ADP Delivers Strong Q1 Fiscal 2027 Results and Boosts Full-Year Guidance

Executive Summary

Automatic Data Processing, Inc. (NASDAQ: ADP) filed a Form 8-K under Item 2.02 (Results of Operations and Financial Condition) announcing its financial results for the first quarter of fiscal 2027 ended September 30, 2026. The company exceeded initial internal expectations across key metrics, highlighted by solid top-line growth, double-digit earnings growth, and margin expansion, leading management to raise full-year fiscal 2027 guidance for revenue and adjusted diluted EPS.

Q1 Fiscal 2027 Key Financial Metrics

• Total Revenues: $5,490.7 million, up 6.1% compared to $5,175.2 million in Q1 FY26 (6% on an organic constant currency basis).
• Net Earnings: $1,149.2 million, an increase of 10.6% compared to $1,039.2 million in the prior-year period.
• Adjusted EBIT: $1,471.1 million, an increase of 11.5% compared to $1,319.4 million; Adjusted EBIT margin expanded 130 basis points to 26.8%.
• Diluted EPS: $2.83, up 13.7% year-over-year from $2.49.
• Adjusted Diluted EPS: $2.82, up 12.8% year-over-year from $2.50.
• Effective Tax Rate: 22.7% on both reported and adjusted bases.

Segment Performance

1. Employer Services

• Revenues: Increased 6% reported and 6% on an organic constant currency basis.
• U.S. Pays Per Control: Grew 2%.
• Segment Margin: Expanded by 130 basis points.

2. PEO Services

• Revenues: Increased 7% to $1,805.2 million.
• Revenues Excluding Pass-throughs: Increased 4%.
• Average Worksite Employees (WSEs): Rose 2% to approximately 771,000.
• Segment Margin: Remained flat year-over-year.

3. Client Funds Interest

• Interest on Funds Held for Clients: Increased 14.8% to $329.3 million (up from $286.8 million).
• Average Client Funds Balances: Increased 6% to $36.9 billion.
• Average Interest Yield: Rose 30 basis points to 3.6%.

Updated Fiscal 2027 Outlook

Following the strong Q1 outperformance, ADP updated its full-year guidance:

Metric	Prior Outlook (July 29, 2026)	Updated Outlook (October 28, 2026)
Consolidated Revenue Growth	5% to 6%	~6%
Adjusted EBIT Margin Expansion	70 to 90 bps	70 to 90 bps
Adjusted Diluted EPS Growth	9% to 11%	10% to 12%
Diluted EPS Growth	N/A	12% to 14%
Employer Services Revenue Growth	5% to 6%	~6%
Average Client Funds Balances Growth	3% to 4%	4% to 5%
Client Funds Portfolio Yield	~3.7%	~3.8%
Client Funds Interest Revenue	$1,540M to $1,560M	$1,590M to $1,610M

Market & Trading Implications

• High Significance: Earnings releases accompanied by raised annual earnings and revenue guidance are typically strong positive catalysts.
• Operational Strength: Broad-based gains in pays per control, client funds yields, and margin leverage demonstrate high operating discipline and pricing power despite broader macroeconomic variables.