ADP Beats on Q3 Revenue and EPS, Raises FY2026 Guidance on AI and International Strength

Transcript intelligence

What changed

Revenue growth accelerated from 6% in Q2 to 7% in Q3, while adjusted EBIT margin expansion held steady at 80 bps year-over-year. Adjusted EPS of $3.37 exceeded the $3.30 consensus by roughly 2%, and revenue of $5.94 billion beat the $5.85 billion estimate by about 1.5%. Record Employer Services retention and client satisfaction scores were new highlights this quarter. Management quantified AI efficiency gains for the first time: ADP Assist payroll agents save an average of 30 minutes per payroll run, Smart Actions reduces user clicks by approximately 80% for common HR tasks, and one client reduced payroll operation steps from 23 to 8 using Lyric AI tools. International expansion continued with small acquisitions in Mexico and Nordic countries, and over 200 new U.S. HR compliance laws alongside the EU transparency directive drove demand for compliance services. System integrator partnerships with Accenture, KPMG, and UI are being leveraged to scale Lyric implementation capacity.

Guidance delta

Full-year FY2026 guidance was raised for the second consecutive quarter. Revenue growth is now expected at 6%-7%, up from approximately 6% previously. Adjusted EPS growth is now expected at 10%-11%, up from 9%-10%. Both the revenue and EPS ranges were lifted at both the low and high ends, reflecting stronger-than-expected Q3 performance and continued confidence in AI-driven productivity and international expansion.

Key takeaways

• Revenue grew 7% year-over-year to $5.94 billion, beating the $5.85 billion consensus by approximately 1.5%.
• Adjusted EPS of $3.37 exceeded the $3.30 estimate by roughly 2.1%.
• Adjusted EBIT margin expanded 80 bps year-over-year, matching the prior quarter's pace of margin improvement.
• Employer Services retention and client satisfaction reached record levels.
• AI products showed quantifiable efficiency gains: ADP Assist saves 30 minutes per payroll run, Smart Actions cuts clicks by about 80%, and Lyric reduced one client's payroll steps from 23 to 8.
• Full-year FY2026 guidance raised to 6%-7% revenue growth and 10%-11% EPS growth, up from approximately 6% revenue and 9%-10% EPS previously.

Management priorities

• Expand AI capabilities through additional ADP Assist agents and broader Marketplace offerings.
• Scale ADP Lyric implementation capacity using internal teams and system integrator partners including Accenture, KPMG, and UI.
• Pursue selective M&A to accelerate international market reach, as evidenced by recent deals in Mexico and Nordic countries.
• Continue price-based margin expansion and drive further productivity gains.
• Grow cross-sell of insurance and retirement services to small-business PEO clients.