Paychex (Paychex (PAYX)) reported fiscal fourth-quarter results that beat Wall Street expectations on Wednesday, but shares dipped after the company's revenue forecast for the coming year came in a touch below what analysts were looking for.
The payroll and human capital management company posted adjusted earnings of $1.32 per share for the quarter, ahead of the $1.30 consensus estimate. Revenue rose 12% year over year to $1.61 billion, also topping expectations of $1.60 billion. On a GAAP basis, diluted earnings per share jumped 43% to $1.17, while net income climbed 41% to $420.6 million.
Despite the solid quarter, investors zeroed in on the fiscal 2027 outlook. Paychex forecast revenue in the range of $6.84 billion to $6.90 billion, compared with the analyst consensus of $6.87 billion. The company also guided for adjusted earnings per share of $5.90 to $6.01, with the low end matching the average estimate.
The stock was down about 2.1% at $98.60 in Wednesday trading, according to market data.
Management Solutions Drives Growth
The company's Management Solutions segment, which includes payroll and HR services, saw revenue increase 14% to $1.18 billion. That growth was fueled by higher product penetration, an increase in HR Solutions worksite employees, and pricing gains. The acquisition of Paycor also contributed roughly 8 percentage points to the segment's revenue growth, thanks to its larger client base.
Margins Expand, Shareholder Returns Stay Strong
Operating income rose 40% to $604.7 million, while adjusted operating income increased 17% to $675.8 million. Operating margin expanded to 37.7% from 30.2% a year earlier, and adjusted operating margin improved to 42.1% from 40.4%.
During fiscal 2026, Paychex returned $2.2 billion to shareholders through $1.6 billion in dividends and $611 million in share repurchases. The company ended the year with $1.2 billion in cash, restricted cash, and corporate investments, and $4.6 billion in total borrowings.
Fiscal 2027 Outlook and AI Initiatives
For fiscal 2027, Paychex expects revenue growth of 5% to 6%, an adjusted operating margin of about 44%, and an effective tax rate near 24%.
On the earnings call, Chief Financial Officer Bob Schrader said the guidance assumes flat employment levels, a stable macroeconomic environment, and no additional Federal Reserve rate changes. He noted that the company exited fiscal 2026 with organic growth approaching double the rate recorded at the end of fiscal 2025.
Chief Executive Officer John Gibson said bookings strengthened throughout the year, with fourth-quarter bookings surpassing third-quarter levels, which management had previously described as the strongest quarter in 13 years.
The company also said it exceeded its fiscal 2026 Paycor synergy goals, generating more than $100 million in cost synergies. Revenue synergies contributed more than 50 basis points to growth.
Paychex recently launched WISE, its AI-powered intelligence engine, across its HCM platforms and internal operations. Gibson said the company is already generating revenue from WISE-related reporting enhancements and has about 10,000 customers participating in a soft launch of its intelligence timekeeping product.
"We finished fiscal 2026 with strong momentum, delivering double-digit revenue and earnings growth while accelerating organic revenue growth throughout the year," Gibson said.
