Paycom (PAYC) Up 5.7% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Paycom Software (PAYC). Shares have added about 5.7% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Paycom due for a pullback? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Paycom Software, Inc. before we dive into how investors and analysts have reacted as of late.

Paycom's Q4 Earnings Surpass Expectations, Revenues Rise Y/Y

Paycom Software reported better-than-expected fourth-quarter 2025 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate. The online payroll and human resource technology provider reported non-GAAP earnings of $2.45 per share, which beat the Zacks Consensus Estimate of $2.44. Paycom’s bottom line increased 5.6% year over year, mainly driven by higher revenues, operating efficiency and lower income taxes.

Paycom reported revenues of $544.3 million, which beat the consensus mark of $542.7 million. The top line increased 10.2% year over year, primarily benefiting from increased sales momentum, international expansion and artificial intelligence (AI) integration in its products.

Paycom’s Q4 Results in Detail

Paycom’s Recurring revenues (representing 95% of the total revenues) improved 11.2% to $517.1 million in the fourth quarter. Our estimate for the company’s Recurring revenues was pegged at $515.2 million.

Paycom’s revenues from the Implementation and Other segment decreased to $27.2 million from $29 million in the year-ago quarter and contributed 5% to total sales. Our estimate for the segment’s revenues was pegged at $27.1 million.

Adjusted gross profits increased 11.3% from the year-ago period to $459.4 million. The adjusted gross margin expanded 80 basis points (bps) on a year-over-year basis to 84.4%.

Paycom’s adjusted EBITDA rose 9.9% year over year to $236.3 million. The adjusted EBITDA margin contracted 10 bps from 43.5% to 43.4%.

Paycom’s Balance Sheet & Cash Flow

Paycom exited the fourth quarter with cash and cash equivalents of $370 million compared with $375 million recorded in the previous quarter. The company had no debt as of Dec. 31, 2025.

In the fourth quarter of 2025, PAYC generated operating cash flow of approximately $196.1 million, paid out $20.6 million in dividends and bought back $108.8 million worth of its common stock. In 2025, it generated an operating cash flow of $678.9 million, paid out $84.8 million in dividends and bought back $325.5 million worth of its common stock.

The company had $1.1 billion remaining under its buyback authorization as of Dec. 31, 2025. Earlier on Feb. 10, Paycom declared its upcoming quarterly dividend of 37.5 cents per share, payable on March 23, 2026.

Paycom Initiates 2026 Guidance

Paycom initiated its revenue guidance for 2026. It forecasts revenues to be in the band of $2.175-$2.195 billion. The company projects recurring revenues to grow 7% year over year. PAYC forecasts revenues from interest on funds held for clients to be $103 million.

Paycom expects its 2026 adjusted EBITDA to be between $950 million and $970 million, translating to an EBITDA margin of approximately 44% at the midpoint.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Paycom has a average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock has a score of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Interestingly, Paycom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Paycom belongs to the Zacks Internet - Software industry. Another stock from the same industry, Reddit Inc. (RDDT), has gained 0.9% over the past month. More than a month has passed since the company reported results for the quarter ended December 2025.

Reddit Inc. reported revenues of $725.61 million in the last reported quarter, representing a year-over-year change of +69.6%. EPS of $1.24 for the same period compares with $0.36 a year ago.

For the current quarter, Reddit Inc. is expected to post earnings of $0.62 per share, indicating a change of +376.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +2.8% over the last 30 days.

Reddit Inc. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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This article originally published on Zacks Investment Research (zacks.com).

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