Automatic Data Processing reported second-quarter fiscal 2026 adjusted earnings of $2.62 per share, surpassing the consensus forecast of $2.58. This represents a 11.5% increase versus the $2.35 posted in the year-ago quarter. Non-GAAP operating margin expanded by 120 basis points to 25.6%, driven by disciplined expense management and scalable cloud infrastructure investments.

Total revenues rose 6.2% year-over-year, led by Employer Services, which grew 5.8%, and Professional Employer Organization (PEO) Services, which advanced 8.4%. PEO client workforce increased by 7% to 975,000 worksite employees, and average revenue per client climbed by 3.1%, reflecting strong demand for bundled HR and payroll solutions.

Following the quarter, management lifted its full-year revenue guidance range by 40 basis points, now projecting growth of 5.5% to 6.0%. Free cash flow is expected to exceed $2.7 billion, up from prior guidance of $2.6 billion, supported by working capital efficiency and lower capital expenditures. The company plans to deploy $1.5 billion toward share repurchases and dividends over the next 12 months.

Trading at roughly 22 times forward earnings, the stock commands a premium to peers despite mid-single-digit growth expectations. Slowing U.S. employment gains, demographic headwinds and potential policy-driven shifts in payroll tax structures represent ongoing risks. However, recent initiatives in AI-driven workforce analytics could help sustain margins if adoption accelerates.