01—Abstract
Summary
Summary of the 10-Q filed September 30, 2025. Cited figures are marked; the original filing is the authoritative source.
Paychex, Inc. (PAYX) reported first-quarter fiscal 2026 results for the three months ended August 31, 2025.
Total revenue rose to $1,540.0 milliona from $1,318.5 million, with Management Solutions revenue of $1,163.3 million (up from $961.7 million) and PEO and Insurance Solutions revenue of $329.1 million (up from $319.3 million). The filing attributes the Management Solutions growth in part to the acquisition of Paycor HCM, Inc., completed April 14, 2025, which the company says contributed approximately 17% to Management Solutions revenue growth year-over-year. Profitability was pressured by acquisition-related costs and higher interest expense.
Operating income declined to $541.9 millionb from $546.7 million, while total expenses rose to $998.1 million from $771.8 million; the filing records $84.1 million of Paycor acquisition-related costs in selling, general and administrative expenses. Interest expense increased to $68.2 million from $9.6 million, reflecting debt issued to finance the acquisition. Net income fell to $383.8 million from $427.4 million, and diluted earnings per share were $1.06 versus $1.18.
Adjusted operating income, a non-GAAP measure, grew to $626.7 millionc, and adjusted diluted earnings per share were $1.22 versus $1.16. The balance sheet shows cash and cash equivalents of $809.0 million, down from $1,628.6 million at May 31, 2025, while corporate investments rose to $861.9 million from $34.5 million. Long-term borrowings were $4,550.3 million, and total stockholders' equity was $3,970.6 million.
Operating cash flow was $718.4 milliond, and the company paid $389.1 million in dividends ($1.08 per share declared) and repurchased $160.1 million of common stock. Goodwill of $4,523.6 million and intangible assets of $1,886.8 million reflect the Paycor acquisition.
02—Key points
Key Highlights
- Total revenue of $1,540.0 million, up from $1,318.5 million in the prior year period, with Management Solutions revenue of $1,163.3 million.
- Operating income of $541.9 million, down from $546.7 million, including $84.1 million of Paycor acquisition-related costs; adjusted operating income was $626.7 million.
- Net income of $383.8 million and diluted EPS of $1.06, compared with $427.4 million and $1.18 a year earlier; adjusted diluted EPS was $1.22.
- Interest expense rose to $68.2 million from $9.6 million, primarily due to debt issued to finance the Paycor acquisition.
- Operating cash flow of $718.4 million, compared with $546.1 million in the prior year period.
- Cash and cash equivalents fell to $809.0 million from $1,628.6 million at May 31, 2025, while corporate investments increased to $861.9 million.
- Dividends paid of $389.1 million and share repurchases of $160.1 million during the quarter; the $400.0 million repurchase program runs through May 31, 2027.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2026, Paychex kept $0.25.
- Revenue$1.54B100.0%
- Cost of revenue−$413.8M26.9%
- Gross profit$1.13B73.1%
- Operating costs−$584.3M37.9%
- Operating income$541.9M35.2%
- Interest, other & tax−$158.1M10.3%
- Net income$383.8M24.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed September 30, 2025Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $1.54B$1.32B | +16.8% |
| Cost of Revenue | $413.80M$380.00M | +8.9% |
| Gross Profit | $1.13B$938.50M | +20.0% |
| SG&A Expenses | $584.30M$391.80M | +49.1% |
| Operating Expenses | $998.10M$771.80M | +29.3% |
| Operating Income | $541.90M$546.70M | −0.9% |
| Net Income | $383.80M$427.40M | −10.2% |
| EPS (Basic) | $1.07$1.19 | −10.1% |
| EPS (Diluted) | $1.06$1.18 | −10.2% |
| Shares Outstanding (Basic) | 360.10M360.10M | 0.0% |
| Shares Outstanding (Diluted) | 361.90M361.90M | 0.0% |
05—Questions
Frequently Asked Questions
What drove the revenue increase in the quarter?
Management Solutions revenue rose to $1,163.3 million from $961.7 million. The filing says Paycor, acquired in April 2025, contributed approximately 17% to Management Solutions revenue growth, with additional growth from higher revenue per client driven by price realization and product penetration. PEO and Insurance Solutions revenue increased to $329.1 million from $319.3 million, and interest on funds held for clients rose to $47.6 million from $37.5 million.
Why did operating income decline even though revenue grew?
Total expenses increased to $998.1 million from $771.8 million. The filing attributes this to higher compensation-related expenses from Paycor headcount, higher technology, selling and marketing investments, and $84.8 million of acquisition-related costs, which include $61.1 million of amortization of acquired intangibles. Operating margin fell to 35.2% from 41.5%, while adjusted operating margin was 40.7%.
How did the Paycor acquisition affect the balance sheet and borrowing costs?
The company completed the Paycor acquisition for total purchase consideration of approximately $4.1 billion, financed through $4.2 billion of fixed-rate corporate bonds. Goodwill rose to $4,523.6 million and intangible assets were $1,886.8 million at August 31, 2025. Interest expense increased to $68.2 million from $9.6 million as a result of this incremental debt.
How is the company returning capital to shareholders?
During the quarter, Paychex paid $389.1 million in dividends, declaring $1.08 per share, up from $0.98 per share in the prior year period. It also repurchased 1.1 million shares for $160.1 million at a weighted-average price of $145.59 per share. Authorization remaining under the $400.0 million repurchase program was $135.9 million as of August 31, 2025.
What liquidity sources does the company have available?
As of August 31, 2025, unused capacity under the company's unsecured credit facilities was approximately $2.0 billion, with $18.5 million of short-term borrowings outstanding. Long-term borrowings totaled $4,550.3 million on the balance sheet. The company states that operating cash flows, corporate cash and investments, and available short-term financing will support operations, capital purchases, dividends, share repurchases, acquisitions and debt service.
06—Continue