Automatic Data Processing Q4 Earnings Call Highlights

Key Points

• ADP delivered solid fiscal 2026 results: Revenue grew 7%, adjusted EBIT margin expanded 80 basis points for the full year, and adjusted EPS increased 11% to $21.9 billion in total revenue. Employer Services bookings rose 6%, retention reached 92.1%, and Retirement Services surpassed $1 billion in annual revenue.
• AI adoption expanded rapidly across ADP’s products and operations. ADP Assist reached nearly all of its more than 1.1 million clients, while Lyric HCM live clients increased 94% and access to the AI-enabled service platform The Zone expanded to 48% of the service workforce.
• ADP expects continued but slower growth in fiscal 2027, forecasting 5%–6% revenue growth and 9%–11% adjusted EPS growth. The company also plans to maintain elevated share repurchases after buying back $2.1 billion of stock in fiscal 2026, with $6 billion remaining under its authorization.

Automatic Data Processing NASDAQ: ADP reported fourth-quarter fiscal 2026 revenue growth of 7%, adjusted EBIT margin expansion of 140 basis points and adjusted earnings-per-share growth of 17%, capping a year in which the company said results reached the high end of its updated guidance ranges.

For the full fiscal year, ADP reported 7% revenue growth, 80 basis points of adjusted EBIT margin expansion and 11% adjusted EPS growth. Total revenue reached $21.9 billion. President and CEO Maria Black said the results reflected progress across the company’s technology, outsourcing and global-scale priorities.

“Our results this quarter and the full fiscal year are grounded in the value we continue to deliver to our clients,” Black said, describing demand for support with payroll, HR, compliance and workforce changes associated with artificial intelligence.

Bookings, retention and retirement-services milestone

Employer Services generated more than $2.2 billion in new-business bookings during fiscal 2026, up 6% from the prior year. Black said growth was broad-based, with contributions from ADP’s small-business portfolio, HR outsourcing, enterprise and international businesses. She said the fourth quarter was particularly strong, especially in June, and cited record seller productivity for the year.

Employer Services retention was 92.1% for the fiscal year, exceeding the company’s expectations. ADP also recorded its third consecutive year of record-high overall client satisfaction scores, according to Black.

ADP Retirement Services surpassed $1 billion in annual revenue for the first time. The business serves more than 210,000 clients and supports retirement savings for millions of Americans, Black said.

Chief Financial Officer Peter Hadley said Employer Services revenue rose 7% on a reported basis and 6% on an organic constant-currency basis in the fourth quarter. Foreign exchange contributed close to 1 percentage point of reported revenue growth. Employer Services pays per control grew 1% in the quarter, while the segment’s margin expanded 90 basis points.

For the full year, Employer Services revenue grew 7% reported and 5% on an organic constant-currency basis. Segment margin expanded 60 basis points, including approximately 20 basis points of acquisition-related drag from the Workforce Software acquisition, which anniversaried early in the second quarter.

PEO growth accompanied by margin pressure

ADP’s Professional Employer Organization segment posted 7% fourth-quarter revenue growth. Revenue excluding zero-margin pass-throughs grew 5%. Average worksite employees increased 2% to 775,000, driven primarily by continued new-business bookings growth.

PEO margin contracted 100 basis points during the quarter, mainly because zero-margin pass-through revenue grew faster than overall revenue and because of higher workers’ compensation and selling expenses.

For fiscal 2026, PEO revenue rose 7%, while revenue excluding zero-margin pass-throughs increased 5%. Average worksite employees grew 2%, and PEO margin contracted 110 basis points. Hadley said retention improved during the year despite elevated healthcare insurance costs.

AI deployment expands across products and operations

Black said ADP is embedding AI into payroll, onboarding, service and sales processes. The company’s ADP Assist agents, launched in January, are now available to nearly all of its more than 1.1 million clients across payroll, benefits, HR and compliance.

During fiscal 2026, 3.1 million unique active users had 12 million conversations with ADP Assist. Since January, the tool surfaced 45,000 compliance insights to thousands of clients, according to Black. ADP also made ADP Assist available through its Marketplace, enabling clients to connect solutions and technology ecosystems through natural-language conversations and ADP APIs.

ADP Lyric HCM, the company’s enterprise platform, continued to gain traction. The number of live Lyric clients increased 94% from a year earlier, while the Lyric pipeline rose 50%. New logos represented 70% of pipeline opportunities. Black said ADP signed three fourth-quarter deals involving Lyric, ADP Workforce Suite and ADP Global Payroll.

The company also expanded use of The Zone, its AI-infused service platform. At the start of fiscal 2026, 10% of ADP’s service workforce had access to The Zone; that figure reached 48% by year-end, above the company’s target. Among associates using the platform, 96% of service work took place on it. ADP said contacts per client declined 4% during fiscal 2026 as the platform scaled.

During the question-and-answer session, Black said ADP aims to deploy The Zone broadly across its sales organization and U.S. service population during fiscal 2027. Hadley said overall headcount was 67,000 at the end of both fiscal 2025 and fiscal 2026, with targeted additions in sales, marketing, product and technology offset by efficiencies in service and operations.

Fiscal 2027 outlook

ADP’s fiscal 2027 outlook assumes a broadly stable macroeconomic environment. The company expects consolidated revenue growth of 5% to 6%, adjusted EBIT margin expansion of 70 to 90 basis points and adjusted EPS growth of 9% to 11%.

• Employer Services revenue is expected to grow 5% to 6%.
• Employer Services new-business bookings are projected to increase 4% to 7%.
• Employer Services retention is expected to decline by 10 to 30 basis points from fiscal 2026’s 92.1% level.
• U.S. pays per control is expected to be flat to up 1%.
• PEO revenue is forecast to rise 5% to 7%, or 3% to 5% excluding zero-margin pass-throughs.
• Average PEO worksite employee growth is expected to be about 2%.

ADP expects client funds interest revenue of $1.54 billion to $1.56 billion in fiscal 2027, up from $1.35 billion in fiscal 2026. Its outlook assumes average client funds balances will grow 3% to 4% and average yield will increase to 3.7% from 3.4%.

The company repurchased 8.6 million shares, representing more than 2% of shares outstanding, for $2.1 billion in fiscal 2026. Hadley said ADP expects repurchases to remain at elevated levels in fiscal 2027, absent major market changes, supported by proceeds from its May 2026 bond offering and excess operating cash flow. The company has $6 billion remaining under its share repurchase authorization.

About Automatic Data Processing (NASDAQ:ADP)

Automatic Data Processing, Inc (ADP) is a global provider of cloud-based human capital management (HCM) and payroll solutions. Founded in 1949 and headquartered in Roseland, New Jersey, ADP began as a payroll processing company and has evolved into a diversified provider of workforce management, HR, benefits administration, tax and compliance services, and analytics for employers of all sizes.

ADP's product portfolio includes payroll processing and tax filing, time and attendance systems, benefits administration, talent management, and HR outsourcing.

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