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what it is
ADP runs payroll and HR admin for more than one million clients.
how it gets paid
FY2025 revenue was $20.6B. Employer Services was $14.0B (~68%), PEO Services $6.1B (~30%), and interest on funds ~$0.5B — totals round.
why it's growing
Revenue grew 7.1% last year. Looking more closely at revenues, the employer services segment, which provides global hcm and human resources outsourcing solutions, grew about 7%.
what just happened
ADP beat the street with $2.62 in EPS versus $2.60 expected.
At a glance
A+ balance sheet — rock-solid finances — built to survive anything
100/100 earnings predictability — you can trust these numbers
26.5x trailing p/e — priced about right
2.5% dividend yield — cash in your pocket every quarter
34.5% return on capital — every dollar works hard here
xvary composite: 82/100 — above average
What they do
ADP runs payroll and HR admin for more than one million clients.
ADP serves more than one million clients. Leaving means moving payroll, taxes, and HR records at once. Employer Services is about two-thirds of revenue; PEO is most of the rest, with client funds interest a smaller line. You are not buying one product — you are buying two major rails tied to the same customer base.
How they make money
$20.6B
annual revenue · their business grew +7.1% last year
Employer Services
$14.0B
+7.2%
PEO Services
$6.1B
+6.8%
Interest on Funds
$0.5B
+20.0%
The products that matter
payroll and hr outsourcing
Employer Services
$14.0B · ~68% of FY2025 revenue
This is the core engine: payroll, tax filing, HR administration, and benefits support. It was $14.0B in FY2025 (~68% of consolidated revenue) and grew about 7% for the year. This is the part customers hate switching away from.
core segment
co-employment hr services
PEO Services
$6.1B · ~30% of FY2025 revenue
ADP co-employs workers for small and mid-size businesses, taking on payroll, benefits, workers' comp, and compliance. It was $6.1B in FY2025 (~30% of consolidated revenue). This is how ADP gets deeper into a client account instead of just running checks.
deeper wallet share
Key numbers
$332
18-month target
The 18-month target sits about 25% above the quoted price — valuation still embeds room if adjusted EBIT margin holds near the mid-20s (% of revenue).
26.0%
adjusted EBIT margin (Q2 FY2026)
Release cited 26.0% adjusted EBIT margin, up 80 bps vs. the prior-year quarter — non-GAAP; see 8-K tables for reconciliation.
34.5%
return on capital
For every dollar it puts into the business, ADP earns 34.5 cents back in operating profit.
2.5%
dividend yield
You get paid 2.5% to wait while a very boring machine keeps printing cash.
Financial health
A+
strength
- balance sheet grade A+ — near the highest rating possible
- risk rank 1 — safer than 95% of stocks
- price stability 100 / 100
- long-term debt $4.0B (4% of capital)
- net profit margin 19.5% — keeps 20 cents of every dollar in revenue
- return on equity 44% — $0.44 profit for every $1 investors have put in
A+ with balance sheet grade and risk rank standing out. your money faces less risk here than at most public companies.
Total return vs. market
You invested $10,000 in ADP 3 years ago → it's now worth $11,380.
The index would have given you $13,920.
source: institutional data · total return
What just happened
beat estimates
Q2 fiscal 2026: ~$5.4B revenue, $2.62 adjusted diluted EPS, 26.0% adjusted EBIT margin.
Per the Jan. 28, 2026 release, revenue rose 6% vs. the prior-year quarter to about $5.4B (5% organic constant currency). Adjusted diluted EPS rose 11% to $2.62; adjusted EBIT margin expanded 80 bps to 26.0%.
~$5.4B
Q2 FY2026 revenue
$2.62
adj. diluted EPS
26.0%
adj. EBIT margin
why it matters
The quarter pairs top-line growth with margin expansion on adjusted EBIT — read the release tables for GAAP vs. non-GAAP reconciliation.
-
q2 fiscal 2026 (period ended dec. 31, 2025): consolidated revenue reached about $5.4 billion, up 6% vs. the prior-year quarter (5% organic constant currency).
-
adjusted diluted eps was $2.62 (up 11%); adjusted ebit was $1.4 billion with adjusted ebit margin at 26.0%, up 80 basis points vs. the prior-year quarter.non-gaap definitions and reconciliations ship with the release tables filed to the sec on form 8-k.
-
employer services revenue rose 6% vs. the prior-year quarter; peo services revenue rose 6% with average worksite employees up about 2% to ~758,000.
-
interest on funds held for clients rose 13% to $309 million; average client funds balances rose 6% to $37.6 billion.
-
fiscal 2026 outlook: the company updated guidance — including about 6% revenue growth, adjusted ebit margin expansion of 50–70 bps, and adjusted diluted eps growth of 9%–10%.
snap-source: ADP Q2 FY2026 (Jan. 28, 2026) — mediacenter.adp.com · release text mirrored at dhrmap.com (same figures)
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What could go wrong
the #1 risk is a US employment slowdown reducing payroll volumes and new business bookings.
med
Employment recession
ADP gets paid when people are employed and getting paid. If payrolls shrink, ADP processes fewer checks, books less new business, and collects less interest income on the cash moving through the system. Payrolls fell 2.7% in the 2020 recession. That is the stress case worth keeping on your desk.
2020 payroll shock: -2.7%
med
Interest rate cuts shrink float income
ADP earns interest on roughly $40B of client funds sitting between employers and employees. That income is high margin and rate-sensitive. If the Fed cuts 100 basis points, the math on a $40B base points to roughly $400M less annual interest income before mix and timing effects.
100bp rate cut on $40B = roughly $400M less gross interest income
low
Great business, average stock
ADP is safe. That does not make the stock automatic. $10,000 invested three years ago turned into $11,380, while the index reached $13,920. If you pay 26.5x earnings for stability, you need stability and enough growth to keep that premium intact.
3-year gap versus index: -$2,540
A weaker labor market and lower rates would hit both earnings engines — payroll activity on a $20.6B revenue base and interest earned on roughly $40B of client funds.
source: institutional data · regulatory filings · risk analysis
Pay attention to
metric
client retention above 92%
This is the moat in one number. If retention breaks below 92%, the whole "payroll is sticky" story needs a reset.
trend
US employer services bookings
Management already flagged softer bookings. This is your earliest signal that labor demand is cooling before revenue fully shows it.
cal
client funds interest revenue
Watch this line as Fed policy shifts. It is high-margin income, and it matters more to EPS than many payroll investors admit.
risk
growth below the usual range
If revenue growth slips below the usual 7% area while the stock still sits near 26.5x earnings, the premium stops looking defensive and starts looking expensive.
Analyst rankings
short-term outlook
average
Momentum score 3. In human-speak: analysts do not see a special near-term edge here.
risk profile
safest 5%
Stability score 1. This sits among the lower-risk names in the market.
chart momentum
below average
Technical score 4. The chart says safety, not urgency.
earnings predictability
100 / 100
Management delivers highly consistent results. Few large companies score cleaner than this.
source: institutional data
Institutional activity
institutions have been net selling for 3 consecutive quarters — 930 buyers vs. 1,097 sellers in 3q2025. total institutional holdings: 0.3B shares. net selling for 3 quarters.
source: institutional data
Price targets
3-5 year target range
$237
$426
$265
current price
$332
target midpoint · +25% from current · 3-5yr high: $410 (+55% · 14% ann'l return)
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