Automatic Data Processing Inc.: Q3 FY2026 earnings call

What management said about Q3 FY2026, from the documents filed with the SEC on 29 April 2026: press release. Guidance figures: 11 raised, 4 kept. The quarter’s numbers.

Read the filing

Key takeaways

• Revenues grew 7 percent to 5.9 billion: Revenues increased 7% on reported basis to $5.9 billion, or 6% on organic constant currency basis. Net earnings grew 9% to $1.4 billion. Management said results came in ahead of expectations across revenue growth, adjusted EBIT margin, and adjusted EPS. Source
• Employer Services revenues grew 7 percent: Employer Services revenues increased 7% on reported basis to $4.0 billion and 5% on organic constant currency basis. Growth was driven by price increases and client volume gains. Source
• Client funds interest income increased 14 percent: Interest on funds held for clients increased 14% to $404 million. This growth was driven by client funds balance growth and higher interest yields on portfolio investments. Source
• Adjusted EBIT margin expanded 80 basis points: Adjusted EBIT margin increased 80 basis points to 30.2%. Operating expense growth was well-controlled relative to revenue growth, demonstrating strong operating leverage. Source
• Revenue growth guidance raised to 6-7 percent: Management raised full-year fiscal 2026 revenue growth guidance to 6-7% from prior guidance of approximately 6%, citing strong execution and market momentum. Source
• EPS guidance raised to 10-11 percent growth: Diluted and adjusted diluted EPS growth guidance both raised to 10-11% from prior 9-10%. Adjusted EBIT margin expansion raised to 70-80 bps from 50-70 bps. Source
• Company building AI capabilities for HCM: Management noted AI is adding new layers of complexity to clients' work and ADP is building capabilities to meet that moment. Investing in AI across products, service delivery, and sales. Source

Guidance

What changed from last quarter

• Guidance raised: Revenue growth guidance raised to 6-7% from prior approximately 6%. Source
• Guidance raised: Adjusted EBIT margin expansion raised to 70-80 bps from prior 50-70 bps. Source
• Guidance raised: Diluted EPS growth raised to 10-11% from prior 9-10%. Source
• Guidance raised: Adjusted diluted EPS growth raised to 10-11% from prior 9-10%. Source
• Guidance raised: Employer Services revenue growth raised to 6-7% from prior approximately 6%. Source
• Guidance raised: Client revenue retention improved to (20) to flat bps from (30) to (10) bps. Source
• Guidance raised: U.S. pays per control raised to about 1% from prior approximately flat. Source
• Guidance raised: PEO Services revenue growth raised to 6-7% from prior 5-7%. Source
• Guidance raised: PEO revenue ex zero-margin pass-throughs raised to 4-5% from prior 3-5%. Source
• Guidance raised: Interest on client funds guidance raised to $1.340-1.350 billion from $1.310-1.330 billion. Source
• Guidance raised: Client funds extended strategy contribution raised to $1.300-1.310 billion from $1.270-1.290 billion. Source

Quarterly Results and Revenue Growth

• Revenues grew 7 percent to 5.9 billion: Revenues increased 7% on reported basis to $5.9 billion, or 6% on organic constant currency basis. Net earnings grew 9% to $1.4 billion. Management said results came in ahead of expectations across revenue growth, adjusted EBIT margin, and adjusted EPS. Source

Employer Services Segment Performance

• Employer Services revenues grew 7 percent: Employer Services revenues increased 7% on reported basis to $4.0 billion and 5% on organic constant currency basis. Growth was driven by price increases and client volume gains. Source

PEO Services Segment Results

• PEO Services revenues increased 7 percent: PEO Services revenues increased 7% to $1.9 billion. Revenues excluding zero-margin benefits pass-throughs, a measure of organic growth, increased 5%. Source
• Average worksite employees grew 2 percent: Average worksite employees paid by PEO Services increased 2% to approximately 762,000. This reflects strong demand for comprehensive employment administration outsourcing. Source
• PEO Services segment margin declined 120 basis points: PEO Services segment margin decreased 120 basis points to 13.0%. Decline was due to zero-margin benefits pass-through costs and workers compensation and state unemployment tax expenses. Source

Client Funds and Interest Income

• Client funds interest income increased 14 percent: Interest on funds held for clients increased 14% to $404 million. This growth was driven by client funds balance growth and higher interest yields on portfolio investments. Source
• Average client funds balances increased 9 percent: Average client funds balances increased 9% to $48.3 billion. Larger client balances reflect client business growth and ADP's expanding role in managing employee payment timing. Source
• Average interest yield increased 10 basis points: Average interest yield on client funds increased 10 basis points to 3.3%. Higher yields reflected improved market conditions and portfolio positioning. Source

Margins and Profitability

• Adjusted EBIT margin expanded 80 basis points: Adjusted EBIT margin increased 80 basis points to 30.2%. Operating expense growth was well-controlled relative to revenue growth, demonstrating strong operating leverage. Source
• Operating expenses controlled relative to revenue: Operating expenses and costs of revenues grew at a slower pace than revenue growth, enabling margin expansion. Management emphasized disciplined cost management and financial discipline. Source

Full-Year Guidance Raised Across Metrics

• Revenue growth guidance raised to 6-7 percent: Management raised full-year fiscal 2026 revenue growth guidance to 6-7% from prior guidance of approximately 6%, citing strong execution and market momentum. Source
• EPS guidance raised to 10-11 percent growth: Diluted and adjusted diluted EPS growth guidance both raised to 10-11% from prior 9-10%. Adjusted EBIT margin expansion raised to 70-80 bps from 50-70 bps. Source

AI Investment and Technology Strategy

• Company building AI capabilities for HCM: Management noted AI is adding new layers of complexity to clients' work and ADP is building capabilities to meet that moment. Investing in AI across products, service delivery, and sales. Source

Figures management reported

Earlier plans management reported on

• On track: CFO stated company will continue to deliver on financial commitments while making strategic investments in AI capabilities. Guidance raise signals strong progress. Source

Other quarters

• Q4 FY2026 earnings call
• Q2 FY2026 earnings call
• Q1 FY2026 earnings call
• Q4 FY2025 results

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.