01—Abstract
Summary
Summary of the 10-Q filed September 24, 2026. Cited figures are marked; the original filing is the authoritative source.
Paychex, Inc. reported total revenue of $1,630.5 milliona for the first quarter ended August 31, 2026, up from $1,540.0 million in the prior year period.
Total service revenue was $1,580.7 millionb, with Management Solutions at $1,213.1 million (versus $1,163.3 million) and PEO and Insurance Solutions at $367.6 million (versus $329.1 million). Operating income rose to $619.2 million from $541.9 million, and net income increased to $429.7 million from $383.8 million. Diluted earnings per share were $1.21 compared with $1.06 a year earlier.
Adjusted diluted earnings per share, a non-GAAP measure, were $1.34c versus $1.22. Cash flow from operations was $413.5 million, down from $718.4 million in the prior year period. Cash and cash equivalents fell to $600.9 million from $1,088.2 million at May 31, 2026, while corporate investments rose to $333.3 million from $36.3 million.
Long-term borrowings were $4,558.0 milliond, and the company reported $2.0 billion of unused credit facility capacity. Dividends paid were $424.1 million, or $1.19 per share declared. The company repurchased no shares in the quarter and had $675.6 million remaining under its $1.0 billion repurchase program.
The filing reports net unrealized losses of $92.4 million on available-for-sale securities as of August 31, 2026, versus $52.5 million at May 31, 2026. The Federal Reserve raised the Federal Funds rate to a range of 3.75% to 4.00% effective September 17, 2026. Management states that disclosure controls were effective and that there were no material changes in internal control over financial reporting during the quarter.
02—Key points
Key Highlights
- Total revenue rose 6% to $1,630.5 million, driven by Management Solutions (up 4% to $1,213.1 million) and PEO and Insurance Solutions (up 12% to $367.6 million).
- Operating income increased 14% to $619.2 million; operating margin was 38.0% versus 35.2% a year earlier.
- Net income increased 12% to $429.7 million, and diluted EPS rose 14% to $1.21.
- Adjusted diluted EPS (non-GAAP) was $1.34, up 10% from $1.22, excluding acquisition-related costs.
- Operating cash flow declined to $413.5 million from $718.4 million in the prior year period.
- Cash and cash equivalents decreased to $600.9 million, while corporate investments increased to $333.3 million from $36.3 million.
- Unrealized losses on available-for-sale securities widened to $92.4 million; the Federal Reserve raised rates to 3.75%–4.00% after quarter end.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2027, Paychex kept $0.26.
- Revenue$1.63B100.0%
- Cost of revenue−$430.1M26.4%
- Gross profit$1.20B73.6%
- Operating costs−$581.2M35.6%
- Operating income$619.2M38.0%
- Interest, other & tax−$189.5M11.6%
- Net income$429.7M26.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2027filed September 24, 2026Financial Statements
Q1 FY2027 against Q1 FY2026
| Line item | Q1 FY2027Q1 FY2026 | Change |
|---|---|---|
| Revenue | $1.63B$1.54B | +5.9% |
| Cost of Revenue | $430.10M$413.80M | +3.9% |
| Gross Profit | $1.20B$1.13B | +6.6% |
| SG&A Expenses | $581.20M$584.30M | −0.5% |
| Operating Expenses | $1.01B$998.10M | +1.3% |
| Operating Income | $619.20M$541.90M | +14.3% |
| Net Income | $429.70M$383.80M | +12.0% |
| EPS (Basic) | $1.21$1.07 | +13.1% |
| EPS (Diluted) | $1.21$1.06 | +14.2% |
| Shares Outstanding (Basic) | 355.80M360.10M | −1.2% |
| Shares Outstanding (Diluted) | 356.60M361.90M | −1.5% |
05—Questions
Frequently Asked Questions
How did Paychex perform in the first quarter of fiscal 2027?
Total revenue increased 6% to $1,630.5 million, operating income rose 14% to $619.2 million, and net income grew 12% to $429.7 million. Diluted EPS was $1.21, up from $1.06.
What drove revenue growth?
The filing attributes Management Solutions growth to higher revenue per client from price realization and product penetration. PEO and Insurance Solutions growth reflected higher average worksite employees and higher PEO insurance volumes. Interest on funds held for clients rose 5% on higher average interest rates.
Why did operating cash flow decline?
Net cash provided by operating activities fell to $413.5 million from $718.4 million. The filing cites timing of PEO receivables and payroll tax settlements, a decrease in accrued corporate compensation from settling fiscal 2026 year-end bonuses, and an increase in accrued interest related to corporate bonds.
How is the company's liquidity and capital position?
Cash, restricted cash, and total corporate investments totaled $1.0 billion as of August 31, 2026. Long-term borrowings were $4.6 billion, and $2.0 billion of credit facility capacity was unused. The company paid $424.1 million in dividends and made no share repurchases during the quarter.
What interest rate and investment risks does the filing disclose?
Net unrealized losses on AFS securities were $92.4 million at August 31, 2026, up from $52.5 million at May 31, 2026. The filing states that a 25-basis-point decrease in longer-term rates would increase portfolio fair value by approximately $30.0 million to $35.0 million. Management states the unrealized losses are not due to credit concerns.
06—Continue