Paychex, Inc.
PAYX · Nasdaq
Next quarter
Reports Sep 23, 2026, before the open.
Consensus is $1.33 EPS for Aug 2026 across 6 estimates, ranging $1.32 to $1.33.
PAYX May 2026
- 0.76%
- +0.44%
- $1.31
- $1.32
- —
- —
Highlights
- Adjusted EPS: Fourth-quarter adjusted diluted EPS was $1.32, $0.01 above the $1.31 consensus estimate, up 11% from $1.19 a year ago but down from $1.56 in fiscal Q3.
- Revenue: Total revenue rose 12% year over year to $1.61 billion, including a full quarter of Paycor revenue versus only a partial quarter in the prior-year period.
- Management Solutions: Revenue increased 14% to $1.18 billion; Paycor contributed approximately 8 percentage points of year-over-year growth, while product penetration, worksite employee growth and pricing supported the balance.
- PEO and Insurance: Revenue grew 9% to $369.7 million, driven by higher average PEO worksite employees and increased PEO insurance revenue.
- Profitability: GAAP operating income rose 40% to $604.7 million and operating margin expanded to 37.7% from 30.2%; adjusted operating income increased 17% to $675.8 million, with adjusted margin rising to 42.1% from 40.4%.
- Interest income: Interest on funds held for clients increased 15% to $52.2 million, primarily reflecting higher average investment balances following the Paycor acquisition.
- AI rollout: Paychex launched WISE, its AI-powered workforce intelligence engine, across its HCM platforms and internal operations; by May 31, WISE powered approximately 600 AI features and agents using more than 26 trillion data points.
- Fiscal 2027 outlook: Paychex expects total revenue growth of 5% to 6%, adjusted operating margin of approximately 44%, and adjusted diluted EPS growth of 7% to 9%; interest on funds held for clients is expected at $195 million to $205 million.
- Capital returns: The company returned $2.2 billion to shareholders in fiscal 2026, comprising $1.6 billion of dividends and $611.0 million of share repurchases, while generating $2.56 billion of operating cash flow.
Analysis
Paychex finished fiscal 2026 with a solid, acquisition-assisted fourth quarter. Adjusted diluted EPS of $1.32 modestly exceeded the $1.31 consensus estimate and increased 11% from $1.19 a year ago, although it declined from $1.56 in fiscal Q3, whose results benefited from the company’s seasonally stronger third quarter. Revenue rose 12% year over year to $1.61 billion, versus $1.75 billion in the prior quarter, while adjusted operating income increased 17% to $675.8 million and adjusted operating margin improved 170 basis points to 42.1%.
Fourth-quarter results
The quarter combined double-digit growth with a sharper comparison against the prior-year period, when Paycor contributed only part of a quarter. Total revenue reached $1.61 billion, up from $1.43 billion a year earlier. Net income increased 41% to $420.6 million, while GAAP diluted EPS rose 43% to $1.17. The larger GAAP increase reflected lower acquisition-related costs compared with the prior year, making adjusted EPS the cleaner measure of underlying performance.
- Revenue mix: Management Solutions generated $1.18 billion, up 14%, while PEO and Insurance Solutions contributed $369.7 million, up 9%. Interest on funds held for clients increased 15% to $52.2 million.
- Expectation: Adjusted diluted EPS of $1.32 was $0.01, or 0.76%, above the $1.31 consensus estimate.
- Sequential comparison: Revenue, operating income and adjusted EPS were below fiscal Q3 levels of $1.75 billion, $792.0 million and $1.56, respectively, consistent with the company’s seasonally stronger third quarter.
Paycor integration
Paycor was the main structural driver of the year-over-year comparison. Acquired in April 2025, it contributed a full quarter of revenue and expenses in the current period versus only a partial quarter in the prior-year period. Management said the acquisition is advancing Paychex’s upmarket expansion and increasing revenue per client through Paycor’s larger-client base.
- Management Solutions contribution: Paycor represented approximately 8 percentage points of the segment’s 14% growth in the quarter.
- Growth drivers: The remaining increase reflected higher product penetration, more client worksite employees, price realization and higher revenue per client.
- Integration costs: Fourth-quarter acquisition-related costs were $71.1 million, including $60.5 million of amortization tied to Paycor’s acquired intangible assets and $10.4 million of compensation-related integration costs.
Margin expansion
Reported profitability benefited from both revenue growth and a much lower level of acquisition-related costs than in the prior-year quarter. Total expenses were effectively flat at $1.00 billion despite higher compensation, amortization, technology, selling and marketing investments associated with Paycor and Paychex’s strategic priorities.
- GAAP profitability: Operating income increased 40% to $604.7 million, and operating margin expanded to 37.7% from 30.2%.
- Underlying profitability: Adjusted operating income grew 17% to $675.8 million, while adjusted operating margin rose to 42.1% from 40.4%.
- Below the line: Interest expense increased $1.0 million to $64.7 million because of incremental debt issued to finance Paycor. Other income declined $7.7 million to $14.2 million as corporate investment balances fell after debt repayment and share repurchases.
WISE AI platform
AI was the quarter’s principal product and strategic announcement. Paychex launched WISE, its Workforce Intelligence Engine, across its HCM platforms and internal operations. The company positions WISE as an agentic AI layer intended to move beyond recommendations toward more autonomous execution while retaining human oversight and governance.
- Scale: As of May 31, WISE powered approximately 600 AI features and agents across Paychex’s solutions and operations.
- Data foundation: WISE draws on more than 26 trillion proprietary data points, supporting insights from structured and unstructured workforce data.
- Strategic role: Management expects the platform to improve productivity, enhance decision-making and differentiate Paychex’s combination of HCM technology and advisory expertise.
Fiscal 2027 outlook
Paychex is guiding to a materially slower top-line growth rate as the Paycor contribution becomes part of the base, while expecting continued margin and earnings progression. The outlook assumes current market conditions and excludes acquisition-related costs from adjusted metrics.
- Revenue: Total revenue and Management Solutions revenue are each expected to grow 5% to 6%; PEO and Insurance Solutions revenue is expected to grow 6% to 7%.
- Earnings: Adjusted operating margin is expected to be approximately 44%, compared with 43.2% for fiscal 2026, and adjusted diluted EPS is expected to grow 7% to 9%.
- Interest income: Interest on funds held for clients is expected to range from $195 million to $205 million, below fiscal 2026’s $210.9 million.
Cash returns and leverage
Cash generation remained a major support for shareholder distributions and ongoing investment. Fiscal-year operating cash flow increased 34% to $2.56 billion from $1.90 billion, allowing Paychex to return substantially all of its fiscal-year net income through dividends and repurchases.
- Shareholder returns: Paychex paid $1.6 billion of dividends, or $4.43 per share, and repurchased 5.6 million shares for $611.0 million.
- Balance sheet: Cash, restricted cash and corporate investments totaled $1.2 billion at May 31, while borrowings net of debt issuance costs were $4.6 billion.
- Liquidity: The company ended the year with $2.0 billion of available capacity under its unsecured credit facilities and generated $2.6 billion of operating cash flow.
