ADP FY2026 Earnings: $21.9B Revenue, $4.4B Net Income and a $44B Client Float

Automatic Data Processing closed fiscal 2026 with $21,947.4 million of revenue, up 6.7%, and $4,413.5 million of net earnings, up 8.2%. Diluted earnings per share rose 9.6% to $10.94. Both segments grew 7%, bookings grew 6%, retention held at 92.1%, and management finished, in the CFO's words, "at the high end of our guidance range." But the most important number is not on the income statement. On June 30, 2026, ADP held $43,957.8 million of its clients' payroll and tax money and owed $44,415.5 million of client fund obligations against it. That float earned $1,354.8 million of interest this year, up 14%. We rebuilt five fiscal years as a public Beancount ledger, with the client money on its own two accounts, so the float shows from the side employers never see: the payroll company's books.

If you are choosing a payroll provider rather than a stock, start with our ADP vs. Gusto vs. Paychex payroll provider guide. This post covers the company behind the quote.

The Headline Numbers​

Every figure below comes from the Form 10-K for fiscal 2026 and the fourth-quarter and fiscal 2026 earnings release. (ADP calls the bottom line "net earnings"; the tables below say "net income" to match the series.)

Two lines did the work. Revenue added $1,386.5 million while operating expenses, the largest cost, grew slightly slower than revenue at 6.4%. And other income grew 16% to $410.6 million, almost all of it interest income on corporate funds ($371.0 million). Against that, SG&A grew 8.8%, faster than revenue — the one cost line running hot. The effective tax rate was 23.0%, down from 23.2%, and the diluted share count fell 1.3% to 403.3 million, which is why EPS grew faster than net income.

The fourth quarter looked like the year in miniature: revenue up 7% to $5,473.8 million, net earnings up 7% to $978.6 million, diluted EPS up 10% to $2.45. Adjusted EBIT rose 13% to $1.4 billion with margin up 140 basis points to 25.1%.

The GAAP to non-GAAP bridge is small this year — $144.3 million on $5.7 billion of pre-tax earnings — and the release reconciles it exactly:

Adjusted EBIT grew 10% and adjusted diluted EPS grew 11% to $11.12. The bridge stays in prose and this table; the ledger books GAAP lines only.

Revenue Deep Dive​

The ledger books all of this as one Income:Revenue posting of $21,947.4 million, because interest on client funds is part of total revenue in the filing and every company in this series posts the filing's total to that one account. The split lives in this table and in the ledger file's comments.

Employer Services is the core: HCM software, outsourcing and the international business. Revenue grew 7% to $14,831.4 million (5% on an organic constant-currency basis), and pre-tax earnings grew 8.6% to $5,436.8 million. The operating stats explain the mix: new business bookings up 6% to $2.2 billion, client revenue retention flat at 92.1%, and U.S. pays per control up 1%. So growth came from selling more to new and existing clients, not from clients hiring. One percent more paychecks per client is barely a hiring signal.

PEO Services grew 7% to $7,128.1 million, but the mix matters more than the total. Excluding zero-margin benefits pass-throughs — health premiums ADP collects and remits dollar for dollar — growth was 5%. Average worksite employees rose 2% to about 762,000. And pre-tax earnings fell 1.5% to $936.1 million even as revenue grew, which is the segment's margin story (see below).

Interest on funds held for clients grew 14% to $1,354.8 million "due to growth in average client funds balances and average interest yield," in the release's words: balances up 7% to $40.4 billion, yield up 20 basis points to 3.4%. Almost all of it sits in Employer Services ($1,342.4 million); the PEO holds only $12.4 million of it.

We read the release for the seven demand and supply themes we track in every earnings post. None of the seven appears in its strong form. There is no "demand exceeds supply," no upcycle language, no tight supply, no pricing commentary at all — "pricing" appears only in the risk-factor boilerplate. The closest hits are bookings ("new business bookings increased 6% to $2.2 billion"), retention ("strong Employer Services retention, and record client satisfaction scores," per CEO Maria Black), and the CFO's "at the high end of our guidance range." On product, the closest is internal: "AI tools now being embedded across our product, service and sales teams in ways that are enhancing quality and productivity." For a company whose volume follows employment, the absence of any hiring-demand commentary is a finding. Pays per control grew 1%, and management guided next year to 0–1%.

The Margin Story​

ADP reports no gross-profit subtotal; costs of revenues = operating expenses + R&D + depreciation and amortization.

Five years of steady expansion: the pre-tax margin rose from 23.1% to 26.1%, three full points, driven by costs of revenues falling from 57.3% to 53.6% of revenue. Net margin crossed 20% for the first time in this ledger's history. Mechanically, the float did a large share of the work: interest on client funds tripled from $451.8 million to $1,354.8 million over these five years at almost no marginal cost, contributing over 3 points of revenue share that did not exist in FY2022 (interest was 2.7% of revenue then, 6.2% now).

The blemish is SG&A, which broke a four-year streak at 19.6–19.7% of revenue and jumped to 20.1%. In dollars it grew $356.5 million, or 8.8% — the fastest of any operating line. The release does not break out the cause, but the segment margins point at where to look: Employer Services margin rose 60 basis points to 36.7% (5,436.8 on 14,831.4), while PEO margin fell 110 basis points to 13.1% (936.1 on 7,128.1). The PEO added $437.7 million of revenue and lost $14.4 million of pre-tax earnings. Benefits pass-throughs grew 7.4% while worksite employees grew 2%: more premium dollars flowing through at zero margin, plus workers' compensation and state unemployment costs up 5.5% to $718.4 million. The PEO is growing its top line faster than its profit.

The One Big Question: What Is $44B of Float Worth?​

A payroll company collects a client's payroll a day or more before payday, and the payroll taxes days or weeks before they are due. Until it sends the money on, it holds the money and invests it — mostly in highly rated bonds. ADP's portfolio is corporate bonds, Treasuries, agencies and asset-backed securities with $38.2 billion of amortized cost at June 30, 2026. This is the same business Paychex runs, at roughly nine times the scale:

Paychex FY2026 ended May 31, 2026; ADP FY2026 ended June 30, 2026.

On the balance sheet the float is two lines that exist for almost no other kind of company in our series, and the ledger gives each its own account:

; FY2026 balance sheet — the client-money lines, as filed on June 30, 2026
2026-06-29 pad Assets:Current:FundsHeldForClients         Equity:Adjustments
2026-06-30 balance Assets:Current:FundsHeldForClients            43957.8 MUSD  ; funds held for clients — clients' payroll and tax money awaiting remittance (52561.1 total current)
 
2026-06-29 pad Liabilities:Current:ClientFundObligations  Equity:Adjustments
2026-06-30 balance Liabilities:Current:ClientFundObligations    -44415.5 MUSD  ; client funds obligations — owed to clients' employees and tax agencies (50024.9 total current)

The two lines are not equal, and the gap has a legible cause:

The obligations are carried at face value: the dollars owed to employees and tax agencies. The funds are invested in available-for-sale bonds carried at fair value. When rates rose in 2022–2023, the bonds lost market value and the assets fell short by up to $2.2 billion — and the shortfall matched the portfolio's net unrealized loss almost to the million in four of these five years. As bonds matured at par and were reinvested at higher yields, both columns collapsed together: at June 30, 2026 the gap is $(457.7) million against a $(459.2) million net unrealized position, with the small remainder being collection timing and the portfolio's corporate-funds slice. (FY2025 is the loose year, off by $68.1 million — the year ADP also ran a $4.8 billion commercial-paper book against short-term marketable securities.) The loss sits in accumulated other comprehensive loss, which improved from $(2,305.8) million in FY2023 to $(902.1) million now. In the ledger, the gap is visible because the two accounts are modeled as filed and never netted.

This is a mark-to-market gap, not a solvency gap — the bonds mature at par — but it makes ADP a rate position in both directions. Higher rates help interest income only as the portfolio rolls, and hurt the mark right away. The FY2027 outlook quantifies the bet: interest on funds of $1,540–$1,560 million on balances growing 3–4% with the average yield rising to about 3.7%, "based on Fed Funds futures contracts and various forward yield curves as of July 28, 2026." If the curve is wrong, that $200 million of guided growth is the first thing at risk.

The balance sheet also shows how ADP funded itself this year. Long-term debt rose $989.4 million to $4,964.1 million on a $1.0 billion issue of 5.00% notes due 2036, sold in the fourth quarter — while $4,769.5 million of commercial paper borrowings went to zero. ADP termed out its short paper into ten-year money at 5%. Interest expense barely moved this year ($459.3 million vs $455.9 million) because the notes landed late; the full coupon hits in FY2027.

Tracking a $21.9B Payroll Company in Plain Text​

Double-entry makes it hard to blur whose money is whose. The conventions here match every other company in the series: how we model every company. The only differences are the sector-shape accounts — the client-money pair plus operating-lease, treasury-stock, depreciation and interest accounts for the filing's own lines — documented against their filing captions in the main.bean banner. Income postings are credits (negative), expenses are debits (positive), and Equity:Adjustments absorbs net income, so each income-statement transaction sums to zero while the balance assertions pin retained earnings. This is FY2026 as pushed to the ledger:

; Check: −21947.4 + 10240.6 + 1028.8 + 490.8 + 4408.2 + 459.3 + −371.0 + −39.6 + 1316.8 + 4413.5 = 0 ✓
2026-06-30 * "Automatic Data Processing, Inc." "FY2026 Income Statement"
  Income:Revenue                               -21947.4 MUSD  ; total revenues incl. interest on funds held for clients
  Expenses:CostOfRevenue                        10240.6 MUSD  ; operating expenses
  Expenses:ResearchAndDevelopment                1028.8 MUSD  ; research and development
  Expenses:DepreciationAndAmortization            490.8 MUSD
  Expenses:SellingGeneralAdministrative          4408.2 MUSD
  Expenses:Interest                               459.3 MUSD  ; interest expense
  Income:OtherNet                                -371.0 MUSD  ; interest income on corporate funds
  Income:OtherNet                                 -39.6 MUSD  ; other (income)/expense residual: realized gains on AFS securities -2.9 + non-service pension income -28.3 + net gain on ADP Ventures' investments -8.4 (-410.6 total other (income)/expense, net)
  Expenses:IncomeTax                             1316.8 MUSD  ; provision for income taxes
  Equity:Adjustments                             4413.5 MUSD  ; net income offset (RE set by balance assertion)

Other income is two labeled postings on Income:OtherNet instead of one net figure, because it is a credit — mostly the $371.0 million of interest income on corporate funds — and netting it into an expense account would hide that ADP's corporate cash is itself a profit line. The $8.4 million ventures gain and the pension income sit in the residual posting with their note citations.

The balance-sheet number that carries the narrative apart from the float is treasury stock: $23,165.9 million at cost, up $2,144.5 million this year. ADP has bought back over a third of its issued shares over time — 240.9 million of 638.7 million issued sit in treasury — which is why the share count keeps falling and EPS keeps outrunning net income. Stockholders' equity is only $6,031.2 million against a $63.2 billion balance sheet, because the balance sheet is client money and the profits mostly leave as buybacks and dividends rather than accumulating in equity.

The Multi-Year Arc​

Five years, one shape: revenue compounding at 7.4% a year, net income at 10.6%, margins widening every single year. The compounding has three engines of roughly equal importance. First, the core business grows mid-single digits on bookings and retention. Second, the float tripled its income contribution as rates rose — $451.8 million to $1,354.8 million — at near-zero marginal cost. Third, the share count shrinks every year under a buyback program that added $5.8 billion to treasury stock over this window, lifting per-share growth above already-strong net income growth.

Note what the funds-held column does not do: it does not grow smoothly. It swings $31–$50 billion with payroll calendars and collection timing — June 30 is a point-in-time snapshot of money in transit, not a managed balance. Judge the float by its average ($40.4 billion this year) and its yield (3.4%), not by the period-end line.

The Verdict: Bull vs. Bear​

Bull Case

• Revenue grew 6.7% with both segments at 7%, bookings up 6% to $2.2 billion, and retention flat at a high 92.1%. The core business is growing on new sales, not price alone.
• Pre-tax margin widened for the fifth straight year, to 26.1%, and net margin crossed 20%. Costs of revenues fell to 53.6% of revenue.
• The float earned $1,354.8 million at almost no cost — 6.2% of revenue and nearly a quarter of pre-tax earnings — and the FY2027 guide sees $1,540–$1,560 million as the yield rises toward 3.7%.
• The AFS funding gap collapsed from $(2,205.0) million to $(457.7) million and now matches the portfolio's unrealized position almost exactly. It is a rate mark, not a hole.
• Buybacks keep compounding per-share value: treasury stock up $2.1 billion this year, diluted shares down 1.3%, EPS up 9.6% on net income up 8.2%.

Bear Case

• None of the strong-demand phrasings appear anywhere in the release. Pays per control grew 1% and is guided to 0–1%; retention is guided down 10–30 basis points. Management is telling you hiring is flat.
• SG&A broke a four-year streak and jumped to 20.1% of revenue, growing 8.8% — faster than revenue — with no breakout in the release.
• The PEO added $437.7 million of revenue and lost $14.4 million of pre-tax earnings. Margin fell 110 basis points to 13.1% as zero-margin pass-throughs outgrew worksite employees.
• The $1.0 billion of 5.00% notes due 2036 landed late in the year; the full coupon hits FY2027, and the commercial-paper flexibility they replaced is gone.
• The FY2027 interest guide assumes the forward curve as of July 28, 2026 is right. If rates fall faster than futures priced, the guided $200 million of float growth shrinks first.

Our Take. ADP is two businesses fused into one income statement: a mid-single-digit software and outsourcing compounder with 92% retention, and a $40 billion bond fund that pays its earnings out as revenue. Both worked this year. The software side grew 7% with expanding margins in Employer Services; the bond fund earned $1.35 billion as old paper rolled into higher yields. The ledger keeps them visibly apart: $44.0 billion of client money against $44.4 billion owed, and a corporate business underneath that crossed 20% net margins. The line we would watch is the PEO, where revenue growth already costs more than it earns, and the FY2027 retention guide, which management shaded down. If retention holds and the curve cooperates, the 9–11% adjusted EPS growth guide looks reachable. If hiring stalls further, ADP still collects its float — that is the point of the model — but the bookings engine that justifies the multiple slows with it.