Automatic Data Processing (ADP) Q3 2026 earnings summary

Executive summary

• Achieved 7% revenue growth and 10% adjusted diluted EPS growth year-over-year in Q3 FY26, with strong margin expansion and strategic execution driven by AI-powered innovation and new business bookings.

• Employer Services and PEO Services both contributed to revenue growth, with Employer Services showing record-high retention and client satisfaction, and PEO Services experiencing margin pressure due to higher costs.

• AI and automation are deeply integrated into operations, with new AI agents and tools delivering measurable productivity gains and expanding addressable markets, including the Lyric HCM platform and ADP Assist agents.

• Cash returned to shareholders totaled $3.4B for the nine months ended March 31, 2026, including $1.9B in dividends and $1.5B in share repurchases.

• Strategic focus included scaling GenAI capabilities, acquisition of WorkForce Software, and operational productivity improvements.

Financial highlights

• Q3 FY26 total revenues reached $5.94B, up 7% from $5.55B in Q3 FY25, with adjusted EBIT up 10% to $1.8B and margin up 80 basis points.

• Employer Services revenues grew 7% (5% organic constant currency), with segment margin up 130 basis points; PEO Services revenues up 7% (5% excluding zero-margin pass-throughs), but margin declined 120 basis points.

• Net earnings for the nine months ended March 31, 2026, were $3.43B, up 8% year-over-year; diluted EPS increased 10% to $8.49.

• Average client funds balances increased 9% to $48.3B, with average interest yield at 3.3% and interest on funds held for clients up 14% to $404M.

• Operating cash flow for the nine months was $4.01B, up from $3.50B in the prior year.

Outlook and guidance

• Fiscal 2026 revenue growth outlook raised to 6–7%, with adjusted EBIT margin expansion of 70–80 basis points and adjusted diluted EPS growth guidance increased to 10–11%.

• Employer Services and PEO Services revenue growth both expected at 6–7%; new business bookings growth of 4–7%.

• Client funds interest revenue forecast midpoint raised to $1.34–$1.35B, with average yield anticipated at ~3.4%.

• Full-year effective tax rate guidance remains at ~23%.

• Management expects continued strong cash flow generation and sufficient liquidity to support dividends, share repurchases, and capital expenditures.