Earnings Preview: After a solid FY25, can Paychex maintain momentum in Q1?

Paychex’s (NASDAQ: PAYX) strong fundamentals and successful business model have enabled it to effectively navigate market challenges, with the strategic Paycor acquisition and high client retention rates adding to the momentum. While the company delivered an impressive performance in fiscal 2025 across revenue, adjusted earnings, and margin, the stock remained volatile, reflecting cautious investor sentiment.

When the New York-headquartered human capital management company reports its first-quarter results next week, Wall Street analysts will be expecting adjusted earnings of $1.2 per share, compared to $1.16 per share in the prior-year quarter. The consensus revenue estimate for Q1 is $1.54 billion, which represents a 17% year-over-year increase.

After retreating from its mid-year peak, Paychex shares have steadily declined and ended the last trading session at a one-year low, underperforming the S&P 500 index. The stock has lost around 8% in the past 30 days, continuing the downturn ahead of the earnings. The average stock price for the last 12 months is $144.71. With a history of regular dividend hikes, Paychex currently delivers a yield of 3%, outperforming many peers.

Results Beat

In the fourth quarter of fiscal 2025, Paychex’s total revenue grew 10% from the prior year to $1.4 billion, with revenue of the core Management Solutions segment increasing 12%. As a result, adjusted earnings rose 6% year-over-year to $1.19 per share in Q4. Meanwhile, reported net income declined 22% annually to $297.2 million or $0.82 per share. Both the top line and earnings were in line with analysts’ estimates. The company said it expects full-year 2026 revenue to grow 16.5-18.5%, and adjusted earnings per share to increase between 8.5% and 10.5%.

From Paychex’s Q4 2025 Earnings Call:

“A core component of our go-to-market strategy involves cultivating long-standing relationships with channel partners, such as brokers, CPAs, and banks, just to name a few. More than half of our new business originates from channel partner referrals. Following the acquisitions, we introduced the Paychex Partner Plus program to brokers to foster relationships and drive mutual growth. Together, we now have a broader suite of solutions to offer brokers, which can supplement their offerings to clients. And the partner plus program provides a structured framework designed to safeguard mutual clients from competing products.”

Outlook

Paychex has delivered consistent revenue growth in recent years, and the uptrend is expected to continue this year, driven by its stable growth outside of payroll and synergies realized from the recently acquired Paycor business. The company plans to continue investing in Paycor and Flex, its cloud-based HR and payroll management platform designed to help businesses streamline operations.

Paychex’s resilience stems from its scalable platform, high client retention, and stable recurring revenue base. While macroeconomic challenges, including tariff-related uncertainties and regulatory changes, persist, the company’s extensive exposure to small businesses positions it for long-term growth since these enterprises represent a vast client base.

On Wednesday, the stock traded close to the levels seen a year ago, after opening the session at $128.94. It has declined about 11% in the past six months.