ADP's First Quarter 2026 Earnings Reveal Encouraging Momentum

Investors keeping a keen eye on ADP, the human resources and payroll services giant, have reasons to be optimistic following its first quarter fiscal 2026 earnings release. With the announcement of a robust 7% revenue growth and matching 7% adjusted EPS growth, the company's solid performance effectively echoes its strategic advancements.

In an environment reflecting stable HCM demand, ADP recorded a noteworthy upswing in Employer Services new business bookings, achieving a record sales volume for this quarter. Particularly uplifting for the firm was the reacceleration of growth in the Employer Services HR Outsourcing segment and stability within the small business portfolio, which encompasses retirement and insurance services.

Additionally, ADP's PEO (Professional Employer Organization) revenue impressively grew by 7%, buoyed by the expansion in zero-margin pass-throughs and heightened wage levels. It's noteworthy that although Employer Services retention dipped slightly, it surpassed expectations, underscoring the robustness of client relations.

A further positive indicator was the expectations for client funds interest revenue, which rose by $10 million due to better-than-expected average client funds balance growth. ADP is forecasting these average balances to climb between 3% and 4% for fiscal 2026.

The call around ADP's technological edge also underscored its strategic position. With significant advancements in small business solutions, including embedded payroll systems and new functionalities, the firm continues to sharpen its competitive edge. Notably, the mid-market solution rollout of Workforce Now Next-Gen reached a milestone with 80% new mid-market clients adopting this modern stack.

While ADP's margins were slightly impacted by the costs related to acquisitions, the outlook remains firm. The company's fiscal 2026 consolidated revenue outlook stands at 5% to 6% growth, supported by an anticipated EBIT margin expansion of 50 to 70 basis points. This performance set a promising tone as ADP continues executing its long-term strategy, balancing technological advances with solid financial outcomes.