Automatic Data Processing, Inc.

What they do

ADP provides cloud-based HCM software and outsourcing services, including payroll, HR, talent, benefits, compliance, and retirement solutions. It operates through two segments: Employer Services and PEO Services. The company leverages its workforce dataset and AI-enabled platforms, such as ADP Assist and ADP Lyric HCM, to deliver services.

Revenue drivers

• Employer Services — Offers comprehensive HCM and HR outsourcing solutions; revenues increased 7% in fiscal 2026, with new business bookings of $2.2 billion and client revenue retention of 92.1%.
• PEO Services — Provides employment administration outsourcing; revenues increased 7% in fiscal 2026, with revenue excluding zero-margin benefits pass-throughs up 5%.
• Pays per control — U.S. pays per control increased 1% in Q4 and for fiscal 2026, reflecting client employee growth.

Recent performance

For fiscal 2026, ADP reported revenues of $21.95 billion, up 7% (6% organic constant currency). Net income was $4.41 billion, up 8%, and diluted EPS was $10.94, up 10%. Adjusted EBIT was $5.9 billion, up 10%, with margin expansion of 80 basis points to 26.8%. Fourth quarter revenues were $5.47 billion, net earnings $1.0 billion, and diluted EPS $2.45.

Strategy

ADP is executing on three strategic priorities: leading with best-in-class HCM technology, providing unmatched expertise and outsourcing solutions, and leveraging global scale. The company is embedding AI into its platforms, with ADP Assist agents and a dedicated AI agent marketplace. It is also scaling GenAI capabilities across service operations to enhance client support and productivity.

Risks

• Regulatory compliance — Failure to comply with complex U.S. and foreign laws could result in penalties, license revocation, or service terminations.
• AI technology changes — Inability to respond to changes in technology, including AI, could hurt competitive position.
• Cybersecurity breaches — Security or cyber breaches, including those involving AI, could disrupt operations and harm reputation.
• Economic conditions — Overall market, political, and economic conditions, including interest rates and inflation, could impact client demand and profitability.

Outlook

For fiscal 2027, ADP expects consolidated revenue growth of 5% to 6%, adjusted EBIT margin expansion of 70 to 90 basis points, and adjusted diluted EPS growth of 9% to 11%. Management remains focused on driving growth through AI-enabled solutions and delivering shareholder returns.