Paychex, Inc.

    PAYX ·NASDAQ ·Services-Engineering, Accounting, Research, Management ·Inc. in DE
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    Any of these factors, as well as such other factors as discussed in Part I, Item 1A, “Risk Factors” and throughout Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10‑K (“Form 10-K”), and in our periodic filings with the Securities and Exchange Commission (the “SEC”), could cause our actual results to differ materially from our anticipated results. The information provided in this Form 10‑K is based upon the facts and circumstances known as of the date of this report, and any forward-looking statements made by us in this Form 10‑K speak only as of the date on which they are made. Except as required by law, we undertake no obligation to update these forward-looking statements after the date of filing this Form 10-K with the SEC to reflect events or circumstances after such date, or to reflect the occurrence of unanticipated events.

     

    Our investor presentation regarding the financial results for the fiscal year ended May 31, 2025 is available and accessible on our Paychex Investor Relations portal at https://investor.paychex.com. Information available on our website is not a part of, and is not incorporated into, this Form 10-K. We intend to make future investor presentations available exclusively on our Paychex Investor Relations portal.

     

    Item 1. Business

     

    Unless we state otherwise or the context otherwise requires, the terms “Paychex,” “we,” “us,” “our” and the “Company” refer to Paychex, Inc., a Delaware corporation, and its consolidated subsidiaries.

     

    Overview

     

    We are an industry-leading human capital management (“HCM”) company delivering a full suite of technology and advisory solutions in human resources (“HR”), employee benefit solutions, insurance, and payroll processing. As of May 31, 2025, we served approximately 800,000 clients and their employees across the U.S. and parts of Europe. Paychex was incorporated in Delaware in 1979, maintains a corporate headquarters in Rochester, New York, and has a fiscal year that ends on May 31st.

    For any organization, a key function is effective human capital management, which requires resources and expertise. Organizations are faced with rapid evolution in employer-employee relations including: an increasing number and complexity of federal, state, and local regulations; changing workforce dynamics; and challenges attracting and retaining talent. Changing workplace dynamics reflect employees increasingly becoming mobile, working remotely, and expecting a user experience similar to consumer-oriented applications.

    We specialize in helping clients adapt to the rapidly evolving environment. Paychex offers a full range of integrated HCM solutions from hire to retire for businesses and their employees that enables customization to the clients' businesses, whether it is small or large, simple or complex. We believe that we have the breadth of solutions to cover the full spectrum of the employee life cycle, while also enabling integrations with popular HR, accounting, enterprise resource planning (“ERP”), and point-of-sale applications.

    Key features of our solutions include:

     

    •
    Comprehensive cloud-based HCM platforms optimized to meet clients' HR and payroll needs;
    •
    Expertise in HR and payroll backed by approximately 250 compliance experts and over 650 HR business professionals;
    •
    Streamlined workforce management that combines technology with flexible, tech-enabled support options;
    •
    Modern, mobile, and intuitive user experience with self-service capabilities;
    •
    Scalable and customizable platforms that provide clients the flexibility to add solutions as they grow;
    •
    Software as a service, or “SaaS”, delivery model that reduces total cost of ownership for our clients; and
    •
    Advanced data analytics and artificial intelligence (“AI”) capabilities powered by large data sets.

    We market our solutions through a combination of direct and virtual sales forces supported by various digital lead generation and multi-channel marketing initiatives. Over 50% of our revenues are from solutions other than payroll processing.

     

    On April 14, 2025, we completed our acquisition of Paycor HCM, Inc. ("Paycor"), a leading provider of HCM, payroll and talent software. The transaction aims to enhance the Company’s capabilities upmarket, expand its sales force and enhance its suite of AI-driven HCM solutions.

    2

    Company Strategy

     

    Our strategy is to be the digitally driven HR leader, serving as an essential partner to clients by providing them with the technology and advisory solutions they need for HR, payroll, benefits, and insurance. We believe that successfully executing this strategy will lead to strong, long-term financial performance. We intend to strengthen and extend our position as a leading provider through continued investments in both our innovative technology and HR advisory solutions. Key elements of our strategy include:

     

    •
    Growing our client base. We operate in a large and growing market, with significant potential to expand within our current target markets. We continually invest in new demand generation, sales tools, go-to-market strategies along with channel partnerships, ecommerce, and digital marketing.
    •
    Expanding our share of wallet. We offer a full-suite of integrated solutions incorporating a unique combination of industry-leading HR technology and HR advisory solutions that sets us apart in the industry. We intend to continue to increase penetration across our HCM software, HR outsourcing, retirement, and insurance offerings.
    •
    Driving technology innovation. We continue to invest significantly in our proprietary, award-winning HCM platforms to maximize efficiency and functionality for our clients and their employees. We have a robust product roadmap that is focused on enhancing our ability to address the needs of our customers and prospective customers. We believe we are well positioned to capitalize on the AI opportunity with large and growing data sets, predictive analytics and AI models, and increased AI investments to improve efficiency, enhance the customer experience, and unlock new growth opportunities.
    •
    Pursuing strategic acquisitions. We utilize acquisitions, when appropriate, as a means to expand our portfolio, enter new markets, or increase our scale. We will continue to evaluate and monitor potential acquisitions and target acquisitions that are aligned with our overall strategy.

     

    Our Clients

    We provide HCM solutions to a diverse client base operating in a broad range of industries throughout the U.S. and parts of Europe. The flexibility and scalability of our solutions enable our clients to select the best solution that meets their needs. We utilize service agreements and arrangements with clients that generally do not contain specified contract periods and may be terminated by either party with 30-days’ notice of termination.

    We believe client retention is a useful indicator of client satisfaction with our solutions and support. For fiscal 2025, our client retention of Paychex clients was in the range of 82% to 83% of our beginning client base.

     

    Our Solutions

     

    We provide a unique blend of innovative technology solutions, backed by our extensive compliance and HR expertise, that help customers more effectively hire, develop, and retain top talent in this challenging workforce environment. Clients have the option of processing payroll online using our SaaS technology, outsourcing to our payroll specialists, or using a combination of these methods. Payroll is integrated with HCM software modules for clients who have more complex HR needs. We continue to invest in our technology, enhancing our solutions to continuously improve the customer and employee experiences from hire to retire.

    We also provide comprehensive HR outsourcing through our administrative services organization (“ASO”) and professional employer organization (“PEO”) solutions. We have over 650 HR business professionals who are dedicated to our clients and have the experience and training to provide HR best practices and advice. Our HR business partners are available to provide our ASO and PEO clients with guidance on HR issues. The integration of leading-edge technology and flexible support options enables us to meet our clients’ needs, from the tactical to the strategic.

     

    We closely monitor the evolving challenges and needs of our clients, and proactively aid our clients in navigating macroeconomic challenges, legislative changes, and other complexities they may face. Over the past year, top challenges for employers were macroeconomic pressures including inflation and interest rates, availability of qualified talent, providing appropriate employee development, keeping technology current, and ensuring legal and regulatory compliance. We have approximately 250 compliance professionals who are in real-time contact with tax agencies and regulators to understand upcoming or newly enacted laws and regulations. The contributions of these compliance experts are intended to ensure that our HCM solutions are updated in a timely fashion to adhere to applicable regulations and to help our clients stay in compliance.

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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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    From 10-Q filed 2026-03-26 (period ending 2026-02-28).

    Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     

    Management’s Discussion and Analysis of Financial Condition and Results of Operations reviews the operating results of Paychex, Inc. and its wholly owned subsidiaries (“Paychex,” the “Company,” “we,” “our,” or “us”) for the three months ended February 28, 2026 (the “third quarter”), the nine months ended February 28, 2026 (the "nine months"), the respective prior year periods ended February 28, 2025 (the “prior year periods”), and our financial condition as of February 28, 2026. The focus of this review is on the underlying business reasons for material changes and trends affecting our revenue, expenses, net income, and financial condition. This review should be read in conjunction with the February 28, 2026 consolidated financial statements and the related Notes to Consolidated Financial Statements (Unaudited) contained in this Quarterly Report on Form 10-Q (“Form 10-Q”). This review should also be read in conjunction with our Annual Report on Form 10-K (“Form 10-K”) for the year ended May 31, 2025 (“fiscal 2025”). Forward-looking statements in this Form 10-Q are qualified by the cautionary statement included under the next sub-heading, “Cautionary Note Regarding Forward-Looking Statements.”

     

    Cautionary Note Regarding Forward-Looking Statements

     

    Certain written and oral statements made by management of Paychex may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States (“U.S.”) Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by such words and phrases as “aim,” “expect,” “outlook,” “will,” “guidance,” “projections,” “strategy,” “mission,” “anticipate,” “believe,” “can,” “could,” “design,” “may,” “possible,” “potential,” “should,” “view,” and other similar words or phrases. Forward-looking statements include, without limitation, all matters that are not historical facts. Examples of forward-looking statements include, among others, statements we make regarding the integration of Paycor HCM, Inc. ("Paycor"), operating performance, events, or developments that we expect or anticipate will occur in the future, including statements relating to our outlook, revenue growth, earnings, earnings-per-share growth, and similar projections.

     

    Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to known and unknown uncertainties, risks, changes in circumstances, and other factors that are difficult to predict, many of which are outside our control. Our actual performance and outcomes, including without limitation, our actual results and financial condition may differ materially from those indicated in or suggested by the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

     

    •
    our ability to keep pace with changes in technology or provide timely enhancements to our solutions and support;
    •
    software defects, undetected errors, and development delays for our solutions;
    •
    the possibility of cyberattacks, security vulnerabilities or Internet disruptions, including data security and privacy leaks and data loss and business interruptions;
    •
    risks related to our use of artificial intelligence ("AI") and new technologies in our business;
    •
    the possibility of failure of our business continuity plan during a catastrophic event;
    •
    the failure of third-party service providers to perform their functions;
    •
    the possibility that we may be exposed to additional risks related to our co-employment relationship with our professional employer organization (“PEO”) business;
    •
    changes in health insurance and workers’ compensation insurance rates and underlying claim trends;
    •
    risks related to acquisitions and the integration of the businesses we acquire, including risks related to the integration of Paycor;
    •
    our clients’ failure to reimburse us for payments made by us on their behalf;
    •
    the effect of changes in government regulations mandating the amount of tax withheld or the timing of remittances;
    •
    our failure to comply with covenants in our corporate bonds and debt agreements;
    •
    changes in our credit ratings;
    •
    changes in governmental regulations, laws, and policies;
    •
    our ability to comply with U.S., state, and foreign laws and regulations;
    •
    our compliance with data privacy and AI laws and regulations;
    •
    our failure to protect our intellectual property rights;
    •
    potential outcomes related to pending or future litigation matters;
    •
    the impact of macroeconomic factors on the U.S. and global economy, and in particular on our small- and medium-sized business clients;

    22

     

     

     

    •
    volatility in the political, market, and economic environment, including inflation and interest rate changes;
    •
    our ability to attract and retain qualified people; and
    •
    the possible effects of negative publicity on our reputation and the value of our brand.

    Any of these factors, as well as such other factors as discussed in our Form 10-K for fiscal 2025 and in our periodic filings with the Securities and Exchange Commission (the “SEC”), could cause our actual results to differ materially from our anticipated results. The information provided in this Form 10-Q is based upon the facts and circumstances known as of the date of this report, and any forward-looking statements made by us in this Form 10-Q speak only as of the date on which they are made. Except as required by law, we undertake no obligation to update these forward-looking statements after the date of filing this Form 10-Q with the SEC to reflect events or circumstances after such date, or to reflect the occurrence of unanticipated events.

     

    Our investor presentation regarding the financial results for the third quarter is available and accessible on our Paychex Investor Relations portal at https://investor.paychex.com. Information available on our website is not a part of, and is not incorporated into, this Form 10-Q. We intend to make future investor presentations available exclusively on our Paychex Investor Relations portal.

     

    Overview

     

    We are an industry-leading human capital management (“HCM”) company providing comprehensive technology and advisory solutions in human resources (“HR”), employee benefits, insurance, and payroll across the U.S. and parts of Europe.

     

    We support our clients with three proprietary SaaS-based HCM platforms: SurePayroll®, Paychex Flex®, and Paycor®, each designed to meet diverse client needs and business requirements. For example, larger clients often have more complex HCM demands. Our integrated HCM solutions span the entire employee life cycle, enabling clients to choose from a broad range of solutions that seamlessly integrate with leading HR, accounting, enterprise resource planning, and point-of-sale applications. Our technology is complemented by a wide array of advisory, benefits, and insurance solutions. In today's dynamic, complex regulatory landscape, we see growing demand for HR outsourcing solutions.

     

    Our offerings are disaggregated into two categories, (1) Management Solutions and (2) PEO and Insurance Solutions, as discussed under the heading “Our Solutions” in Part I, Item 1 of our Form 10-K for fiscal 2025.

     

    As the digitally driven HR leader, our mission is to help businesses succeed. Our strategy includes growing our client base; increasing product penetration; driving technology innovation; and pursuing strategic acquisitions, all aimed at achieving long-term financial success.

     

    We maintain industry-leading margins by efficiently managing costs while strategically investing in our business, particularly in sales and marketing and leading-edge, AI-driven technology and advisory solutions, which we view as critical to our ongoing success. Looking ahead, we believe that investing in our solutions, people, and digital capabilities positions us to capitalize on long-term growth opportunities.

     

    By closely monitoring client needs and challenges, we proactively assist our clients in navigating legislative changes and other employment complexities. Our unique blend of innovative technology and extensive HR expertise enables clients to more effectively hire, develop, and retain top talent in this tight labor market. Ongoing investments in our platforms have equipped us well to meet the current business demands and regulatory compliance, resulting in high levels of client satisfaction and retention.

     

    On April 14, 2025, we completed the acquisition of Paycor, a leading provider of HCM, payroll, and talent software. This acquisition expands our upmarket position, suite of HCM technology and cross-sale potential. Refer to the "Results of Operations" and “Liquidity and Capital Resources” section of this Item 2 for additional information.

     

    Third Quarter and Year to Date Business Highlights

     

    Highlights compared to the prior year periods are as follows:

     

    23

     

     

     

     

    For the three months ended

     

     

     

    For the nine months ended

     

     

     

     

    February 28,

     

     

     

    February 28,

     

     

     

    In millions, except per share amounts

    2026

     

    2025

    Change(2)

    2026

     

    2025

    Change(2)

    Total service revenue

    $

     

    1,752.1

     

     

     

    $

     

    1,466.1

     

     

     

    20

     

    %

    $

     

    4,747.8

     

     

     

    $

     

    4,027.9

     

     

     

    18

     

    %

    Total revenue

    $

     

    1,808.9

     

     

     

    $

     

    1,509.0

     

     

     

    20

     

    %

    $

     

    4,906.5

     

     

     

    $

     

    4,144.4

     

     

     

    18

     

    %

    Operating income

    $

     

    792.0

     

     

     

    $

     

    691.8

     

     

     

    14

     

    %

    $

     

    1,905.8

     

     

     

    $

     

    1,776.6

     

     

     

    7

     

    %

    Adjusted operating income(1)

    $

     

    863.2

     

     

     

    $

     

    708.5

     

     

     

    22

     

    %

    $

     

    2,138.9

     

     

     

    $

     

    1,793.3

     

     

     

    19

     

    %

    Net income

    $

     

    560.3

     

     

     

    $

     

    519.3

     

     

     

    8

     

    %

    $

     

    1,339.5

     

     

     

    $

     

    1,360.1

     

     

     

    (2

    )

    %

    Adjusted net income(1)

    $

     

    614.9

     

     

     

    $

     

    541.1

     

     

     

    14

     

    %

    $

     

    1,510.3

     

     

     

    $

     

    1,373.3

     

     

     

    10

     

    %

    Diluted earnings per share

    $

     

    1.56

     

     

     

    $

     

    1.43

     

     

     

    9

     

    %

    $

     

    3.71

     

     

     

    $

     

    3.76

     

     

     

    (1

    )

    %

    Adjusted diluted earnings per share(1)

    $

     

    1.71

     

     

     

    $

     

    1.49

     

     

     

    15

     

    %

    $

     

    4.19

     

     

     

    $

     

    3.79

     

     

     

    11

     

    %

    Dividends paid to stockholders

    $

     

    388.0

     

     

     

    $

     

    353.0

     

     

     

    10

     

    %

    $

     

    1,165.0

     

     

     

    $

     

    1,059.2

     

     

     

    10

     

    %

     

     

     

    (1)
    Adjusted operating income, adjusted net income, and adjusted diluted earnings per share are not U.S. generally accepted accounting principle (“GAAP”) measures. Refer to the “Non-GAAP Financial Measures” section of this Item 2 for a discussion of non-GAAP measures and a reconciliation to the U.S. GAAP measures of operating income, net income, and diluted earnings per share.
    (2)
    Percentage changes are calculated based on unrounded numbers.

     

    For further analysis of our results of operations for the third quarter and nine months, the prior year periods, and our financial position as of February 28, 2026, refer to the tables and analysis in the “Results of Operations” and “Liquidity and Capital Resources” sections of this Item 2.

     

    RESULTS OF OPERATIONS

     

    Summary of Results of Operations:

     

    For the three months ended

     

     

     

    For the nine months ended

     

     

     

     

    February 28,

     

     

     

    February 28,

     

     

     

    In millions, except per share amounts

    2026

     

    2025

    Change(1)

    2026

     

    2025

    Change(1)

    Revenue:

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Management Solutions

    $

     

    1,354.6

     

     

     

    $

     

    1,100.7

     

     

     

    23

     

    %

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    Held by

    holders ( registered funds via N-PORT, institutional investors via 13F). Showing top by dollar value.

    Holder Type ETF MF Position ($) % of holder Δ % of holder Holder AUM

    Recent insider activity

    Last 90 days. Open-market trades (purchases & sales) by directors, officers, and 10%+ owners. 2 transactions across 2 insiders. Net: -4,366 shares, -$425,173.

    Date Insider Role Action Shares Price Value
    2026-06-26 TUCCI JOSEPH M Director Sell -3,907 $98.25 -$383,863
    2026-05-13 Roaldsen Elizabeth Sr. Vice President Sell -459 $90.00 -$41,310

    Source: SEC Form 4 filings.

    Next expected filings

    • ~2026-07-10 10-K expected by 2026-07-22 (in 1 day)
    • ~2026-09-29 10-Q expected by 2026-10-12 (in 82 days)
    • ~2026-12-21 10-Q expected by 2027-01-03 (in 165 days)
    • ~2027-03-25 10-Q expected by 2027-04-07 (in 259 days)

    Predicted from historical filing cadence; not an SEC commitment.

    Recent SEC filings

    • 2026-06-24 8-K Earnings Release; Financial Statements and Exhibits
    • 2026-03-26 10-Q Quarterly Report
    • 2026-03-25 8-K Earnings Release; Financial Statements and Exhibits
    • 2026-01-26 8-K Material Agreement Entered; Material Agreement Terminated; Material Financial Obligation
    • 2026-01-20 8-K Officer/Director Change; Other Events; Financial Statements and Exhibits
    • 2025-12-22 10-Q Quarterly Report
    • 2025-12-19 8-K Earnings Release; Financial Statements and Exhibits
    • 2025-09-30 10-Q Quarterly Report
    • 2025-09-30 8-K Earnings Release; Financial Statements and Exhibits
    • 2025-07-14 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
    • 2025-07-11 10-K Annual Report
    • 2025-06-25 8-K Earnings Release; Financial Statements and Exhibits
    • 2025-05-16 8-K Officer/Director Change; Financial Statements and Exhibits
    • 2025-04-14 8-K Completion of Acquisition/Disposition; Other Events; Financial Statements and Exhibits
    • 2025-04-10 8-K Other Events; Financial Statements and Exhibits