Automatic Data Processing, Inc. (ADP) 8-K

Summary

Q1 FY2027 results and raised FY2027 revenue and adjusted diluted EPS growth outlook. Revenue rose 6% to $5.49B; net earnings rose 11% to $1.13B and diluted EPS rose 14% to $2.83. Management said revenue growth, adjusted EBIT margin expansion and adjusted EPS growth exceeded its expectations. ADP’s results reflect growth in its employer and professional employer organization services, as well as higher income from investing client funds.

Key Figures

• Employer Services revenue rose 6%; U.S. pays per control, a measure of employee growth in a subset of clients’ U.S. payrolls, increased 2%. Segment margin was 36.5%, vs 35.2%.
• PEO Services revenue rose 7%, while revenue excluding zero-margin benefits pass-throughs rose 4%. Average paid worksite employees increased 2% to 771,000; segment margin was flat at 13.0%.
• Interest on funds held for clients increased 15% to $329M as average balances rose 6% to $36.9B and the average yield increased 30 bp to 3.6%. Adjusted EBIT margin rose 130 bp to 26.8%; GAAP pretax margin was 26.5%, vs 25.3%.
• Share repurchases were $759M, vs $366M; average diluted shares outstanding declined 2% to 397.6M, supporting per-share growth. FY2027 client-funds investment assumptions use a blended 5.3% rate for new purchases, based on forward yield curves as of 10/27/2026.

Guidance

Guidance changes, derived from earlier filings

Metric	Period	Earlier guidance	Guidance now	Change
Total revenue growth	FY2027	5%-6%	≈6%	narrowed (raised low end)
Adjusted EBIT margin expansion (non-GAAP)	FY2027	70-90 bp	70-90 bp	reaffirmed
Adjusted effective tax rate (non-GAAP)	FY2027	≈23%	≈23%	reaffirmed
Diluted EPS growth (GAAP)	FY2027	11%-13%	12%-14%	raised
Adjusted diluted EPS growth (non-GAAP)	FY2027	9%-11%	10%-12%	raised
Employer Services revenue growth	FY2027	5%-6%	≈6%	narrowed (raised low end)
Employer Services new business bookings growth	FY2027	4%-7%	4%-7%	reaffirmed
Employer Services client revenue retention decrease	FY2027	decrease of 10-30 bp	10-30 bp	reaffirmed
U.S. pays per control growth	FY2027	0%-1%	≈1%	narrowed (raised low end)
PEO Services revenue growth	FY2027	5%-7%	5%-7%	reaffirmed
PEO Services revenue growth, excluding zero-margin benefits pass-throughs	FY2027	3%-5%	3%-5%	reaffirmed
PEO Services average worksite employee growth	FY2027	≈2%	≈2%	reaffirmed
Average client funds balance growth	FY2027	3%-4%	4%-5%	raised
Yield on client funds portfolio	FY2027	≈3.7%	≈3.8%	raised
Interest revenue on funds held for clients	FY2027	$1.54B-$1.56B	$1.590B-$1.610B	raised
Net impact from client funds extended strategy	FY2027	$1.545B-$1.565B	$1.590B-$1.610B	raised

Investor Takeaways

• Employer Services bookings growth of 4%-7% and client revenue retention decrease of 10-30 bp are measures to watch for evidence that the segment’s revenue momentum is holding.
• Client-funds interest revenue depends on the guided 4%-5% average-balance growth and ≈3.8% portfolio yield; performance against those assumptions will test the outlook’s investment-income contribution.