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ADP Q3 Earnings Top Estimates on Strong Revenue Execution
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Key Takeaways
ADP Q3 EPS of $3.37 and revenues of $5.94B beat estimates, both up 10.1% and 7% y/y, respectively.
ADP saw 7% growth in the Employer and PEO segments, with record client retention and satisfaction.
ADP raised the FY2026 outlook, implying 6-7% revenue growth and up to 11% EPS growth.
Automatic Data Processing, Inc. (ADP - Free Report) posted third-quarter fiscal 2026 adjusted earnings per share of $3.37, beating the Zacks Consensus Estimate of $3.28 by 2.7%. The metric increased 10.1% from the year-ago quarter.
Total revenues came in at $5.94 billion, topping the consensus mark of $5.86 billion by 1.4% and rising 7% year over year. Operationally, Employer Services client revenue retention and overall client satisfaction reached record highs for the third quarter.
Automatic Data Processing, Inc. Price, Consensus and EPS Surprise
ADP’s revenue performance reflected gains across its two operating segments. Employer Services revenues increased 7% year over year to $4.04 billion, whereas PEO Services revenues rose 7% to $1.91 billion.
Client funds tailwinds also remained supportive. Interest on funds held for clients increased 14% year over year to $403.9 million, driven by average client funds balances that rose 9% to $48.3 billion and an average yield of 3.3%, up 10 basis points.
Automatic Data Processing Sees Employer Services Lift
Employer Services continued to be a key growth engine in the quarter. Management cited solid business booking growth, while retention and client satisfaction set record highs for the third quarter.
Profitability improved meaningfully in the segment. Employer Services’ margin expanded 130 basis points year over year, with ADP pointing to operational productivity improvements alongside growth in client funds interest revenues as notable contributors.
ADP’s PEO Segment Mix Weighs on Margin
PEO Services turned in another quarter of revenue expansion, but profitability moved the other way. Segment margin declined 120 basis points year over year, reflecting a combination of business mix and cost items within the segment.
ADP noted that zero-margin benefits pass-through growth was a key factor behind the margin pressure. Higher state unemployment insurance costs and higher selling expenses also contributed. On an operating metric basis, average worksite employees increased 2% year over year to about 762,000.
Automatic Data Processing Expands Adjusted Operating Profit
ADP converted its revenue growth into higher operating profit. Adjusted EBIT increased 10% year over year to $1.79 billion and the adjusted EBIT margin improved to 30.2%, representing an 80-basis-point expansion.
Below the operating line, ADP’s effective tax rate for the quarter was 23.7% on both a reported and adjusted basis. On a GAAP basis, net earnings increased 9% year over year to $1.36 billion, while diluted earnings per share rose 10% to $3.38.
ADP’s Balance Sheet Shows Higher Client Fund Levels
Automatic Data Processing ended March 31, 2026, with cash and cash equivalents of $3.23 billion. Funds held for clients totaled $46.41 billion, matched by client funds obligations of $46.77 billion, underscoring the scale of client funds activity in the quarter.
On leverage, long-term debt stood at $3.98 billion. Through the first nine months of fiscal 2026, ADP generated $4.01 billion in cash from operating activities. Capital returns remained sizable, with $1.46 billion used for share repurchases and $1.94 billion paid out in dividends over the same nine months.
Automatic Data Processing Raises FY26 Outlook
ADP raised its fiscal 2026 outlook following the quarter’s results. The company expects total revenue growth of 6-7% and an adjusted EBIT margin expansion of 70-80 basis points. It also lifted its adjusted diluted earnings per share growth view to 10-11%.
Within the outlook, ADP updated expectations for client funds contribution, projecting interest on funds held for clients of $1.340 billion to $1.350 billion, and total contribution from the client funds extended investment strategy of $1.300 billion to $1.310 billion. Strategically, ADP highlighted continued investment in AI across products and service delivery, including further deployment of ADP Assist agents and an expanded agentic AI ecosystem through ADP Marketplace, alongside scaling GenAI capabilities across service operations via “The Zone.”
WCN’s adjusted earnings of $1.23 per share outpaced the consensus mark by 3.4% and rose 8.9% from the year-ago quarter. WCN’s total revenues of $2.37 billion beat the consensus mark by 0.7% and increased 6.4% year over year.
S&P Global Inc. (SPGI - Free Report) reported impressive first-quarter 2026 results.
SPGI’s adjusted earnings per share of $4.97 beat the consensus mark by 3.1% and rose 13.7% year over year. Total revenues came in at $4.2 billion, surpassing the consensus estimate by 2.6% and rising 10.4% from the year-ago quarter.
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ADP Q3 Earnings Top Estimates on Strong Revenue Execution
Key Takeaways
Automatic Data Processing, Inc. (ADP - Free Report) posted third-quarter fiscal 2026 adjusted earnings per share of $3.37, beating the Zacks Consensus Estimate of $3.28 by 2.7%. The metric increased 10.1% from the year-ago quarter.
Total revenues came in at $5.94 billion, topping the consensus mark of $5.86 billion by 1.4% and rising 7% year over year. Operationally, Employer Services client revenue retention and overall client satisfaction reached record highs for the third quarter.
Automatic Data Processing, Inc. Price, Consensus and EPS Surprise
Automatic Data Processing, Inc. price-consensus-eps-surprise-chart | Automatic Data Processing, Inc. Quote
ADP Posts Broad-Based Top-Line Growth
ADP’s revenue performance reflected gains across its two operating segments. Employer Services revenues increased 7% year over year to $4.04 billion, whereas PEO Services revenues rose 7% to $1.91 billion.
Client funds tailwinds also remained supportive. Interest on funds held for clients increased 14% year over year to $403.9 million, driven by average client funds balances that rose 9% to $48.3 billion and an average yield of 3.3%, up 10 basis points.
Automatic Data Processing Sees Employer Services Lift
Employer Services continued to be a key growth engine in the quarter. Management cited solid business booking growth, while retention and client satisfaction set record highs for the third quarter.
Profitability improved meaningfully in the segment. Employer Services’ margin expanded 130 basis points year over year, with ADP pointing to operational productivity improvements alongside growth in client funds interest revenues as notable contributors.
ADP’s PEO Segment Mix Weighs on Margin
PEO Services turned in another quarter of revenue expansion, but profitability moved the other way. Segment margin declined 120 basis points year over year, reflecting a combination of business mix and cost items within the segment.
ADP noted that zero-margin benefits pass-through growth was a key factor behind the margin pressure. Higher state unemployment insurance costs and higher selling expenses also contributed. On an operating metric basis, average worksite employees increased 2% year over year to about 762,000.
Automatic Data Processing Expands Adjusted Operating Profit
ADP converted its revenue growth into higher operating profit. Adjusted EBIT increased 10% year over year to $1.79 billion and the adjusted EBIT margin improved to 30.2%, representing an 80-basis-point expansion.
Below the operating line, ADP’s effective tax rate for the quarter was 23.7% on both a reported and adjusted basis. On a GAAP basis, net earnings increased 9% year over year to $1.36 billion, while diluted earnings per share rose 10% to $3.38.
ADP’s Balance Sheet Shows Higher Client Fund Levels
Automatic Data Processing ended March 31, 2026, with cash and cash equivalents of $3.23 billion. Funds held for clients totaled $46.41 billion, matched by client funds obligations of $46.77 billion, underscoring the scale of client funds activity in the quarter.
On leverage, long-term debt stood at $3.98 billion. Through the first nine months of fiscal 2026, ADP generated $4.01 billion in cash from operating activities. Capital returns remained sizable, with $1.46 billion used for share repurchases and $1.94 billion paid out in dividends over the same nine months.
Automatic Data Processing Raises FY26 Outlook
ADP raised its fiscal 2026 outlook following the quarter’s results. The company expects total revenue growth of 6-7% and an adjusted EBIT margin expansion of 70-80 basis points. It also lifted its adjusted diluted earnings per share growth view to 10-11%.
Within the outlook, ADP updated expectations for client funds contribution, projecting interest on funds held for clients of $1.340 billion to $1.350 billion, and total contribution from the client funds extended investment strategy of $1.300 billion to $1.310 billion. Strategically, ADP highlighted continued investment in AI across products and service delivery, including further deployment of ADP Assist agents and an expanded agentic AI ecosystem through ADP Marketplace, alongside scaling GenAI capabilities across service operations via “The Zone.”
ADP carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Snapshot
Waste Connections, Inc. (WCN - Free Report) posted impressive first-quarter 2026 results.
WCN’s adjusted earnings of $1.23 per share outpaced the consensus mark by 3.4% and rose 8.9% from the year-ago quarter. WCN’s total revenues of $2.37 billion beat the consensus mark by 0.7% and increased 6.4% year over year.
S&P Global Inc. (SPGI - Free Report) reported impressive first-quarter 2026 results.
SPGI’s adjusted earnings per share of $4.97 beat the consensus mark by 3.1% and rose 13.7% year over year. Total revenues came in at $4.2 billion, surpassing the consensus estimate by 2.6% and rising 10.4% from the year-ago quarter.