Paychex 2026 Q2 Earnings Beats Revenue Estimates, EPS Falls Short

Paychex reported Q2 2026 earnings, beating revenue estimates with an 18.3% year-over-year increase to $1.56 billion but missing on EPS, which fell 4.4% to $1.10. The company raised its fiscal 2026 adjusted EPS guidance midpoint to 10.5% from 10%, reflecting confidence in AI-driven productivity gains and Paycor integration synergies.

Revenue

Total revenue surged to $1.56 billion, driven by the Paycor acquisition, which contributed 17% to growth. Management Solutions led with a 21% increase to $1.17 billion, while PEO and Insurance Solutions rose 6% to $336.9 million. Interest on funds held for clients jumped 51% to $54.3 million, and total service revenue hit $1.5 billion.

Earnings/Net Income

Despite the revenue surge, the 4.4% net income decline to $395.4 million and 4.3% EPS drop underscored cost pressures from the Paycor integration and macroeconomic headwinds.

Post-Earnings Price Action Review

The strategy of buying PAYX after an earnings beat and holding for 30 days yielded a 10.35% return but underperformed the market by 75.47%. A Sharpe ratio of 0.09 highlighted suboptimal risk-adjusted returns, though no capital losses were recorded during the period.

CEO Commentary

CEO John Gibson emphasized AI advancements, including a patent-pending compliance platform, and $100 million in Paycor integration cost synergies. He expressed optimism about AI’s role in addressing talent shortages and enhancing client outcomes.

Guidance

Paychex reaffirmed fiscal 2026 guidance, projecting 10–11% adjusted diluted EPS growth and 18% Q3 revenue growth. Management cited cost discipline and AI-driven productivity as key drivers.

Additional News

Paychex’s acquisition of Paycor contributed 17% to Q2 revenue growth. The company declared a $1.08 quarterly dividend, maintaining its 3.7% yield. Citigroup raised its price target to $145, signaling optimism about AI-driven growth and integration synergies.

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