Automatic Data Processing reported second-quarter fiscal 2026 EPS of $2.62, topping consensus estimates by $0.07 per share. Total revenues rose 6.2% year-over-year to $4.4 billion, driven by broad-based demand across its human capital management offerings. Non-GAAP operating margin expanded by 40 basis points, reflecting disciplined cost management despite continued investment in technology and product innovation.

The Employer Services division, which serves more than 800,000 small and mid-sized clients, delivered 5.4% revenue growth as new client additions outpaced attrition for the fifth consecutive quarter. The Professional Employer Organization unit grew revenues by 8.7%, adding over 7,500 new worksite employees and benefiting from improved retention in high-growth verticals such as technology and healthcare.

Management reaffirmed full-year revenue growth guidance of 5% to 6%, and non-GAAP EPS growth guidance of 8% to 10%. Operating cash flow reached $1.1 billion in the quarter, up 12% year-over-year, and free cash flow margin improved by 60 basis points. The company generated $600 million in share repurchases and paid $480 million in dividends, returning over 90% of free cash flow to shareholders.

At a multiple of 22 times fiscal 2026 earnings, ADP’s valuation remains rich relative to its mid-single-digit revenue trajectory. Slowing employment growth and long-term demographic trends pose ongoing risks to hiring volumes, while a shift toward fixed reinvestment of client cash balances is expected to cap portfolio yield benefits by late 2026. Investors will be watching job market indicators and margin trends closely in coming quarters.