ADP Projects 10% EPS Growth in FY 2026—Too Ambitious or Justified?

Published 30/07/2025, 14:56
Updated 30/07/2025, 15:02

Automatic Data Processing (NASDAQ:ADP) has reported its fourth quarter and fiscal 2025 results, showcasing substantial growth and surpassing analysts’ expectations. The company also provided a promising outlook for fiscal 2026, highlighting anticipated growth and strategic initiatives.

ADP Reports Revenue Increase for Q4 FY’25

ADP’s fourth quarter results for fiscal 2025 have demonstrated remarkable growth, with revenues climbing 8% to $5.1 billion. This increase surpassed the expected revenue of $5.05 billion. Net earnings for the quarter rose by 10% to $911 million, while adjusted net earnings were up by 8% to $923 million. This performance was reflected in the company’s diluted earnings per share (EPS), which increased by 10% to $2.23, exceeding the anticipated EPS of $2.22.

In comparison to the previous year, ADP’s Employer Services segment saw an 8% rise in revenues, while its PEO Services segment experienced a 7% growth. The company’s effective tax rate for the quarter stood at 23.5%, aligning with both reported and adjusted rates. The adjusted EBIT for the quarter grew by 9% to $1.2 billion, indicating a margin increase of 40 basis points to 23.7%.

Maria Black, President and CEO of ADP, expressed satisfaction with the fiscal year’s conclusion, emphasizing the company’s strong revenue and earnings growth. The Employer Services and PEO segments performed at the higher end of expectations, driven by record-high client satisfaction levels. The company remains committed to meeting client needs with innovative products and premium services.

ADP Sets Strong Growth Target (NYSE:TGT) of 5%-6% for Fiscal 2026

Looking ahead to fiscal 2026, ADP has set robust growth targets, projecting a revenue increase of 5% to 6%. The company anticipates an adjusted EBIT margin expansion of 50 to 70 basis points and an adjusted diluted EPS growth of 8% to 10%. These projections reflect ADP’s commitment to maintaining strong financial performance and delivering value to shareholders.

The Employer Services segment is expected to see revenue growth of 5% to 6%, with new business bookings anticipated to rise by 4% to 7%. However, client revenue retention is projected to decrease slightly by 10 to 30 basis points. The PEO Services segment is forecasted to achieve revenue growth between 5% to 7%, with an increase in average worksite employees by 2% to 3%.

ADP’s client funds extended investment strategy is expected to contribute significantly, with interest on funds held for clients projected to reach $1.290 to $1.310 billion. This is based on anticipated growth in client funds balances of 2% to 3% and an average yield increase to 3.4%. The company’s strategic focus on innovation and client satisfaction positions it well for continued success in the coming fiscal year.

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