EPS Beats
The Rochester-based company’s first-quarter revenue increased to $1.54 billion from $1.32 billion in the corresponding period last year, which is in line with Wall Street’s estimates. On an adjusted basis, Q1 earnings per share moved up to $1.22 from $1.16 in the year-ago quarter. Analysts had forecast a slower growth. On a reported basis, net income was $383.8 million or $1.06 per share in Q1, down from last year’s profit of $427.4 million or $1.18 per share.
Commenting on the Paycor integration, Paychex CEO John Gibson said in the Q1 earnings call, “Bringing the two companies together provides us a broader set of technology solutions and service models to both win and retain business. We have already enabled several notable client-retention wins in the quarter across our purpose-built platforms. Additionally, we are encouraged by the speed at which we have completed the back-end technology integrations to enable the full breadth of revenue and cost synergy opportunities for fiscal year 2026. We remain optimistic about the revenue synergies, particularly cross-selling Paychex retirement, ASO, and PEO solutions to Paycor’s approximately 50,000 clients.“
Ups Guidance
Paycor, the HR software company Paychex acquired in April this year, contributed around 17% to the core Management Solutions, and the segment’s total revenue grew 21% year-over-year. The management raised its earnings guidance for fiscal 2026, although it sees ongoing macroeconomic uncertainties impacting small and mid-sized businesses, which account for a major share of the company’s clientele.
Full-year adjusted earnings per share are expected to grow in the range of 9% to 11% now, compared to the 8.5-10.5% growth guided earlier. The company reaffirmed its FY26 revenue growth guidance in the 16.5-18.5% range. It continues to expect Management Solutions revenue to rise between 20% and 22% in FY26, and PEO & Insurance Solutions revenue to grow in the 6-8% range. The Paychex leadership said it is on track to achieve targeted Paycor revenue and cost synergies.
Tailwinds
Paychex has been witnessing a steady growth in product penetration across its HCM solutions, aided by retirement and HR outsourcing, particularly among small and mid-sized businesses. The company is leveraging AI and cloud-based platforms to automate routine HR tasks and deliver actionable insights. Stable free cash flow generation supports dividend payout ratio, with the current yield standing at an above-average 3%.
On Tuesday, Paychex shares opened sharply below their 12-month average of $144.59. The stock was down 4% in early trading, extending the downturn that followed the earnings announcement.