Fourth Quarter and Fiscal 2026
Filed Jul 29, 2026ADP Reports Fourth Quarter and Fiscal 2026 Results; Provides Fiscal 2027 Outlook
Fiscal 2026 revenue increased 7% to $21.9 billion, adjusted EBIT increased 10% to $5.9 billion, adjusted EBIT margin increased 80 basis points to 26.8%, and adjusted diluted EPS increased 11% to $11.12. Fourth-quarter adjusted EBIT margin increased 140 basis points to 25.1%, while fiscal 2027 outlook calls for further adjusted EBIT margin expansion of 70 to 90 basis points.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenues, fourth quarterGAAP | $5,473.8 million | – | 7% |
| Revenues, other than interest on funds held for clients and PEO revenues, fourth quarterGAAP | $3,342.1 million | – | – |
| Interest on funds held for clients, fourth quarterGAAP | $355.4 million | – | 15% |
| PEO revenues, fourth quarterGAAP | $1,776.3 million | – | – |
| Total costs of revenues, fourth quarterGAAP | $2,962.5 million | – | – |
| Selling, general, and administrative expenses, fourth quarterGAAP | $1,252.3 million | – | – |
| Interest expense, fourth quarterGAAP | $121.0 million | – | – |
| Earnings before income taxes, fourth quarterGAAP | $1,257.8 million | – | – |
| Net earnings, fourth quarterGAAP | $978.6 million | – | 7% |
| Diluted earnings per share, fourth quarterGAAP | $2.45 | – | 10% |
| Adjusted net earnings, fourth quarternon-GAAP | $1.1 billion | – | 14% |
| Adjusted EBIT, fourth quarternon-GAAP | $1.4 billion | – | 13% |
| Adjusted EBIT margin, fourth quarternon-GAAP | 25.1% | – | increased 140 basis points |
| Effective tax rate, fourth quarterGAAP | 22.2% | – | – |
| Adjusted effective tax rate, fourth quarternon-GAAP | 22.4% | – | – |
| Total revenues, fiscal 2026GAAP | $21,947.4 million | – | 7% |
| Revenues, other than interest on funds held for clients and PEO revenues, fiscal 2026GAAP | $13,476.8 million | – | – |
| Interest on funds held for clients, fiscal 2026GAAP | $1,354.8 million | – | 14% |
| PEO revenues, fiscal 2026GAAP | $7,115.8 million | – | – |
| Total costs of revenues, fiscal 2026GAAP | $11,760.2 million | – | – |
| Selling, general, and administrative expenses, fiscal 2026GAAP | $4,408.2 million | – | – |
| Interest expense, fiscal 2026GAAP | $459.3 million | – | – |
| Earnings before income taxes, fiscal 2026GAAP | $5,730.3 million | – | – |
| Net earnings, fiscal 2026GAAP | $4,413.5 million | – | 8% |
| Diluted earnings per share, fiscal 2026GAAP | $10.94 | – | 10% |
| Adjusted net earnings, fiscal 2026non-GAAP | $4.5 billion | – | 10% |
| Adjusted EBIT, fiscal 2026non-GAAP | $5.9 billion | – | 10% |
| Adjusted EBIT margin, fiscal 2026non-GAAP | 26.8% | – | increased 80 basis points |
| Effective tax rate, fiscal 2026GAAP | 23.0% | – | – |
| Adjusted effective tax rate, fiscal 2026non-GAAP | 23.0% | – | – |
| Employer Services new business bookings, fiscal 2026other | $2.2 billion | – | 6% |
| Employer Services client revenue retention, fiscal 2026other | 92.1% | – | remained flat |
| Average client funds balances, fourth quarterother | $41.0 billion | – | 8% |
| Average interest yield on client funds, fourth quarterother | 3.5% | – | increased 20 basis points |
| Average client funds balances, fiscal 2026other | $40.4 billion | – | 7% |
| Average interest yield on client funds, fiscal 2026other | 3.4% | – | increased 20 basis points |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Employer Services, fiscal 2026Employer Services new business bookings increased 6% to $2.2 billion; client revenue retention remained flat at 92.1%; U.S. pays per control increased 1%; and segment margin increased 60 basis points. | $14,831M | – | 7% on a reported basis and 5% on an organic constant currency basis |
| PEO Services, fiscal 2026PEO Services revenues excluding zero-margin benefits pass-throughs increased 5%; average worksite employees paid increased 2% to about 762,000; and segment margin decreased 110 basis points. | $7,128M | – | 7% |
Fiscal 2027 outlook
- RevenueRevenue growth of 5% to 6%
- Tax rateAdjusted effective tax rate of approximately 23%
- NoteAdjusted EBIT margin expansion of 70 to 90 basis points
- NoteDiluted EPS growth of 11% to 13%
- NoteAdjusted diluted EPS growth of 9% to 11%
- NoteEmployer Services revenue growth of 5% to 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 0% to 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 $1.540 to $1.560 billion
- NoteAnticipated growth in client funds balances of 3% to 4%
- NoteAverage yield on client funds anticipated to increase to approximately 3.7%
- NoteTotal contribution from the client funds extended investment strategy of $1.545 to $1.565 billion
What drove it
- Employer Services revenue increased 7% on a reported basis and 5% on an organic constant currency basis for fiscal 2026.
- PEO Services revenue increased 7% and revenue excluding zero-margin benefits pass-throughs increased 5% for fiscal 2026.
- Interest on funds held for clients increased 14% to $1.4 billion for fiscal 2026.
- Average client funds balances increased 7% to $40.4 billion and the average interest yield on client funds increased 20 basis points to 3.4% for fiscal 2026.
- The company cited strong Employer Services retention, record client satisfaction scores, and AI tools embedded across product, service and sales teams that enhance quality and productivity.
Concerns
- PEO Services segment margin decreased 100 basis points in the fourth quarter and decreased 110 basis points for fiscal 2026.
- Fiscal 2027 outlook calls for Employer Services client revenue retention to decrease by 10 to 30 basis points.
- Fiscal 2027 PEO Services revenue growth outlook of 5% to 7% and revenue excluding zero-margin benefits pass-throughs growth of 3% to 5% are below fiscal 2026 reported growth rates of 7% and 5%, respectively.
- Fiscal 2026 adjusted results exclude a pre-tax gain of about $5 million, pre-tax charges of about $91 million, a pre-tax gain of about $8 million, and pre-tax net charges of about $18 million.
What to watch
- Employer Services new business bookings growth of 4% to 7% in fiscal 2027.
- Employer Services client revenue retention decrease of 10 to 30 basis points in fiscal 2027.
- PEO Services average worksite employee count growth of about 2% in fiscal 2027.
- Adjusted EBIT margin expansion of 70 to 90 basis points in fiscal 2027.
- Interest on funds held for clients outlook of $1.540 to $1.560 billion and the anticipated increase in average yield on client funds to approximately 3.7%.
Analysis
ADP closed fiscal 2026 with broad reported growth. Fourth-quarter total revenues were $5,473.8 million versus $5,126.8 million, while fiscal-year total revenues were $21,947.4 million versus $20,560.9 million. The release characterized full-year revenue growth as 7%, or 6% on an organic constant currency basis. Fiscal-year GAAP net earnings were $4,413.5 million versus $4,079.7 million, and diluted earnings per share were $10.94 versus $9.98.
Profitability improved on the company’s adjusted measures. Fiscal 2026 adjusted EBIT increased 10% to $5.9 billion and adjusted EBIT margin increased 80 basis points to 26.8%. The fourth quarter showed stronger reported margin expansion, with adjusted EBIT increasing 13% to $1.4 billion and adjusted EBIT margin increasing 140 basis points to 25.1%. Adjusted diluted EPS increased 17% to $2.64 in the fourth quarter and 11% to $11.12 for the full year. The effective tax rate was 22.2% reported and 22.4% adjusted in the quarter, and 23.0% on both bases for the year.
Employer Services remained the principal operating strength. Fiscal 2026 Employer Services revenue was $14,831M in the outlook table, new business bookings increased 6% to $2.2 billion, retention remained flat at 92.1%, and segment margin increased 60 basis points. PEO Services revenue was $7,128M in the outlook table and increased 7%, but PEO segment margin decreased 110 basis points for the year. PEO revenue excluding zero-margin benefits pass-throughs increased 5%, while average worksite employees paid increased 2% to about 762,000.
Client funds income was another material contributor. Interest on funds held for clients increased 14% to $1.4 billion in the release, while the consolidated statement reports $1,354.8 million. Average client funds balances increased 7% to $40.4 billion and the average interest yield increased 20 basis points to 3.4% for fiscal 2026. The fiscal 2027 outlook assumes interest on funds held for clients of $1.540 to $1.560 billion, client-funds balance growth of 3% to 4%, and an average yield of approximately 3.7%.
Fiscal 2027 guidance calls for revenue growth of 5% to 6%, adjusted EBIT margin expansion of 70 to 90 basis points, and adjusted diluted EPS growth of 9% to 11%. The outlook also calls for diluted EPS growth of 11% to 13% and an adjusted effective tax rate of approximately 23%. Management is guiding Employer Services new business bookings growth of 4% to 7%, but also expects client revenue retention to decline by 10 to 30 basis points. The margin trajectory, retention movement, PEO margin performance, and delivery of client-funds income assumptions are the central reported items to monitor.
Management, verbatim
ADP’s strong fiscal 2026 performance is grounded in the long-term value that matters most to our clients: trust.
Maria Black, President and Chief Executive Officer, ADP
Our impressive financial results, strong Employer Services retention, and record client satisfaction scores are evidence that ADP is purpose-built for this, and we've never been better positioned to deliver for our clients.
Maria Black, President and Chief Executive Officer, ADP
We were pleased to deliver a strong fourth quarter to finish the year at the high end of our guidance range for revenue growth, margin expansion and adjusted EPS growth, while continuing to invest in the future growth and success of ADP.
Peter Hadley, Chief Financial Officer, ADP
Not in the filing
stated, not guessed- Prior-quarter comparisons for reported metrics.
- GAAP gross margin.
- GAAP operating income and operating margin.
- Adjusted EPS, adjusted EBIT, adjusted EBIT margin, and adjusted net earnings reconciliation tables, which are not included in the provided filing text.
- Cash balance, debt balance, operating cash flow, free cash flow, share repurchases, and dividends.
- Quarterly Employer Services and PEO Services revenue amounts.
- Prior fiscal outlook required for comparison against actual results.
AlphaAI 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.