Q1 FY2027
Filed Sep 23, 2026Paychex Reports First Quarter Fiscal 2027 Results
Total revenue increased 6%, with 12% PEO and Insurance Solutions revenue growth, while GAAP operating income increased 14% and diluted earnings per share increased 14%. The company raised its fiscal 2027 outlook for PEO and Insurance Solutions revenue growth and interest on funds held for clients, while maintaining its other outlook metrics.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenueGAAP | $1.63B | – | 6% |
| Management Solutions revenueGAAP | $1.21B | – | 4% |
| PEO and Insurance Solutions revenueGAAP | $367.6M | – | 12% |
| Total service revenueGAAP | $1.58B | – | 6% |
| Interest on funds held for clientsGAAP | $49.8M | – | 5% |
| Cost of service revenueGAAP | $430.1M | – | 4% |
| Selling, general and administrative expensesGAAP | $581.2M | – | (1)% |
| Total expensesGAAP | $1.01B | – | 1% |
| Operating incomeGAAP | $619.2M | – | 14% |
| Operating marginGAAP | 38.0% | – | – |
| Adjusted operating incomenon-GAAP | $684.7M | – | 9% |
| Adjusted operating marginnon-GAAP | 42.0% | – | – |
| Interest expenseGAAP | −$65.1M | – | (5)% |
| Other income, netGAAP | $10.9M | – | (54)% |
| Income before income taxesGAAP | $565M | – | 14% |
| Income taxesGAAP | $135.3M | – | 19% |
| Net incomeGAAP | $429.7M | – | 12% |
| Adjusted net incomenon-GAAP | $479.2M | – | 9% |
| Basic earnings per shareGAAP | $1.21 | – | 13% |
| Diluted earnings per shareGAAP | $1.21 | – | 14% |
| Adjusted diluted earnings per sharenon-GAAP | $1.34 | – | 10% |
| Weighted-average common shares outstandingGAAP | 355.8M | – | – |
| Weighted-average common shares outstanding, assuming dilutionGAAP | 356.6M | – | – |
| EBITDAnon-GAAP | $729.7M | – | 11% |
| Adjusted EBITDAnon-GAAP | $738.3M | – | 9% |
| Cash flow from operationsGAAP | $413.5M | – | – |
| Cash and cash equivalentsGAAP | $600.9M | – | – |
| Restricted cashGAAP | $55M | – | – |
| Corporate investmentsGAAP | $333.3M | – | – |
| Long-term borrowings, net of debt issuance costsGAAP | $4.56B | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Management SolutionsHigher revenue per client resulting from price realization and product penetration. | $1.21B | – | 4% |
| PEO and Insurance SolutionsGrowth in the number of average PEO worksite employees and increased PEO insurance volumes. | $367.6M | – | 12% |
Fiscal Year 2027 Outlook outlook
- RevenueTotal revenue growth 5% to 6%
- Tax rateEffective income tax rate ~24%
- NoteManagement Solutions revenue growth 5% to 6%
- NotePEO and Insurance Solutions revenue growth 7% to 8%
- NoteInterest on funds held for clients $200 million to $210 million
- NoteAdjusted operating margin ~44%
- NoteAdjusted diluted earnings per share growth 7% to 9%
Capital returns
- Paid dividends of $1.19 per share totaling $424.1 million.
- Dividends paid were $424.1 million compared to $389.1 million.
- Repurchases of common shares were — compared to $160.1 million.
What drove it
- Management Solutions revenue increased 4% driven by higher revenue per client resulting from price realization and product penetration.
- PEO and Insurance Solutions revenue increased 12%, primarily due to growth in the number of average PEO worksite employees and increased PEO insurance volumes.
- Interest on funds held for clients increased 5% due to higher average interest rates.
- Operating income growth primarily reflected revenue growth and lower acquisition-related costs.
- Acquisition-related costs were $65.5 million compared to $84.8 million, including $56.9 million compared to $61.1 million in amortization of Paycor acquired intangibles.
Concerns
- Management Solutions revenue growth was 4%, below the 12% growth reported for PEO and Insurance Solutions revenue.
- Other income, net was $10.9 million compared to $23.8 million.
- Cash flow from operations was $413.5 million compared to $718.4 million.
- The company stated that changes in the macroeconomic environment could alter its guidance.
- The filing identifies risks related to AI and new technologies, cyberattacks and data security, PEO co-employment, insurance rates and claim trends, acquisitions, client reimbursements, interest rates, regulations, and macroeconomic factors affecting small- and medium-sized business clients.
What to watch
- Delivery against fiscal 2027 total revenue growth guidance of 5% to 6%.
- Whether PEO and Insurance Solutions revenue growth meets the increased outlook of 7% to 8%.
- Interest on funds held for clients against the increased outlook of $200 million to $210 million.
- Adjusted operating margin relative to the ~44% fiscal 2027 outlook.
- Management Solutions revenue growth relative to the 5% to 6% fiscal 2027 outlook.
- Early adopter results and client adoption of the WISE engine and WISE Hire agentic recruiting solution.
Balance sheet and cash flow
- Cash, restricted cash, and total corporate investments of $1.0 billion as of August 31, 2026.
- Cash and cash equivalents were $600.9 million as of August 31, 2026, compared with $1,088.2 million as of May 31, 2026.
- Restricted cash was $55.0 million as of August 31, 2026, compared with $52.8 million as of May 31, 2026.
- Corporate investments were $333.3 million as of August 31, 2026, compared with $36.3 million as of May 31, 2026.
- Long-term borrowings, net of debt issuance costs, were $4,558.0 million as of August 31, 2026, compared with $4,556.1 million as of May 31, 2026.
- Cash flow from operations was $413.5 million compared to $718.4 million.
- Net cash used in investing activities was $335.8 million compared to $1,302.7 million.
- Net cash used in financing activities was $906.6 million compared to $515.4 million.
- Net change in cash, restricted cash, and equivalents was $(828.9) million compared to $(1,099.7) million.
- Cash, restricted cash, and equivalents at the end of the period were $655.9 million compared to $1,634.6 million.
Analysis
Paychex reported a solid first quarter of fiscal 2027. Total revenue increased 6% to $1,630.5 million, while PEO and Insurance Solutions revenue increased 12% to $367.6 million. Management Solutions revenue increased 4% to $1,213.1 million, driven by higher revenue per client from price realization and product penetration. Interest on funds held for clients increased 5% to $49.8 million due to higher average interest rates.
Profit growth exceeded revenue growth. GAAP operating income increased 14% to $619.2 million and operating margin was 38.0%, compared with 35.2%. Adjusted operating income increased 9% to $684.7 million and adjusted operating margin was 42.0%, compared with 40.7%. The company attributed operating-income growth primarily to revenue growth and lower acquisition-related costs. Acquisition-related costs were $65.5 million, compared with $84.8 million.
GAAP net income increased 12% to $429.7 million, and diluted earnings per share increased 14% to $1.21. Adjusted net income increased 9% to $479.2 million and adjusted diluted earnings per share increased 10% to $1.34. Interest expense was $(65.1) million compared with $(68.2) million, while other income, net declined to $10.9 million from $23.8 million.
Capital returns consisted of dividends of $1.19 per share totaling $424.1 million. The company reported no common-share repurchases in the quarter, compared with $160.1 million in the prior-year period. Cash flow from operations was $413.5 million compared with $718.4 million. As of August 31, 2026, cash, restricted cash, and total corporate investments were $1.0 billion, while long-term borrowings, net of debt issuance costs, were $4.6 billion.
The fiscal 2027 outlook maintains total revenue growth of 5% to 6%, Management Solutions revenue growth of 5% to 6%, adjusted operating margin of ~44%, an effective income tax rate of ~24%, and adjusted diluted earnings per share growth of 7% to 9%. The company increased PEO and Insurance Solutions revenue growth guidance to 7% to 8% from 6% to 7%, and increased its outlook for interest on funds held for clients to $200 million to $210 million from $195 million to $205 million. The principal reported points to monitor are delivery on the higher PEO outlook, Management Solutions growth, interest-rate-supported client-funds income, margin execution, and adoption of WISE and WISE Hire.
Management, verbatim
Paychex delivered a solid start to total revenue growth in fiscal 2027, with double-digit PEO and Insurance Solutions revenue and EPS growth underscoring the strength of our advisory solutions, disciplined execution, and continued progress against our strategic priorities.
John Gibson, President and Chief Executive Officer
We continued to build meaningful momentum in AI with compelling early adopter results from our award-winning WISE engine and the introduction of WISE Hire, our agentic recruiting solution.
John Gibson, President and Chief Executive Officer
Not in the filing
stated, not guessed- Gross profit and gross margin were not reported.
- Free cash flow was not reported.
- A GAAP effective income tax rate was not reported.
- Prior-quarter income-statement comparisons were not reported.
- A previous release outlook document was not provided; therefore, no actual-versus-prior-guidance comparison is included.
- Fiscal 2027 guidance for gross margin and operating expenses 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.