Paychex 2025 Q4 Earnings Misses Targets as Net Income Declines 22%
Daily EarningsWednesday, Jun 25, 2025 11:04 pm ET
57min readPaychex (PAYX) reported its fiscal 2025 Q4 earnings on June 25th, 2025. The total revenue of increased by 10.2% to $1.43 billion in 2025 Q4, up from $1.30 billion in 2024 Q4. Paychex's EPS declined 22.6% to $0.82 in 2025 Q4 from $1.06 in 2024 Q4. The company's net income declined to $297.20 million in 2025 Q4, down 21.8% from $379.90 million reported in 2024 Q4.
Paychex's revenue for the quarter saw a 10% increase, reaching $1.43 billion, compared to $1.30 billion in the same period last year. Management Solutions contributed $1.04 billion, while PEO and Insurance Solutions added $340.30 million. Interest on funds held for clients provided a further $45.20 million, bringing the total revenue to $1.43 billion for the quarter.
The company's EPS dropped 22.6% to $0.82, with net income decreasing 21.8% to $297.20 million compared to the previous year. Despite the company's longstanding profitability, the decline in EPS and net income suggests challenging conditions in the quarter.
The strategy of buying when it exceeds revenue expectations and holding it for 30 days has demonstrated strong performance, achieving an overall return of 106.50%, surpassing the benchmark return of 98.01%. This strategy has shown an excess return of 8.48% and a compound annual growth rate (CAGR) of 15.71%, indicating solid growth potential. However, the strategy's Sharpe ratio of 0.67 suggests a moderate risk-adjusted return. Additionally, a maximum drawdown of -23.36% highlights the potential for significant volatility and drawdowns, emphasizing the importance of caution in volatile market conditions.
CEO Commentary
John B. Gibson, President, CEO & Director, highlighted Paychex's 10% revenue growth in Q4 and 6% growth for the full fiscal year, despite facing challenges like ERTC headwinds. He noted the successful integration of Paycor, surpassing expectations, and raised cost synergy expectations to approximately $90 million for fiscal '26. Gibson emphasized improved client retention rates and strategic investments for future growth, focusing on tailored solutions and enhanced sales capabilities. He expressed optimism about Paychex's growth potential and resilience amid macroeconomic uncertainties.
Guidance
For fiscal 2026, Paychex anticipates total revenue growth between 16.5% and 18.5%, with the Paycor acquisition contributing approximately 12 to 13 points. Management Solutions is expected to grow by 20% to 22%, while PEO and Insurance Solutions are projected to grow by 6% to 8%. Adjusted diluted EPS is forecasted to increase by 8.5% to 10.5%. For Q1, total revenue growth is anticipated between 16% and 17%, with adjusted operating income margins between 40% and 41%.
Additional News
Paychex recently completed its acquisition of Paycor HCM, Inc., a strategic move that significantly expands its market reach. With Paycor's integration, Paychex aims to capture cost synergies of approximately $90 million by fiscal 2026, enhancing its competitive position. Additionally, Paychex has launched the Paychex Partner Plus program, enrolling over 1,000 brokers to strengthen its referral channels. This initiative is designed to foster relationships and drive mutual growth, providing brokers with a broader suite of solutions to offer their clients. Paychex also repurchased 828,855 shares for $104 million and paid out cumulative dividends totaling $1.4 billion for fiscal 2025.
Paychex's revenue for the quarter saw a 10% increase, reaching $1.43 billion, compared to $1.30 billion in the same period last year. Management Solutions contributed $1.04 billion, while PEO and Insurance Solutions added $340.30 million. Interest on funds held for clients provided a further $45.20 million, bringing the total revenue to $1.43 billion for the quarter.
The company's EPS dropped 22.6% to $0.82, with net income decreasing 21.8% to $297.20 million compared to the previous year. Despite the company's longstanding profitability, the decline in EPS and net income suggests challenging conditions in the quarter.
The strategy of buying when it exceeds revenue expectations and holding it for 30 days has demonstrated strong performance, achieving an overall return of 106.50%, surpassing the benchmark return of 98.01%. This strategy has shown an excess return of 8.48% and a compound annual growth rate (CAGR) of 15.71%, indicating solid growth potential. However, the strategy's Sharpe ratio of 0.67 suggests a moderate risk-adjusted return. Additionally, a maximum drawdown of -23.36% highlights the potential for significant volatility and drawdowns, emphasizing the importance of caution in volatile market conditions.
CEO Commentary
John B. Gibson, President, CEO & Director, highlighted Paychex's 10% revenue growth in Q4 and 6% growth for the full fiscal year, despite facing challenges like ERTC headwinds. He noted the successful integration of Paycor, surpassing expectations, and raised cost synergy expectations to approximately $90 million for fiscal '26. Gibson emphasized improved client retention rates and strategic investments for future growth, focusing on tailored solutions and enhanced sales capabilities. He expressed optimism about Paychex's growth potential and resilience amid macroeconomic uncertainties.
Guidance
For fiscal 2026, Paychex anticipates total revenue growth between 16.5% and 18.5%, with the Paycor acquisition contributing approximately 12 to 13 points. Management Solutions is expected to grow by 20% to 22%, while PEO and Insurance Solutions are projected to grow by 6% to 8%. Adjusted diluted EPS is forecasted to increase by 8.5% to 10.5%. For Q1, total revenue growth is anticipated between 16% and 17%, with adjusted operating income margins between 40% and 41%.
Additional News
Paychex recently completed its acquisition of Paycor HCM, Inc., a strategic move that significantly expands its market reach. With Paycor's integration, Paychex aims to capture cost synergies of approximately $90 million by fiscal 2026, enhancing its competitive position. Additionally, Paychex has launched the Paychex Partner Plus program, enrolling over 1,000 brokers to strengthen its referral channels. This initiative is designed to foster relationships and drive mutual growth, providing brokers with a broader suite of solutions to offer their clients. Paychex also repurchased 828,855 shares for $104 million and paid out cumulative dividends totaling $1.4 billion for fiscal 2025.
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