Automatic Data Processing Inc. (NASDAQ:ADP) released its financial results for the second quarter of fiscal 2026 on Wednesday, showcasing continued growth across key metrics. The company reported quarterly revenues of $5.36 billion, edging past the analyst consensus estimate of $5.34 billion. This figure represents a 6% increase compared to the same period in the previous year, underscoring sustained demand for ADP's human resources management software solutions.
In terms of profitability, ADP delivered adjusted earnings per share (EPS) of $2.62 for the quarter, outperforming the consensus estimate of $2.58. These results reflect solid operational execution and effective cost management amid a competitive market environment.
Segment Revenue Performance
ADP's revenue is primarily generated by charging service fees within its two principal segments: Employer Services and Professional Employer Organization (PEO) Services. Both segments structure fees based on the extent and nature of services rendered to clients.
Within the Employer Services segment, revenues rose by 6% year-over-year to reach $3.61 billion. This indicates sustained client engagement in this core area, which includes payroll processing and related HR functions.
The PEO Services segment, which provides comprehensive HR outsourcing solutions, also recorded a 6% gain in revenues, totaling $1.76 billion. Growth in this segment reflects continued appetite among businesses for integrated workforce management services.
Profitability and Margins
Operating profitability saw notable improvement as well. Adjusted earnings before interest and taxes (EBIT) increased by 10% to $1.4 billion for the quarter. Correspondingly, the adjusted EBIT margin advanced by 80 basis points to 26.0%, highlighting effective margin expansion initiatives.
Net income rose 10% year-over-year, reaching $1.1 billion, signaling robust bottom-line performance amidst growth investments and operational efficiency efforts.
At the end of the quarter on December 31, ADP maintained a strong liquidity position with $2.42 billion in cash and cash equivalents. Additionally, the company generated $1.13 billion in operating cash flow during the quarter, underscoring its ability to convert earnings into cash.
Management Commentary
ADP's Chief Executive Officer, Maria Black, attributed the company's strong second-quarter results to the breadth and competitive strengths of its product portfolio. She emphasized the differentiated service model and the consistency of client experiences as key contributors to performance.
Fiscal Year 2026 Outlook
Reflecting confidence in continued growth, ADP updated its full-year 2026 guidance. The company now anticipates revenue growth of approximately 6%, an adjustment from prior guidance of 5% to 6%. This elevates expected annual revenues to around $21.8 billion, up slightly from the previous range of $21.6 billion to $21.8 billion, aligning with analyst expectations.
Regarding profitability, ADP forecasted adjusted diluted EPS growth between 9% and 10%, improving prior guidance which called for 8% to 10% growth. This translates to an earnings range of $10.91 to $11.01 per share, again in line with consensus estimates.
Market Response
Following the earnings announcement, Automatic Data Processing's shares experienced a modest decline, trading down 0.28% to $253.79 as of Wednesday's closing. The slight dip contrasts with the company's robust financial performance and revised guidance, indicating potential market dynamics unrelated to fundamental results.
Conclusion
ADP's second-quarter results demonstrate continued strength in its service offerings and financial metrics. The company’s ability to exceed revenue and EPS estimates, alongside upward revisions to full-year guidance, indicates operational resilience. With solid cash flow generation and margin expansion, ADP positions itself well for sustained growth in the evolving human capital management sector.