Executive Summary

Q4 FY25: Revenue $5.13B (+8% y/y), adjusted EBIT margin 23.7% (+40 bps y/y), GAAP diluted EPS $2.23, adjusted diluted EPS $2.26 . Versus S&P Global consensus, ADP delivered a revenue and EPS beat in Q4*.
FY25: Revenue $20.56B (+7%), adjusted EBIT $5.35B (+9%), adjusted EBIT margin 26.0% (+50 bps), adjusted diluted EPS $10.01; GAAP diluted EPS $9.98 .
FY26 outlook: Revenue growth 5–6%, adjusted EBIT margin expansion 50–70 bps, adjusted/GAAP diluted EPS growth 8–10%, adjusted effective tax rate ~23% .
Key catalysts: Client funds interest tailwind (CFI revenue guided to $1.29–$1.31B; net impact from extended strategy $1.25–$1.27B) and AI/product cycle momentum (Lyric HCM, Workforce Software) balanced by expected adjusted margin contraction in Q1 FY26 before ramping through the year .

What Went Well and What Went Wrong

What Went Well

Strong Q4 close and full-year performance: “We concluded fiscal year 2025 with strong revenue and earnings growth… bolstered by record-high client satisfaction levels” — Maria Black, CEO .
Employer Services retention hit 92.1% for the year (near record) on record client satisfaction; U.S. pays per control +1% in Q4/FY25 .
Product momentum: Lyric HCM client wins up >50% y/y, pipeline up; Workforce Software integration driving co-selling and traction, esp. in multinational enterprise .

What Went Wrong

ES new business bookings grew only 3% in FY25; softer finish in HRO/international with elongated decision cycles delaying Q4 closures .
PEO margins down (–20 bps in Q4; –60 bps FY) on faster zero-margin benefits pass-through growth and higher SUI costs, despite 7% revenue and 3% WSE growth .
Transparency shift: Management will no longer provide point margin forecasts for ES/PEO segments; directional commentary and actuals will continue, which may reduce guidance granularity .

Financial Results

Metric	Q2 2025	Q3 2025	Q4 2025
Revenue ($USD Millions)	$5,048.4	$5,553.0	$5,126.8
Net Earnings ($USD Millions)	$963.2	$1,249.5	$910.6
Diluted EPS ($)	$2.35	$3.06	$2.23
Adjusted Net Earnings ($USD Millions)	$963.2	$1,249.6	$923.1
Adjusted Diluted EPS ($)	$2.35	$3.06	$2.26
Adjusted EBIT ($USD Millions)	$1,272.0	$1,629.7	$1,212.9
Adjusted EBIT Margin (%)	25.2%	29.3%	23.7%

Segment breakdown:

Segment	Q2 2025 Revenue ($MM)	Q3 2025 Revenue ($MM)	Q4 2025 Revenue ($MM)
Employer Services	$3,388.5	$3,767.9	$3,465.6
PEO Services	$1,663.3	$1,788.5	$1,664.2
ES Segment Margin (%)	34.9%	39.8%	33.5%
PEO Segment Margin (%)	15.1%	14.2%	13.2%

KPIs and portfolio economics:

KPI	Q2 2025	Q3 2025	Q4 2025
U.S. Pays per Control (change)	+1%	+1%	+1%
Avg Paid PEO WSEs	746,000	748,000	761,000
End-of-Period PEO WSEs	751,000	751,000	764,000
Interest on Funds Held for Clients ($MM)	$272.8	$355.2	$307.8
Avg Yield on Client Funds Portfolio (%)	3.1%	3.2%	3.2%
Avg Client Funds Balance ($B)	$35.3	$44.5	$38.1

Non-GAAP adjustments in Q4: $19.3M optimization initiatives added ~$0.03 to adjusted EPS; tax effects included (see reconciliation) .

Guidance Changes

FY2025 guidance changes (Q2 → Q3):

Metric	Period	Previous Guidance (Jan 29, 2025)	Current Guidance (Apr 30, 2025)	Change
Adjusted EBIT Margin expansion	FY2025	30–50 bps	40–50 bps	Raised
Adjusted Diluted EPS growth	FY2025	7–9%	8–9%	Raised
ES Client Revenue Retention	FY2025	(30) to (10) bps	(20) bps to flat	Raised
PEO Margin	FY2025	(90) to (70) bps	(80) to (60) bps	Raised
CFI Revenue ($MM)	FY2025	$1,140–$1,160	$1,160–$1,170	Raised
Net Impact from Extended Strategy ($MM)	FY2025	$1,025–$1,045	$1,045–$1,055	Raised

FY2026 initial outlook (Q4):

Metric	Period	Previous Guidance	Current Guidance	Change
Consolidated Revenue Growth	FY2026	N/A	5–6%	New
Adjusted EBIT Margin expansion	FY2026	N/A	50–70 bps	New
Adjusted Effective Tax Rate	FY2026	N/A	~23%	New
Diluted & Adjusted Diluted EPS growth	FY2026	N/A	8–10%	New
ES Revenue Growth	FY2026	N/A	5–6%	New
ES New Business Bookings	FY2026	N/A	+4–7%	New
ES Client Revenue Retention	FY2026	N/A	(10)–(30) bps	New
U.S. Pays per Control	FY2026	N/A	0–1%	New
PEO Revenue Growth	FY2026	N/A	5–7%	New
PEO Revenue ex Pass-throughs	FY2026	N/A	3–5%	New
Avg PEO WSE Growth	FY2026	N/A	2–3%	New
Client Funds Interest Revenue ($MM)	FY2026	N/A	$1,290–$1,310	New
Net Impact from Extended Strategy ($MM)	FY2026	N/A	$1,250–$1,270	New
Yield on Client Funds Portfolio	FY2026	N/A	~3.4%	New

Note: Management will no longer provide point margin forecasts for ES/PEO segments; actuals and directional commentary will be provided .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3 FY25)	Current Period (Q4 FY25)	Trend
AI/Technology initiatives	ADP Assist driving service/sales efficiency; minutes shaved per call; broad deployment plans	“Meaningful productivity improvements” already realized; net investment in AI still in the tens of millions; continued rollout across org and products	Expanding deployment
Lyric HCM momentum	Rebrand resonating; bookings contribution expected; pipeline up significantly y/y	Clients sold up >50% y/y; live clients doubled; pipeline growing; strong enterprise/MNC receptivity	Accelerating
Workforce Software	Acquisition closed Oct; integration progressing; co-selling wins expected	Co-selling already contributing; bullish on up-market/MNC contribution; ongoing integration with Lyric/GlobalView	Scaling
Embedded payroll (Fiserv/Clover)	Referral program launched; embedded integrations forthcoming; potential TAM expansion	RUN embedded into Clover now for subset; broader deployment planned; Cash Flow Central to be embedded in RUN; contributions expected	Building
Macro, tariffs, FX	Q3: FX headwind; short rates down; international bookings lumpy with uncertainty	International softness delayed decisions; FX a modest ES tailwind in FY26	Mixed; cautious
Pricing	Targeting ~100 bps pricing (vs 50 bps pre-pandemic)	Pricing assumptions ~100 bps in FY26, slight moderation vs FY25	Elevated but easing
Retention	Modest declines vs record highs; strong small biz stability	FY retention 92.1%; guidance prudently assumes 10–30 bps decline in FY26	Still strong; cautious outlook
Client funds interest	Laddering drives CFI tailwind; Q3 balances strong	Avg yield guided to 3.4% in FY26; CFI revenue $1.29–$1.31B	Tailwind continues
PEO margins & benefits inflation	PEO margin pressure from pass-throughs/SUI timing	PEO margins down; benefits pass-through growth expected to outpace PEO revenue	Ongoing pressure

Management Commentary

“We concluded fiscal year 2025 with strong revenue and earnings growth… record-high client satisfaction levels across the company.” — Maria Black, CEO .
“Our fiscal 2026 outlook assumes a continued slight moderation in the macroeconomic environment… adjusted EBIT margin expansion of 50 to 70 basis points.” — Peter Hadley, CFO .
“We expect… client funds interest revenue will increase from $1.19 billion in fiscal 2025 to a range of $1.29 to $1.31 billion in fiscal 2026… net impact… to $1.25 to $1.27 billion.” — Peter Hadley, CFO .
“We are already well and truly off to the races… Workforce Software being part of the integrated suite from a selling perspective.” — Peter Hadley, CFO .
“Our pipelines remain healthy… laser-focused on accelerating ES new business bookings growth in fiscal 2026.” — Maria Black, CEO .

Q&A Highlights

Bookings softness detail: HRO/international delays, not competitive losses; large, complex deals with elongated cycles; pipeline up y/y and still active .
Pricing outlook: FY26 pricing contribution ~100 bps, slightly moderating from FY25; retention broad-based strength, small-business out-of-business rates better than feared .
Workforce Software & NextGen WFN: Active co-selling; NextGen WFN expanding beyond core mid-market; improved implementation experience and fewer service contacts .
PEO dynamics: Pass-through benefits inflation driving reported revenue; non-pass-through revenues dampened by moderating wage growth; expectation of lower SUI than FY25 .
Margin cadence: Expect adjusted EBIT margin contraction y/y in Q1 FY26 due to acquisition timing and investments, ramping thereafter .

Estimates Context

Metric	Q2 2025 Consensus*	Q2 2025 Actual	Q3 2025 Consensus*	Q3 2025 Actual	Q4 2025 Consensus*	Q4 2025 Actual
Revenue ($USD Millions)	4,957.5*	5,048.4	5,492.7*	5,553.0	5,045.0*	5,126.8
Primary EPS ($)	2.295*	2.35	2.973*	3.06	2.227*	2.26 (Adjusted Diluted)

Values with asterisks () retrieved from S&P Global. ADP beat consensus revenue and EPS in Q2–Q4 FY25.

Key Takeaways for Investors

Q4 delivered broad-based beats vs S&P Global consensus on both revenue and EPS; sequential softness from Q3 reflects normal seasonality and mix rather than demand deterioration* .
FY26 setup balances tailwinds (CFI yield and balances, FX modest tailwind for ES) with prudent macro assumptions (0–1% U.S. pays per control, retention down 10–30 bps) .
Margin cadence matters for trading: management flagged adjusted EBIT margin contraction in Q1 FY26 before ramp; near-term margin prints could headline risk despite full-year expansion guidance .
Product cycle is a structural positive: Lyric HCM and NextGen WFN momentum, plus Workforce Software integration/co-selling should support bookings re-acceleration (ES bookings guide +4–7%) .
PEO margins will likely stay pressured by benefits pass-through inflation and mix; investors should focus on revenue ex pass-throughs (guided +3–5%) and WSE growth (2–3%) for underlying performance .
Pricing contribution remains elevated (~100 bps) vs pre-pandemic norms, offering a lever to offset macro moderation while retention remains high .
Guidance communication shifts (no point segment margins) reduce granularity; monitor quarterly segment actuals and directional commentary for margin trajectory .

Footnote: Consensus/estimate values marked with asterisks (*) are retrieved from S&P Global.

AUTOMATIC DATA PROCESSING INC (ADP)·Q4 2025 Earnings Summary