What were the primary drivers of ADP's revenue growth in the nine months ended March 31, 2026?

ADP's revenue growth was driven by several factors, including new business secured, strong client retention, increased pricing, a rise in zero-margin benefits pass-throughs, positive foreign currency impact, and a notable increase in interest earned on client funds. Specifically, average client fund balances increased by 7.3% and the average interest rate earned also saw a slight increase.

How did ADP's profitability perform during the period, and what is the outlook on margins?

ADP demonstrated strong profitability, with net earnings increasing by 8% and diluted EPS growing by 10% to $8.49 for the nine months ended March 31, 2026. The company also achieved EBIT margin expansion of 50 basis points to 27.1%, indicating operational efficiencies and effective cost management in conjunction with revenue growth.

What is the company's stance on returning capital to shareholders?

ADP has a strong commitment to returning capital to shareholders, evidenced by $3.4 billion in shareholder-friendly actions during the first nine months of fiscal year 2026. This included $1.9 billion in dividends and $1.5 billion in share repurchases, reflecting the company's solid free cash flow generation and confidence in its financial health.

How did the PEO Services segment perform, and what factors influenced its results?

PEO Services revenue grew by 6% (7% on an organic constant currency basis) to $5.3 billion for the nine months ended March 31, 2026. This growth was attributed to an increase in zero-margin benefits pass-throughs and a 2% rise in average worksite employees. However, earnings before income taxes for PEO Services slightly decreased due to increased selling and marketing expenses, higher operating costs for state unemployment insurance, and increased zero-margin benefits pass-through costs, partially offset by revenue growth.

ADP 10-Q Quarterly Report Q3 FY2026 — Revenue, Net Income, EPS

Summary

Automatic Data Processing, Inc. (ADP) reported solid financial results for the nine months ended March 31, 2026. Total revenues grew by 7% to $16.5 billion, driven by strong client retention, new business, an increase in pricing, and growth in interest earned on client funds. Net earnings also increased by 8% to $3.4 billion, translating to diluted earnings per share (EPS) of $8.49. The company's financial condition remains robust, supported by consistent cash flow generation and a healthy liquidity position, allowing for continued shareholder-friendly actions including dividends and share repurchases. The company continues to invest in its strategic priorities, including leading with best-in-class HCM technology and leveraging AI transformation to enhance its offerings. Key operational highlights include a 1% increase in 'pays per control' for Employer Services and a 2% increase in average worksite employees for PEO Services, indicating stable underlying business growth. The company also successfully integrated the WorkForce Software acquisition, which is expected to contribute to future growth. Despite increased operating expenses, particularly related to PEO services and investments in R&D and sales, ADP maintained its focus on operational efficiencies and margin expansion, with EBIT margin increasing by 50 basis points.

Key Highlights

1Total revenues for the nine months ended March 31, 2026, increased by 7% to $16.5 billion, with a 6% organic constant currency growth, demonstrating sustained top-line momentum.
2Net earnings rose by 8% to $3.4 billion, and diluted EPS grew by 10% to $8.49, reflecting strong profitability and efficient operations.
3The company returned $3.4 billion to shareholders through dividends ($1.9 billion) and share repurchases ($1.5 billion) during the nine months, underscoring a commitment to shareholder value.
4Interest on funds held for clients saw a significant increase, contributing to revenue growth, with average client fund balances up 7.3% and average interest rates rising slightly.
5Employer Services revenue grew 7% on a reported basis, with a 5% organic constant currency growth, supported by a 1% increase in 'pays per control'.
6PEO Services revenue increased by 6% on a reported basis (7% organic constant currency), driven by a 2% increase in average worksite employees.
7The company successfully integrated the WorkForce Software acquisition completed in October 2024, with no material pro forma impact initially, suggesting smooth operational integration.

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q3 Ended Mar 31, 2026

Summary

Key Highlights

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