ADP Beats Earnings Expectations, Raises Full-Year Outlook
Automatic Data Processing reported third-quarter fiscal 2026 results that exceeded analyst expectations across revenue, profit margins, and earnings per share. The human resources software company raised its full-year guidance on Wednesday.
ADP reported quarterly revenues of $5.94 billion, beating the consensus estimate of $5.85 billion. Quarterly adjusted earnings per share reached $3.37, above the $3.29 estimate.
Where the money comes from
ADP's two main business segments both grew 7% year-over-year. Employer Services revenues reached $4.04 billion, while PEO Services revenues climbed to $1.91 billion. Both segments charge clients based on the scope of services they use.
A growing source of profit came from interest on client funds. That revenue jumped 14% to $404 million as client fund balances averaged $48.3 billion and interest yields rose 10 basis points to 3.3%.
Profit margins expand
Adjusted operating income increased 10% to $1.79 billion, with operating margins expanding 80 basis points to 30.2%. Net earnings rose 9% year-over-year to $1.4 billion.
The company generated $2.24 billion in operating cash flow during the quarter and held $3.23 billion in cash and equivalents as of March 31.
AI spending and the year ahead
CEO Maria Black said the quarter reflected disciplined execution while the company continues investing in artificial intelligence capabilities for human capital management. She said organizations rely on ADP for critical workforce functions and that the company is building tools to address the complexity AI introduces to workplace operations.
CFO Peter Hadley said the company's financial strength allows continued investment in AI across products, services, and sales while maintaining financial commitments.
ADP now expects full-year revenue growth of 6% to 7%, up from prior guidance of 6%, translating to $21.795 billion to $22 billion. The company raised adjusted diluted EPS growth guidance to 10% to 11%, up from 9% to 10%, equating to $11.01 to $11.11 per share.
Shares rose 5.43% to $209.99 following the announcement.
For HR professionals: ADP's expansion of AI capabilities in workforce management reflects broader industry shifts. Learn more about AI for Human Resources and how these tools affect your role, or explore the AI Learning Path for CHROs to understand strategic implications for your organization.
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