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ADP stock jumps following a Q4 fiscal 2026 earnings beat. Discover key updates on HR software revenue, AI integration and 2027 guidance.
Automatic Data Processing Inc. (NASDAQ: ADP) reported strong fourth-quarter fiscal 2026 results. The company generates revenue from its Employer Services and PEO (Professional Employer Organization) segments, with pricing tied to the scope of services provided. Both Employer Services and PEO Services segments saw a 7% increase in revenues, reaching $3.7 billion and $1.8 billion respectively. Additionally, interest earned on funds held for clients surged by 15% to $355 million, driven by an 8% increase in average client fund balances to $41 billion and a 20 basis point rise in average interest yield to 3.5%.
ADP demonstrated robust profitability in Q4 fiscal 2026. Adjusted EBIT (Earnings Before Interest and Taxes) increased by 13% to $1.4 billion, leading to a 140 basis point expansion in the adjusted EBIT margin, which reached 25.1%. Net earnings for the quarter grew 7% year-over-year to $1 billion. The company maintained a solid financial position with $4.23 billion in cash and equivalents as of June 30 and generated $1.43 billion in operating cash flow during the quarter. Executives anticipate continued revenue and earnings growth into fiscal 2027, bolstered by strong bookings, high client retention, and the strategic integration of AI-enabled productivity tools.
CEO Maria Black highlighted that employers are increasingly relying on ADP's solutions to navigate compliance complexities, workforce restructuring, and the adoption of AI technologies. ADP's internal data suggests that AI is transforming work at the task level rather than eliminating jobs broadly, which in turn elevates the need for dependable payroll, HR, and compliance support. The company experienced widespread bookings growth across its small business, HR outsourcing, enterprise, and international sectors, maintaining a strong Employer Services retention rate of 92.1%. Black also noted the successful expansion of ADP Assist across various HCM functions, now serving nearly all of ADP's 1.1 million-plus clients. The Lyric HCM platform is gaining significant traction, with a 94% year-over-year increase in live clients and a 50% growth in its sales pipeline, fueled by enterprise and international demand. Strategic moves include the successful integration of the Workforce Software acquisition and an ongoing research partnership with the Stanford Digital Economy Lab to analyze AI's impact on work through ADP's payroll data. The company remains open to further strategic acquisitions.
For fiscal 2027, ADP has provided a positive outlook, projecting revenue growth of 5%-6%, which translates to an estimated range of $23.044 billion to $23.264 billion. This forecast is in line with the analyst consensus estimate of $23.190 billion. Furthermore, the company anticipates adjusted diluted EPS (Earnings Per Share) to grow between 9%-11%, equating to a range of $12.12 to $12.34, which also aligns with the analyst consensus of $12.20. Following these strong results and optimistic guidance, Automatic Data Processing shares experienced a significant boost, trading up 6.13% at $280.37 at the time of publication.