01—Abstract
Summary
Summary of the 10-Q filed March 26, 2026. Cited figures are marked; the original filing is the authoritative source.
Paychex, Inc. reported third-quarter fiscal 2026 results for the three months ended February 28, 2026, with total revenue of $1.81 billiona, up from $1.51 billion, and net income of $560.3 million, compared with $519.3 million in the prior-year quarter.
Diluted earnings per share were $1.56b, versus $1.43. For the nine months, total revenue was $4.91 billion (versus $4.14 billion) and net income was $1.34 billion, down from $1.36 billion, with diluted EPS of $3.71 versus $3.76. Management attributes much of the revenue growth to the Paycor acquisition completed on April 14, 2025, which contributed approximately 19% and 18% to Management Solutions revenue growth for the third quarter and nine months, respectively.
Operating income rose to $792.0 millionc for the quarter, while interest expense increased to $68.1 million from $22.6 million, reflecting debt issued to finance Paycor. The filing also reports adjusted operating income of $863.2 million and adjusted diluted EPS of $1.71 for the quarter; these are non-GAAP measures. Balance sheet and liquidity remained substantial.
Cash and cash equivalents were $1.74 billiond, long-term borrowings totaled $4.55 billion net of current portion, and the company reported $2.0 billion of unused credit facility capacity as of February 28, 2026. Operating cash flow for the nine months was $1.98 billion, against $1.56 billion a year earlier. Shareholders received $1.17 billion in dividends over the nine months, and the company repurchased $361.6 million of common stock.
In January 2026 the Board approved a new $1.0 billion repurchase program with no expiration date. Subsequent to quarter-end, the company repaid $400.0 million of Senior Notes, Series A that matured on March 13, 2026.
02—Key points
Key Highlights
- Total revenue of $1,808.9 million for the third quarter, up from $1,509.0 million, and $4,906.5 million for the nine months, up from $4,144.4 million.
- Management Solutions revenue rose to $1,354.6 million for the quarter, reflecting increases of 23%, with Paycor contributing approximately 19% of that growth.
- Net income was $560.3 million for the quarter, versus $519.3 million, while nine-month net income declined to $1,339.5 million from $1,360.1 million.
- Interest expense rose to $68.1 million for the quarter from $22.6 million, primarily due to debt issued to finance the Paycor acquisition, and acquisition-related costs were $233.1 million for the nine months.
- Adjusted operating margin was 47.7% for the quarter, compared with 46.9% in the prior-year quarter; GAAP operating margin was 43.8% versus 45.8%.
- Operating cash flow for the nine months was $1,975.8 million, versus $1,557.1 million, and $1,165.0 million in dividends were paid.
- The Board approved a new $1.0 billion share repurchase program on January 16, 2026, and the company repaid $400.0 million of Senior Notes, Series A after quarter-end.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2026, Paychex kept $0.31.
- Revenue$1.81B100.0%
- Cost of revenue−$431.2M23.8%
- Gross profit$1.38B76.2%
- Operating costs−$585.7M32.4%
- Operating income$792.0M43.8%
- Interest, other & tax−$231.7M12.8%
- Net income$560.3M31.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2026filed March 26, 2026Financial Statements
Q3 FY2026 against Q3 FY2025
| Line item | Q3 FY2026Q3 FY2025 | Change |
|---|---|---|
| Revenue | $1.81B$1.51B | +19.9% |
| Cost of Revenue | $431.20M$387.40M | +11.3% |
| Gross Profit | $1.38B$1.12B | +22.8% |
| SG&A Expenses | $585.70M$429.80M | +36.3% |
| Operating Expenses | $1.02B$817.20M | +24.4% |
| Operating Income | $792.00M$691.80M | +14.5% |
| Net Income | $560.30M$519.30M | +7.9% |
| EPS (Basic) | $1.56$1.44 | +8.3% |
| EPS (Diluted) | $1.56$1.43 | +9.1% |
| Shares Outstanding (Basic) | 358.70M360.10M | −0.4% |
| Shares Outstanding (Diluted) | 359.50M362.00M | −0.7% |
05—Questions
Frequently Asked Questions
How did Paychex's revenue and profitability change in the third quarter?
Total revenue increased to $1,808.9 million from $1,509.0 million, driven mainly by Management Solutions growth tied to the Paycor acquisition and higher interest on funds held for clients. Net income rose to $560.3 million from $519.3 million, and diluted EPS was $1.56 versus $1.43.
What drove the increase in expenses and the change in operating margin?
Total expenses rose 24% to $1,016.9 million for the quarter, mainly from compensation-related expenses, which increased 17% due to higher headcount from the Paycor acquisition, and other expenses, which rose 29% on technology, selling, and marketing investments. GAAP operating margin fell to 43.8% from 45.8%, while acquisition-related costs of $71.2 million were a major factor.
How did the Paycor acquisition affect the company's debt and interest costs?
Paychex issued $4.2 billion of fixed-rate Corporate Bonds to finance the April 14, 2025 Paycor acquisition, which had total purchase consideration of approximately $4.1 billion. Interest expense increased to $204.8 million for the nine months from $41.7 million, and long-term borrowings were $4.55 billion net of debt issuance costs as of February 28, 2026.
What is the company's liquidity position and capital return activity?
Cash and cash equivalents were $1,742.5 million and the company had $2.0 billion of unused credit facility capacity at February 28, 2026. The company paid $1,165.0 million in dividends and repurchased $361.6 million of common stock over the nine months, and the Board approved a new $1.0 billion repurchase program in January 2026.
Were there any notable events after the quarter ended?
The company repaid its Senior Notes, Series A for $400.0 million, which matured on March 13, 2026. Its credit facilities were also amended in January 2026, increasing the 2017 Credit Facility from $750 million to $1.0 billion and extending its maturity to January 23, 2031.
06—Continue