that simplify their HR processes and best address their unique needs. And we intend to grow our sales organization and continue to invest in best-in-class sales technology to not only optimize the purchase experience but to also empower 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.
Innovation at ADP
Innovation is in our DNA. For over 75 years, we have proven that actively listening and responding to what clients and their employees need and want keeps the world of work progressing forward. As a founder in the industry, we pioneered HCM automation, HCM in the cloud, mobile HCM and a digital HCM marketplace, laying the groundwork and streamlining our infrastructure to innovate at a faster pace. This spirit of innovation remains a steady guide as we continue to listen and respond to emerging needs. As technologies like AI, machine learning (“ML”) and generative AI change how work happens, we remain focused on providing our clients and associates with HCM technology that is easy to use, powered with smart insights and personalized to support a human-centric experience.
To bring these solutions to market, we pursue multiple paths to innovation. From leveraging our unique data to provide differentiated insights to collaborating with, or investing in, organizations with complementary products to purchasing solutions that add to our strong foundation, each of these paths helps ADP sustain a culture focused on continuous innovation.
Strategically infusing AI
The AI landscape is evolving quickly. As we move from early automation and predictive analytics to AI-enabled workflows, agentic AI is the future of innovation in the HCM space. Our AI strategy is to deliver AI agents for all
major HCM roles that our clients have. Our clients have employees performing different roles such as payroll, HR, benefits, compensation, and recruiting. Our goal is to deliver AI agents that continue to automate tedious, time heavy tasks and deliver value to these individuals to do more strategic activities. Similarly, we intend to deliver AI role-based agents to our internal associates such as sales, software engineering, testing, product management, service, and implementation.
To advance these efforts, we continue to roll out ADP Assist, our award-winning cross-platform solution powered by generative AI that transforms data into credible and actionable insights. ADP Assist offers smart, user-centric solutions through a conversational interface that touches every aspect of HR – payroll, time, talent, benefits, recruitment, analytics, reporting, and compliance.
ADP Assist validates payroll information, checking for payroll anomalies and using generative AI to identify and help resolve missing tax registrations and answer questions by drawing on ADP’s large, up-to-date dataset of compliance information. ADP Assist also uses generative AI to simplify report creation, helping HR practitioners and leaders access internal, national, and global workforce data to analyze compensation, turnover, candidate profile relevancy, and talent market insights. A 2024 AI Breakthrough Award winner, the solution was also recognized in Business Intelligence Group’s 2025 BIG Innovation Awards and 2025 Artificial Intelligence Excellence Awards for driving innovation and possibilities in AI.
Along with transforming our solutions, we firmly believe AI and generative AI enhance our operations and enable us to elevate the end-to-end client experience. To lean into our service expertise, we continue to extend generative AI capabilities to a broader portion of our service and implementation associates to deliver an even better client experience. We also continue to explore generative AI capabilities to further empower our sellers to be more productive. In addition, we extended AI tools to all of our product developers for coding, testing, and documentation.
Data is our differentiator
To harness the power of AI, data is critical – and it’s the foundation of the advantage we bring to our clients. Data is at the core of our products and solutions, informing and driving our approach to innovation and new technology. The global scale and scope of our client base provide us the industry’s largest and deepest HCM dataset with over 1.1 million clients spanning over 140 countries and territories and 42 million workers globally. Our broad and granular data set positions us well to deliver smarter and more tailored HCM agents that we believe will be truly differentiated in the market. Additionally, combining our vast client and service data with client outcomes gives us a deeper understanding of clients’ needs and goals.
AI represents the next frontier, and our industry-leading data set married to our best-in-class distribution offers
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ADP a distinct, competitive advantage. AI and ML drive many of the key features of ADP’s data products, including ADP DataCloud, our award-winning people analytics solution. ADP DataCloud analyzes aggregated, anonymized and timely HCM and compensation data from more than one million organizations across the U.S., powering solutions that provide clients with in-depth workforce and business insights that enable critical HR decisions.
Analytics enhanced by ADP Assist leverages generative AI to deliver answers to analytics questions across key practice areas including benefits, HR, payroll, recruitment and time, helping to remove user friction.
Scalable, Global HCM Offerings
We also continue to advance our next-gen platforms, launching ADP Lyric HCM in September 2024. Building on our position as a leader in global pay, we designed Lyric to be as dynamic as the world of work. The unified, global HCM solution is designed for adaptability, providing our clients with the flexibility they need to address today’s and tomorrow’s workplace challenges, and to personalize the experience based on their needs. The solution was named “Data Solution of the Year for Human Resources” in the 2025 Data Breakthrough Awards.
To expand our global offering and enhance our enterprise solution suite, in October 2024 ADP acquired WorkForce Software, a premier workforce management solutions provider that specializes in supporting large, global enterprises. WorkForce Software’s solutions can adapt to the dynamic needs of today’s employers, creating resiliency, driving performance and making managing a global workforce easy. This acquisition expands our current array of global time and attendance, absence management and scheduling tools and will drive workforce management innovation to help meet the future needs of businesses. In addition, ADP acquired Procesamiento Externo de Información, S.C. (PEI) in February 2025, a provider of local payroll, HCM expertise, and technology solutions for Mexican businesses, strengthening ADP’s capabilities in local and global payroll and HR.
Sustaining a culture of responsible AI
In harnessing the power of data through AI and ML, ADP
recognizes the importance of accountability, transparency, privacy, explainability and governance, and in furtherance of those goals has established an active AI & Data Ethics Committee, 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, ML and data.
As we continue to explore the potential that new technologies like generative AI can provide, we understand the great responsibility we have to approach these innovations in a way that is ethical, secure, and compliant for our business and the clients and workers we serve around the world. This led to our establishment of an interdisciplinary working group across ADP to determine governance for use cases and adoption of a set of principles and processes to govern the use of these newer technologies, including operational monitoring of recommendations made by AI and ML technologies.
Creating a customized HR ecosystem
To meet clients’ shifting needs, we also collaborate with partners through solutions like ADP Marketplace, one of the largest e-commerce platforms for HR solutions in the industry. This innovative marketplace empowers our clients to connect and share data seamlessly across their HR systems, offering access to over 800 partner solutions - from recruiting and onboarding to compliance and learning management. With the introduction of AI technology, including our generative AI smart search tool, clients can quickly discover and evaluate partner solutions using natural language, enabling clients to tailor their HCM ecosystem with integrated solutions that best fit their unique needs.
Additionally, ADP API Central offers secure APIs and tools and resources for custom integrations to simplify and automate business processes. This solution was named
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“New Product of the Year” in Business Intelligence Group’s 2024 BIG Awards for Business.
Accelerating innovation
Reflecting our commitment to innovation, ADP’s corporate venture capital arm and innovation lab, ADP Ventures, is focused on enhancing and strengthening ADP’s core business, creating offerings in new adjacent segments and geographies, and developing new assets to monetize markets and segments beyond HCM. As part of its strategy, ADP Ventures invests in and partners with early-stage and scaling tech startups that advance ADP’s innovation strategy.
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, HR Management, Workforce Management, Compliance Services, Insurance Services and Retirement Services.
Professional Employer Organization. Our PEO business, called ADP TotalSource®
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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 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
(Tabular dollars are presented in millions, except per share amounts)
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. 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 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. 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” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 (“fiscal 2025”), 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.
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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 the third quarter, 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 through its AI transformation. Our ADP Assist agents are applying advanced intelligence to real workforce challenges across payroll and HR, and since their launch in January, our clients have seen meaningful time savings for each payroll processed. ADP Lyric HCM is also saving time for our clients, with one company replacing a dozen disparate systems to achieve a leaner payroll operations model. Additionally, we expanded our AI ecosystem by launching a dedicated space within ADP Marketplace for our partner companies’ AI agents. On the service front, we scaled our GenAI capabilities across our service operations, transforming how our client-facing teams engage, serve, and support our clients across the full lifecycle. Finally, we remained focused on benefiting our clients through our global scale by delivering compliant HCM solutions, local expertise, and trusted relationships wherever they operate.
Highlights from the nine months ended March 31, 2026 include:
•Revenue growth of 7% to $16,473.6 million; 6% growth on an organic constant currency basis
•Earnings before income taxes margin expansion of 50 bps, and adjusted EBIT margin expansion of 50 bps
•Diluted and adjusted diluted earnings per share ("EPS") growth of 10% and 9%, to $8.49 and $8.48, respectively
•Cash returned via shareholder friendly actions of $3.4B, including $1.9B of dividends and $1.5B of share repurchases
For the nine months ended March 31, 2026, we delivered strong revenue growth of 7%, 6% growth on an organic constant currency basis. Our pays per control metric, which represents the number of employees on ADP clients' 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 nine months ended March 31, 2026 as compared to the nine months ended March 31, 2025. PEO average worksite employees increased 2% for the nine months ended March 31, 2026, as compared to the nine months ended March 31, 2025.
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 March 31, 2026 and we remain well positioned to support our associates and our clients.
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RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS
Total Revenues
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Total Revenues | $ | 5,939.2 | $ | 5,553.0 | $ | 16,473.6 | $ | 15,434.1 | ||||||||||||||
| YoY Growth | 7 | % | 6 | % | 7 | % | 7 | % | ||||||||||||||
| YoY Growth, Organic Constant Currency | 6 | % | 6 | % | 6 | % | 7 | % | ||||||||||||||
Total revenues increased for the three and nine months ended March 31, 2026 due to new business started from new business bookings, strong client retention, an increase in zero-margin benefits pass-throughs, the impact of foreign currency, an increase in pricing, and an increase in interest on funds held for clients.
Total revenues for the three months ended March 31, 2026 include interest on funds held for clients of $403.9 million, as compared to $355.2 million for the three months ended March 31, 2025. The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 8.5% to $48.3 billion for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, coupled with an increase in our average interest rate earned to 3.3% for the three months ended March 31, 2026, as compared to 3.2% for the three months ended March 31, 2025.
Total revenues for the nine months ended March 31, 2026 include interest on funds held for clients of $999.4 million, as compared to $881.3 million for the nine months ended March 31, 2025. The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 7.3% to $40.2 billion for the nine months ended March 31, 2026 as compared to the nine months ended March 31, 2025, coupled with an increase in our average interest rate earned to 3.3% for the nine months ended March 31, 2026, as compared to 3.1% for the nine months ended March 31, 2025.
Total Expenses
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | % Change | 2026 | 2025 | % Change | |||||||||||||||||||||||||||||||||||
| Costs of revenues: | ||||||||||||||||||||||||||||||||||||||||
| Operating expenses | $ | 2,696.0 | $ | 2,534.7 | 6 | % | $ | 7,666.5 | $ | 7,196.6 | 7 | % | ||||||||||||||||||||||||||||
| Research and development | 253.9 | 247.1 | 3 | % | 762.9 | 719.2 | 6 | % | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | 122.1 | 122.4 | — | % | 368.3 | 364.6 | 1 | % | ||||||||||||||||||||||||||||||||
| Total costs of revenues | 3,072.0 | 2,904.2 | 6 | % | 8,797.7 | 8,280.4 | 6 | % | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 1,081.7 | 1,015.8 | 6 | % | 3,156.0 | 2,948.6 | 7 | % | ||||||||||||||||||||||||||||||||
| Interest expense | 78.7 | 74.8 | 5 | % | 338.3 | 342.2 | (1) | % | ||||||||||||||||||||||||||||||||
| Total expenses | $ | 4,232.4 | $ | 3,994.8 | 6 | % | $ | 12,292.0 | $ | 11,571.2 | 6 | % | ||||||||||||||||||||||||||||
Operating expenses increased for the three months ended March 31, 2026 due to an increase of $80.0 million of PEO Services zero-margin benefits pass-through costs to $1,170.0 million from $1,090.0 million for the three months ended March 31, 2025. Additionally, for the three months ended March 31, 2026, operating expenses increased by $50.4 million due to higher service and implementation costs in support of our growing revenue and by $18.9 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.
Operating expenses increased for the nine months ended March 31, 2026 due to an increase of $232.8 million of PEO Services zero-margin benefits pass-through costs to $3,427.2 million from $3,194.4 million for the nine months ended March 31, 2025. Additionally, for the nine months ended March 31, 2026, operating expenses increased by $159.9 million due to higher service
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and implementation costs in support of our growing revenue and by $31.9 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.
Research and development expenses increased for the three months ended March 31, 2026 due to increased costs to develop, support, and maintain our new and existing products.
Research and development expenses increased for the nine months ended March 31, 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.
Depreciation and amortization expenses decreased for the three months ended March 31, 2026 due to lower amortization of customer contracts and lists, partially offset by amortization of investments in internally developed software primarily for our next-gen products, and purchased software.
Depreciation and amortization expenses increased for the nine months ended March 31, 2026 due to the amortization of intangible assets acquired in the WorkForce Software acquisition and investments in internally developed software primarily for our next-gen products, and purchased software, partially offset by lower amortization of customer contracts and lists.
Selling, general and administrative expenses increased for the three and nine months ended March 31, 2026 primarily due to increases in selling and marketing expenses of $63.5 million and $180.4 million, respectively, as a result of investments in our sales organization.
Interest expense increased for the three months ended March 31, 2026 primarily due to net increases in interest expense of $3.7 million related to the senior notes issued and redeemed during the year ended June 30, 2025, coupled with an increase of $0.5 million related to commercial paper and reverse repurchase borrowings as a result of increases in average daily commercial paper borrowings and average reverse repurchase outstanding balances of $0.5 billion and $0.2 billion, respectively. This increase was offset by decreases in average interest rates on commercial paper issuances and reverse repurchases of 70 and 30 basis points, respectively, as compared to the three months ended March 31, 2025.
Interest expense decreased for the nine months ended March 31, 2026 primarily due to a decrease of $23.6 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 reverse repurchase outstanding balances of $0.5 billion, as compared to the nine months ended March 31, 2025. This decrease was partially offset by net increases in interest expense of $20.0 million related to the senior notes issued and redeemed during the year ended June 30, 2025.
Other (Income)/Expense, net
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | |||||||||||||||||||||||||||
| Interest income on corporate funds | $ | (63.8) | $ | (55.9) | $ | 7.9 | $ | (262.2) | $ | (231.5) | $ | 30.7 | ||||||||||||||||||||
| Realized (gains)/losses on available-for-sale securities, net | (1.9) | 0.1 | 2.0 | (3.1) | 0.8 | 3.9 | ||||||||||||||||||||||||||
| Gain on sale of assets | — | — | — | — | (2.4) | (2.4) | ||||||||||||||||||||||||||
| Non-service components of pension income, net | (7.2) | (7.9) | (0.7) | (21.3) | (23.4) | (2.1) | ||||||||||||||||||||||||||
| Net (gain)/loss on ADP Ventures' investments | (2.1) | — | 2.1 | (4.3) | — | 4.3 | ||||||||||||||||||||||||||
| Other (income)/loss, net | $ | (75.0) | $ | (63.7) | $ | 11.3 | $ | (290.9) | $ | (256.5) | $ | 34.4 | ||||||||||||||||||||
Interest income on corporate funds increased for the three months ended March 31, 2026 due to higher average investment balances of $7.3 billion as compared to $6.3 billion for the three months ended March 31, 2025, offset by a decrease in average interest rates of 10 basis points, as compared to the three months ended March 31, 2025.
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Interest income on corporate funds increased for the nine months ended March 31, 2026 due to higher average investment balances of $9.9 billion as compared to $9.0 billion for the nine months ended March 31, 2025, coupled with an increase in average interest rates of 10 basis points, as compared to the nine months ended March 31, 2025.
During the three and nine months ended March 31, 2026, the Company recognized a net gain of $2.1 million and $4.3 million, respectively, related to investments made through our Corporate Venture Capital arm, ADP Ventures.
See Note 12 of our Consolidated Financial Statements for further details on non-service components of pension income, net.
Earnings Before Income Taxes ("EBIT") and Adjusted EBIT
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||||||||||
| 2026 | 2025 | YoY Growth | 2026 | 2025 | YoY Growth | |||||||||||||||||||||||||||
| EBIT | $ | 1,781.8 | $ | 1,621.9 | 10 | % | $ | 4,472.5 | $ | 4,119.4 | 9 | % | ||||||||||||||||||||
| EBIT Margin | 30.0 | % | 29.2 | % | 80 bps | 27.1 | % | 26.7 | % | 50 bps | ||||||||||||||||||||||
| Adjusted EBIT | $ | 1,791.5 | $ | 1,629.7 | 10 | % | $ | 4,502.6 | $ | 4,134.2 | 9 | % | ||||||||||||||||||||
| Adjusted EBIT Margin | 30.2 | % | 29.3 | % | 80 bps | 27.3 | % | 26.8 | % | 50 bps | ||||||||||||||||||||||
Note: Numbers may not foot due to rounding.
Earnings before income taxes increased for the three and nine months ended March 31, 2026 due to the increase in total revenues, partially offset by the increase in total expenses discussed above.
EBIT Margin increased for the three months ended March 31, 2026 due to contributions from client funds interest revenues, lower amortization of client contracts and lists, and operating efficiencies related to research and development, service, and implementation expenses, partially offset by increased selling and marketing expenses.
EBIT Margin increased for the nine months ended March 31, 2026 due to contributions from client funds interest revenues, lower interest expense related to commercial paper and reverse repurchase borrowings, lower amortization of client contracts and lists, and increased interest income on corporate funds, partially offset by increased selling and marketing expenses.
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, broad-based optimization initiatives, and (gains)/losses on ADP Ventures' investments, in the applicable periods.
Provision for Income Taxes
The effective tax rate for the three months ended March 31, 2026 and 2025 was 23.7% and 23.0%, respectively. The increase in the effective tax rate is primarily due to an increase in uncertain tax positions and a lower excess tax benefit on stock-based compensation in the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.
The effective tax rate for the nine months ended March 31, 2026 and 2025 was 23.2% and 23.1%, respectively. The increase in the effective tax rate is primarily due to a lower excess tax benefit on stock-based compensation offset by a decrease in uncertain tax positions for the nine months ended March 31, 2026 as compared to the nine months ended March 31, 2025.
Adjusted Provision for Income Taxes
The adjusted effective tax rate for the three months ended March 31, 2026 and 2025 was 23.7% and 23.0%, respectively. The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.
The adjusted effective tax rate for the nine months ended March 31, 2026 and 2025 was 23.2% and 23.1%, 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
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | YoY Growth | 2026 | 2025 | YoY Growth | |||||||||||||||||||||||||||||||||||||
| Net earnings | $ | 1,359.8 | $ | 1,249.5 | 9 | % | $ | 3,434.9 | $ | 3,169.0 | 8 | % | ||||||||||||||||||||||||||||||
| Diluted EPS | $ | 3.38 | $ | 3.06 | 10 | % | $ | 8.49 | $ | 7.75 | 10 | % | ||||||||||||||||||||||||||||||
| Adjusted net earnings | $ | 1,358.0 | $ | 1,249.6 | 9 | % | $ | 3,430.6 | $ | 3,168.8 | 8 | % | ||||||||||||||||||||||||||||||
| Adjusted diluted EPS | $ | 3.37 | $ | 3.06 | 10 | % | $ | 8.48 | $ | 7.75 | 9 | % | ||||||||||||||||||||||||||||||
In addition to the increase in net earnings, diluted EPS increased for the three and nine months ended ended March 31, 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 2.6 million and 1.0 million shares in the three months ended March 31, 2026 and 2025, respectively, and repurchased 5.7 million and 3.4 million shares in the nine months ended March 31, 2026 and 2025, respectively.
Adjusted net earnings and adjusted diluted EPS reflect the changes in the components described above for the three and nine months ended March 31, 2026.
32
ANALYSIS OF REPORTABLE SEGMENTS
| Revenues | |||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | % Change | Nine Months Ended | % Change | ||||||||||||||||||||||||||||||||||||||||||||
| March 31, | March 31, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | As Reported | Organic constant currency | 2026 | 2025 | As Reported | Organic constant currency | ||||||||||||||||||||||||||||||||||||||||
| Employer Services | $ | 4,036.1 | $ | 3,767.9 | 7 | % | 5 | % | $ | 11,134.6 | $ | 10,417.4 | 7 | % | 5 | % | |||||||||||||||||||||||||||||||
| PEO Services | 1,906.0 | 1,788.5 | 7 | % | 7 | % | 5,348.7 | 5,026.3 | 6 | % | 6 | % | |||||||||||||||||||||||||||||||||||
| Other | (2.9) | (3.4) | n/m | n/m | (9.7) | (9.6) | n/m | n/m | |||||||||||||||||||||||||||||||||||||||
| $ | 5,939.2 | $ | 5,553.0 | 7 | % | 6 | % | $ | 16,473.6 | $ | 15,434.1 | 7 | % | 6 | % | ||||||||||||||||||||||||||||||||
| Earnings before Income Taxes | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | % Change | Nine Months Ended | % Change | |||||||||||||||||||||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | As Reported | 2026 | 2025 | As Reported | |||||||||||||||||||||||||||||||||||||||
| Employer Services | $ | 1,658.1 | $ | 1,500.1 | 11 | % | $ | 4,165.6 | $ | 3,847.3 | 8 | % | ||||||||||||||||||||||||||||||||
| PEO Services | 247.2 | 253.3 | (2) | % | 719.0 | 730.6 | (2) | % | ||||||||||||||||||||||||||||||||||||
| Other | (123.5) | (131.5) | n/m | (412.1) | (458.5) | n/m | ||||||||||||||||||||||||||||||||||||||
| $ | 1,781.8 | $ | 1,621.9 | 10 | % | $ | 4,472.5 | $ | 4,119.4 | 9 | % | |||||||||||||||||||||||||||||||||
| Margin | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | YoY Growth | 2026 | 2025 | YoY Growth | |||||||||||||||||||||||||||||||||||||||
| Employer Services | 41.1 | % | 39.8 | % | 130 bps | 37.4 | % | 36.9 | % | 50 bps | ||||||||||||||||||||||||||||||||||
| PEO Services | 13.0 | % | 14.2 | % | (120) bps | 13.4 | % | 14.5 | % | |||||||||||||||||||||||||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-05-08 | Michaud Brian L. | Executive VP | Sell | -848 | $212.13 | -$179,886 |
| 2026-05-07 | SWAN ROBERT HOLMES | Director | Buy | +3,619 | $206.05 | $745,695 |
| 2026-04-14 | D'Ambrosio Christopher | Corp. VP | Sell | -543 | $195.74 | -$106,287 |
| 2026-03-16 | D'Ambrosio Christopher | Corp. VP | Sell | -543 | $208.45 | -$113,188 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-08-05 10-K expected by 2026-08-31 (in 55 days)
- ~2026-10-30 10-Q expected by 2026-11-08 (in 141 days)
- ~2027-01-28 10-Q expected by 2027-02-06 (in 231 days)
- ~2027-04-29 10-Q expected by 2027-05-08 (in 322 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 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
- 2025-05-01 10-Q Quarterly Report
- 2025-04-30 8-K Earnings Release; Financial Statements and Exhibits
- 2025-04-30 8-K Officer/Director Change; Financial Statements and Exhibits