AUTOMATIC DATA PROCESSING, INC.

Recommendation history

• Q3 2026BuyBuy: ADP delivered 7% Q3 revenue growth, 80 bps adjusted EBIT margin expansion and 10% adjusted EPS growth, then raised FY26 revenue growth guidance to 6%-7%, margin expansion to 70-80 bps and adjusted EPS growth to 10%-11%. The core thesis is strengthening retention, pricing and AI-driven productivity, but the main tension is that Employer Services bookings remain guided at a wide 4%-7% range with the critical fourth quarter still ahead, while PEO margins declined 120 bps and AI monetization remains indirect.
• Q2 2026BuyADP delivered a strong Q2 and raised FY2026 revenue growth to about 6% and adjusted EPS growth to 9%-10%, while maintaining 50-70 bps of adjusted EBIT margin expansion. Lyric and international bookings are improving the long-term growth profile, but PEO momentum softened and the margin outlook remains partly dependent on client-funds yields; the call supports a buy, though upside still depends on execution rather than a major guidance reset.
• Q1 2026HoldHold: ADP delivered a solid Q1 with 7% revenue growth and 7% adjusted EPS growth, while reaffirming FY26 revenue growth of 5%-6% and adjusted EPS growth of 8%-10%. The bull case is improving bookings, Lyric/NextGen adoption, and higher client-fund income; the tension is that pays-per-control growth rounded to 0%, retention softened, and management still sees stable—not accelerating—HCM demand.
• Q4 2025HoldHOLD: ADP delivered a strong FY25, with 7% revenue growth to $20.6 billion, 9% adjusted EPS growth and 50 bps adjusted EBIT margin expansion, while guiding FY26 to 5%-6% revenue growth, 8%-10% adjusted EPS growth and 50-70 bps margin expansion. The upside is credible product momentum in Lyric, Workforce Software and AI, but the 3% FY25 Employer Services bookings growth missed expectations, HRO and international decisions were delayed, and management could not yet validate an improving July trend.
• Q3 2025HoldHold: ADP delivered a solid Q3—revenue grew 6%, adjusted EPS 6%, and fiscal 2025 adjusted EPS growth guidance rose to 8%–9%—but the call did not clear the bar for a fresh buy. The core franchise remains resilient, yet international bookings softened, pays-per-control growth is only about 1%, Q4 execution is critical, and Workforce Software is creating a roughly 50-basis-point margin drag with only part of that expected to reverse.
• Q2 2025HoldHold: ADP delivered a solid Q2 with 8% revenue growth, 60 bps of adjusted EBIT margin expansion and 10% adjusted EPS growth, while maintaining FY2025 guidance of 6%-7% revenue growth and 7%-9% adjusted EPS growth. The long-term thesis is supported by strong bookings, Lyric momentum and the WorkForce Software acquisition, but Q3 is set to soften because of FX, lower short-term rates and integration costs, while retention, pays-per-control growth and PEO margins remain under pressure.
• Q1 2025HoldHold: ADP delivered a strong Q1 with 7% revenue growth, 130 bps of adjusted EBIT margin expansion and 12% adjusted EPS growth, while raising FY2025 revenue growth guidance to 6%-7%. However, the $1.2 billion WorkForce Software acquisition is expected to create roughly 50 bps of EBIT-margin pressure and more than 1% of EPS dilution this year, with cross-sell benefits still unquantified; the execution is encouraging, but the post-deal upside is not yet proven.