ADP Reports First Quarter Fiscal 2027 Results
AUTOMATIC DATA PROCESSING INC (ADP) filed an SEC Form 8-K — Results of Operations and Financial Condition. ADP Reports First Quarter Fiscal 2027 Results • Revenues increased 6% compared to last year's first quarter to $5.5 billion; 6% organic constant currency • Net earnings increased 11% to $1.1 billion, and adjusted net earnings increased 11% to $1.1 billion • Adjusted EBIT increase
How this was made
The 30-second read
Why it matters
The earnings beat and raised guidance are likely to attract buying, especially from investors seeking exposure to stable payroll services.
Market read
ADP's strong quarterly performance and raised guidance support a bullish outlook for the company and may lift related HR tech stocks.
What to watch
Potential headwinds from labor market volatility and regulatory changes could temper future growth.
ADP Reports First Quarter Fiscal 2027 Results
Revenue increased 6% to $5.5 billion, net earnings increased 11% to $1.1 billion, adjusted EBIT increased 12% to $1.5 billion, and adjusted EBIT margin increased 130 basis points to 26.8%. The company raised full-year guidance for revenue and adjusted diluted EPS growth.
Actuals vs. the company’s prior outlook
from its previous release| Metric | Guided | Reported | Verdict |
|---|---|---|---|
| Total ADP revenue growth | 5 to 6% | 6% | in line |
| Adjusted diluted EPS growth | 9 to 11% | 13% | above |
| Employer Services revenue growth | 5 to 6% | 6% | in line |
| U.S. pays per control growth | 0 to 1% | 2% | above |
| PEO Services revenue growth | 5 to 7% | 7% | in line |
| PEO Services revenue excluding zero-margin benefits pass-throughs growth | 3 to 5% | 4% | in line |
| PEO Services average worksite employee count growth | ~2% | 2% | in line |
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenuesGAAP | $5.49B | – | 6% |
| Revenues, other than interest on funds held for clients and PEO revenuesGAAP | $3.36B | – | – |
| Interest on funds held for clientsGAAP | $329.3M | – | 15% |
| PEO revenuesGAAP | $1.81B | – | – |
| Total costs of revenuesGAAP | $2.97B | – | – |
| Selling, general, and administrative expensesGAAP | $1.06B | – | – |
| Research and developmentGAAP | $251.3M | – | – |
| Depreciation and amortizationGAAP | $129M | – | – |
| Interest expenseGAAP | $148.1M | – | – |
| Earnings before income taxesGAAP | $1.45B | – | 11% |
| Net earningsGAAP | $1.13B | – | 11% |
| Diluted earnings per shareGAAP | $2.83 | – | 14% |
| Basic earnings per shareGAAP | $2.84 | – | 14% |
| Effective tax rateGAAP | 22.7% | – | – |
| Adjusted EBITnon-GAAP | $1.47B | – | 12% |
| Adjusted EBIT marginnon-GAAP | 26.8% | – | 130 basis points |
| Adjusted net earningsnon-GAAP | $1.12B | – | 11% |
| Adjusted diluted earnings per sharenon-GAAP | $2.82 | – | 13% |
| Adjusted effective tax ratenon-GAAP | 22.7% | – | – |
| Net cash flows provided by operating activitiesGAAP | $651M | – | – |
| Capital expendituresGAAP | $52.7M | – | – |
| Net cash flows used in investing activitiesGAAP | $882.4M | – | – |
| Net cash flows provided by financing activitiesGAAP | $305M | – | – |
| Cash and cash equivalentsGAAP | $3.28B | – | – |
| Funds held for clientsGAAP | $44.73B | – | – |
| Long-term debtGAAP | $4.97B | – | – |
| Total liabilitiesGAAP | $58.36B | – | – |
| Total stockholders' equityGAAP | $5.09B | – | – |
| Average client funds balancesother | $36.9B | – | 6% |
| Average interest yield on client fundsother | 3.6% | – | 30 basis points |
| Net Impact from Client Funds Strategynon-GAAP | $332.9M | – | 26% |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Employer ServicesU.S. pays per control increased 2%. Employer Services segment margin increased 130 basis points to 36.5%. | $3.69B | – | 6% |
| PEO ServicesAverage paid PEO worksite employees during the period increased 2% to 771,000. PEO Services revenues excluding zero-margin benefits pass-throughs increased 4%, and segment margin was flat at 13.0%. | $1.81B | – | 7% |
| OtherSegment earnings were $(123.0) million, compared with $(140.1) million. | −$2.8M | – | n/m |
Fiscal 2027 Outlook outlook
- RevenueRevenue growth of about 6%
- Tax rateAdjusted effective tax rate of approximately 23%
- NoteAdjusted EBIT margin expansion of 70 to 90 basis points
- NoteDiluted EPS growth of 12% to 14%
- NoteAdjusted diluted EPS growth of 10% to 12%
- NoteEmployer Services revenue growth of about 6%
- NoteEmployer Services new business bookings growth of 4% to 7%
- NoteEmployer Services client revenue retention decrease of 10 to 30 basis points
- NoteIncrease in U.S. pays per control of about 1%
- NotePEO Services revenue growth of 5% to 7%
- NotePEO Services revenue, excluding zero-margin benefits pass-throughs, growth of 3% to 5%
- NotePEO Services average worksite employee count growth of about 2%
- NoteInterest on funds held for clients of $1.59 to $1.61 billion
- NoteAnticipated growth in client funds balances of 4% to 5%
- NoteAverage yield anticipated to increase to approximately 3.8%
- NoteTotal contribution from the client funds extended investment strategy of $1.59 to $1.61 billion
Capital returns
- Repurchases of common stock were $758.8 million, compared with $366.0 million.
- Net repurchases for stock-based compensation plans and stock purchase plan were $27.6 million, compared with $57.8 million.
- Dividends paid were $677.0 million, compared with $626.7 million.
- Dividends payable were $670.2 million as of September 30, 2026.
What drove it
- Employer Services revenue increased 6% on a reported basis and 6% on an organic constant currency basis.
- U.S. pays per control increased 2%.
- Interest on funds held for clients increased 15% to $329.3 million.
- Average client funds balances increased 6% to $36.9 billion and the average interest yield on client funds increased 30 basis points to 3.6%.
- Corporate extended interest income increased 35% to $106.1 million.
- Net Impact from Client Funds Strategy increased 26% to $332.9 million.
- Adjusted EBIT margin increased 130 basis points to 26.8%.
Concerns
- PEO Services segment margin was flat at 13.0%.
- Short-term financing to support Client Funds Strategy interest expense was $(102.5) million, compared with $(101.8) million.
- Cash and cash equivalents declined to $3,277.0 million from $4,230.1 million as of June 30, 2026.
- Total stockholders' equity was $5,092.1 million, compared with $6,031.2 million as of June 30, 2026.
- The fiscal 2027 outlook assumes a blended rate of 5.3% for new purchase rates across the client and corporate extended and client long portfolios over the remainder of the fiscal year.
What to watch
- Execution against revenue growth of about 6% and adjusted diluted EPS growth of 10% to 12% for fiscal 2027.
- Whether adjusted EBIT margin expands by the guided 70 to 90 basis points.
- Employer Services new business bookings growth of 4% to 7% and client revenue retention decrease of 10 to 30 basis points.
- PEO Services revenue growth of 5% to 7%, growth excluding zero-margin benefits pass-throughs of 3% to 5%, and average worksite employee count growth of about 2%.
- Client funds interest of $1.59 to $1.61 billion, anticipated client fund balance growth of 4% to 5%, and an anticipated average yield of approximately 3.8%.
Balance sheet and cash flow
- Cash and cash equivalents were $3,277.0 million as of September 30, 2026, compared with $4,230.1 million as of June 30, 2026.
- Funds held for clients were $44,733.3 million as of September 30, 2026, compared with $43,957.8 million as of June 30, 2026.
- Client funds obligations were $46,039.6 million as of September 30, 2026, compared with $44,415.5 million as of June 30, 2026.
- Long-term debt was $4,965.3 million as of September 30, 2026, compared with $4,964.1 million as of June 30, 2026.
- Net cash flows provided by operating activities were $651.0 million, compared with $642.3 million.
- Net increase in client funds obligations was $1,654.0 million, compared with $573.1 million.
- Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents was $80.2 million, compared with $(1,062.9) million.
Analysis
ADP opened fiscal 2027 with revenue of $5,490.7 million, up 6% from $5,175.2 million. Revenue growth was also 6% on an organic constant currency basis. Net earnings increased 11% to $1,125.2 million and diluted EPS increased 14% to $2.83. Adjusted net earnings increased 11% to $1,123.0 million, while adjusted diluted EPS increased 13% to $2.82.
Profitability expanded faster than revenue. Adjusted EBIT increased 12% to $1,470.0 million and adjusted EBIT margin rose to 26.8% from 25.5%, a 130-basis-point increase. Employer Services segment earnings increased 9% to $1,343.5 million and segment margin rose to 36.5% from 35.2%. PEO Services segment earnings increased 7% to $234.4 million, while its segment margin remained 13.0%.
Both operating segments contributed to top-line growth. Employer Services revenue was $3,685.4 million, up 6%, with U.S. pays per control increasing 2%. PEO Services revenue was $1,808.1 million, up 7%; revenue excluding zero-margin benefits pass-throughs increased 4%. Average paid PEO worksite employees increased 2% to 771,000. Interest on funds held for clients increased 15% to $329.3 million, supported by a 6% increase in average client funds balances to $36.9 billion and a 30-basis-point increase in average yield to 3.6%.
Operating cash flow was $651.0 million, compared with $642.3 million. ADP repurchased $758.8 million of common stock and paid $677.0 million of dividends. Cash and cash equivalents were $3,277.0 million as of September 30, 2026, while long-term debt was $4,965.3 million. Client funds obligations increased to $46,039.6 million from $44,415.5 million as of June 30, 2026.
The company raised its fiscal 2027 outlook for revenue growth to about 6% from 5 to 6% and adjusted diluted EPS growth to 10 to 12% from 9 to 11%. ADP maintained its outlook for 70 to 90 basis points of adjusted EBIT margin expansion, an adjusted effective tax rate of approximately 23%, Employer Services new business bookings growth of 4 to 7%, and PEO Services revenue growth of 5 to 7%. The first-quarter results exceeded the prior outlook for adjusted diluted EPS growth and U.S. pays per control growth, while reported revenue and PEO measures were within their prior guidance ranges.
Management, verbatim
ADP is off to a strong start in fiscal 2027 with first quarter results that reflect the resilience of our business model and the trust our clients continue to place in us.
Maria Black, President and Chief Executive Officer, ADP
The complexity of work is growing faster than employers can manage alone and our clients are turning to us and our deep domain expertise to fundamentally change how work gets done inside their organizations.
Maria Black, President and Chief Executive Officer, ADP
Our first quarter results exceeded our expectations across revenue growth, adjusted EBIT margin expansion, and adjusted EPS growth.
Peter Hadley, Chief Financial Officer, ADP
Not in the filing
stated, not guessed- GAAP gross margin was not reported.
- GAAP operating income was not reported.
- Non-GAAP gross margin was not reported.
- Free cash flow was not reported.
- Prior-quarter comparative results for the income statement and segment metrics were not reported.
- A quarterly actual result comparable with the full-year adjusted EBIT margin expansion guidance was not reported.
- A quarterly actual result comparable with the full-year client funds interest guidance was not reported.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
ADP reported its first quarter FY2027 results via an SEC Form 8‑K, highlighting revenue, earnings, and an upward revision to its full‑year outlook.
Ticker impact
ADP disclosed Q1 FY2027 results and raised full-year revenue and adjusted diluted EPS guidance.
likely upward pressure as the market prices in the raised guidance
Revenue grew 6% and EPS rose 14% YoY, and the company lifted its full-year outlook, which typically drives buying interest.
Market effects
Strong HR and payroll services earnings may boost confidence in the broader business services sector.
Positive impact on US large-cap equities, especially other payroll and HR tech firms.
Limited, primarily US-focused.
Counterpoint
If the market had already priced in strong growth, the raise may be already baked in, limiting upside.
Key entities
- ExecutiveMaria Black
President and CEO of ADP, quoted on the results.
- ExecutivePeter Hadley
Chief Financial Officer of ADP, discussed financial performance.
