Paychex, Inc. (NASDAQ:PAYX) reported strong fiscal second-quarter results, highlighted by an 18% year-over-year increase in total revenue to $1.557 billion.
Adjusted diluted earnings per share were $1.26, up from $1.14 a year earlier, while GAAP diluted earnings per share were $1.10, slightly lower than the $1.14 reported last year.
Adjusted EPS beat estimates by 3 cents; sales missed by $10 million.
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Operating income rose 6% to $572 million. Adjusted operating income, excluding $77 million in acquisition costs, jumped 21% to $649 million.
Second-quarter operating margin fell to 36.7% from 40.9% a year earlier, while adjusted operating margin improved to 41.7%, up from 40.9% in the prior-year period.
“We are proud of the significant progress we’ve made on key strategic priorities, enabling us to deliver the most comprehensive suite of HCM solutions in the industry,” commented CEO John Gibson. He credited strategic progress and AI-driven productivity for improved efficiency and client value.
Segment Performance
Management Solutions revenue climbed 21% to $1.2 billion, driven by client growth, product adoption, and the Paycor HCM acquisition.
Professional Employer Organization and Insurance Solutions revenue increased 6% to $336.9 million, primarily due to growth in the number of average PEO worksite employees and an increase in PEO insurance revenues.
Interest on client funds jumped 51% to $54 million, boosted by the Paycor deal and investment gains.
First-Half Financial Performance
For the first half of fiscal 2026, revenue rose 18% to $3.1 billion. Operating income was up 3% to $1.11 billion; adjusted operating income climbed 18% to $1.28 billion. Diluted EPS fell 7% to $2.16; adjusted EPS rose 8% to $2.48.
As of Nov. 30, Paychex had $1.6 billion in cash and investments and $5 billion in net borrowings. Six-month operating cash flow was $1.2 billion.
During the six-month period, the company returned capital to stockholders by paying cumulative dividends of $2.16 per share, totaling $777.0 million, and repurchasing 2.1 million shares for $286.6 million.
Gibson highlighted Paychex’s push to expand AI-powered workforce management, citing recent advances in payroll automation and AI-driven advisory tools. He said these tools boost efficiency, client satisfaction, and position Paychex for AI-led growth.
Outlook
Paychex has raised its fiscal 2026 adjusted EPS growth outlook to 10%-11%, with guidance now ranging from $5.48 to $5.53 per share. All other guidance is unchanged.
PAYX Price Action: Paychex shares were down 3.74% at $109.97 at the time of publication on Friday. The stock is near its 52-week low of $108.00, according to Benzinga Pro data.
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