Earnings Preview: Paychex (PAYX) looks set to end FY25 on a strong note

Paychex Inc. (NASDAQ: PAYX) has benefited from the stable labor market and resilient customers, despite inflationary pressures and the challenging economic environment. The company is leveraging its strong fundamentals and the recently acquired Paycor business to expand AI-driven HCM capabilities and unlock new growth opportunities across market segments.

Estimates

The Rochester-based human capital management solutions provider will publish earnings for the fourth quarter on Wednesday, June 25, at 8:30 am ET. According to analysts, the company performed well in the final months of FY25 – the consensus revenue estimate is $1.41 billion, representing a 9% year-over-year increase. Market watchers forecast May-quarter earnings of $1.19 per share, on an adjusted basis, compared to $1.12 per share in Q4 2024.

Paychex shares have been in an upward spiral over the past several weeks, and they climbed to a new high earlier this month. However, the momentum waned, and since then the stock pared some of its earlier gains. PAYX has grown nearly 20% over the past twelve months, and it outperformed the S&P 500 index quite often this year. Recently, the company announced a 10% increase in its quarterly dividend, raising the yield to 2.8%.

Q3 Outcome

In the third quarter, revenues grew by 5% year-over-year and reached $1.51 billion, in line with Wall Street’s estimates. As a result, adjusted earnings moved up to $1.49 per share in Q3 from $1.38 per share in the same period of 2024. Earnings exceeded expectations for the seventh consecutive quarter. Net income, including special items, was $519.3 million or $1.43 per share in the February quarter, up from last year’s profit of $498.6 million or $1.38 per share.

From Paychex’s Q3 2025 earnings call:

“Client retention has improved over last year’s solid performance and retention in our HR Outsourcing solutions remains near record levels. Client losses are down across all employee-sized segments. Our revenue retention improved over last year and remains above pre-pandemic levels as we continue to focus on acquiring and retaining high-value clients. Our strong retention rates attest to our compelling value proposition, which was validated by a recent Wall Street Journal ranking of the best-managed companies, in which Paychex achieved the second highest increase in customer satisfaction out of all two fifty companies on the list.”

Updates

Recently, Paychex acquired Paycor, a provider of HCM payroll and talent software, for $4.1 billion. The deal is expected to be accretive to the company’s adjusted earnings per share in fiscal 2026 and to deliver significant cost synergies. Small businesses are a core focus of the company. The stable labor market, despite economic uncertainties, has helped the small business sector stay resilient — particularly the services segment which makes up a large portion of the industry.

Shares of Paychex have shown weakness this week, and the trend appears likely to continue ahead of next week’s earnings. On Friday, PAYX traded mostly lower during the session. The last closing price is above the stock’s 52-week average value.