Automatic Data Processing Inc. (ADP) reported solid second-quarter fiscal 2026 results on Wednesday, beating analyst expectations on both the top and bottom lines while raising its outlook for the full year.
The company posted quarterly revenues of $5.36 billion, topping the analyst consensus estimate of $5.34 billion. That represented 6% growth compared to the same period last year.
On the earnings front, the human resources management software company delivered adjusted EPS of $2.62, surpassing the analyst consensus of $2.58.
How the Business Segments Performed
ADP generates most of its revenue by charging service fees across two main divisions: Employer Services and PEO segments. Pricing varies based on the scope of services each client uses.
Employer Services revenues climbed 6% to $3.61 billion. Meanwhile, PEO Services revenues also increased 6% to $1.76 billion. The balanced growth across both segments suggests broad-based demand for ADP's offerings.
Margins Continue Expanding
The company's profitability improved nicely during the quarter. Adjusted EBIT jumped 10% to $1.4 billion, while adjusted EBIT margin expanded 80 basis points to 26.0%.
Net earnings rose 10% year-over-year to $1.1 billion. ADP held $2.42 billion in cash and equivalents as of December 31 and generated $1.13 billion in operating cash flow during the quarter.
CEO Maria Black credited the strong second-quarter performance to "the strength of its product portfolio, differentiated service model, and the consistent client experience it delivers."
Upgraded Full-Year Guidance
Based on its momentum, ADP raised its full-year outlook. The company now expects revenue growth of 6% (up from prior guidance of 5%-6%), translating to $21.8 billion compared to previous guidance of $21.6 billion to $21.8 billion. That aligns with the analyst consensus estimate of $21.8 billion.
For adjusted diluted EPS, ADP now anticipates growth of 9%-10% (versus prior guidance of 8%-10%), or $10.91 to $11.01 compared to previous guidance of $10.81 to $11.01. The analyst consensus estimate sits at $10.91.
ADP Price Action: ADP shares were down 0.28% at $253.79 at the time of publication on Wednesday.
