01—Abstract
Summary
Summary of the 10-Q filed October 31, 2025. Cited figures are marked; the original filing is the authoritative source.
Automatic Data Processing, Inc. (ADP) reported a solid first quarter for fiscal year 2026, with total revenues increasing by 7% year-over-year to $5.2 billiona.
This growth was driven by new client bookings, strong client retention, higher interest income on client funds, and the impact of the recent WorkForce Software acquisition. Net earnings rose 6% to $1.01 billionb, resulting in diluted earnings per share (EPS) of $2.49, a 6% increase. Key financial strengths include continued revenue growth, particularly in the Employer Services segment, and robust profitability.
The company returned $1.0 billionc to shareholders through dividends and share repurchases, underscoring its commitment to capital return. While operating expenses and R&D increased, partly due to investments in new products and the recent acquisition, the company maintained its adjusted EBIT margin. ADP's strong business model, characterized by low capital intensity and consistent cash flow generation, positions it well to meet operational needs and continue strategic investments.
02—Key points
Key Highlights
- Total revenues grew 7% year-over-year to $5.2 billion, driven by new business, client retention, and acquisitions.
- Net earnings increased 6% to $1.01 billion, with diluted EPS growing 6% to $2.49.
- The company returned $1.0 billion to shareholders via dividends ($0.6 billion) and share repurchases ($0.4 billion).
- Interest on funds held for clients increased 13% due to higher average client fund balances and interest rates.
- Operating expenses and R&D expenses saw an 8% increase, reflecting investments in product development and the WorkForce Software acquisition.
- The Employer Services segment revenue grew 7% (5% organically), while PEO Services revenue grew 7%.
- ADP completed the acquisition of WorkForce Software in October 2024, which is expected to enhance its workforce management solutions.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed October 31, 2025Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $5.18B$4.83B | +7.1% |
| Cost of Revenue | $2.84B$2.63B | +7.7% |
| Gross Profit | $2.34B$2.20B | +6.4% |
| R&D Expenses | $251.20M$232.60M | +8.0% |
| SG&A Expenses | $1.01B$926.70M | +8.6% |
| Operating Expenses | $3.98B$3.70B | +7.6% |
| Interest Expense | $135.40M$137.80M | −1.7% |
| Net Income | $1.01B$956.30M | +5.9% |
| EPS (Basic) | $2.50$2.34 | +6.8% |
| EPS (Diluted) | $2.49$2.34 | +6.4% |
| Shares Outstanding (Basic) | 405.10M407.90M | −0.7% |
| Shares Outstanding (Diluted) | 406.50M409.50M | −0.7% |
05—Questions
Frequently Asked Questions
How did ADP's revenue performance in this quarter compare to the previous year?
ADP reported a 7% increase in total revenues for the three months ended September 30, 2025, reaching $5.2 billion, compared to $4.8 billion in the same period last year. On an organic constant currency basis, revenue grew by 6%.
What is the impact of the WorkForce Software acquisition on ADP's financials?
The acquisition of WorkForce Software, completed in October 2024, contributed to revenue growth, particularly in the Employer Services segment. The company reported increased R&D expenses related to integration costs and noted the acquisition's impact on revenue, although it was not deemed material enough to require pro forma financial information.
How is ADP returning capital to shareholders?
ADP demonstrated a strong commitment to shareholder returns by distributing $1.0 billion in the quarter. This included $626.7 million in dividends paid and $366.0 million in share repurchases. The company also repurchased approximately 1.2 million shares of its common stock during the period.
What factors are driving the increase in interest income on funds held for clients?
Interest income on funds held for clients rose by 13% to $286.8 million. This increase is attributed to a 6.5% rise in average client fund balances to $34.9 billion and an increase in the average interest rate earned to 3.3% from 3.1% in the prior year's comparable period.
06—Continue