Automatic Data Processing (ADP)
Market Price (5/3/2026): $214.09 | Market Cap: $86.0 BilSector: Industrials | Industry: Human Resource & Employment Services
Automatic Data Processing (ADP)
Market Price (5/3/2026): $214.09Market Cap: $86.0 BilSector: IndustrialsIndustry: Human Resource & Employment Services
Investment Highlights Why It Matters Detailed financial logic regarding cash flow yields vs trend-riding momentum.
Attractive yieldTotal YieldTotal Yield = Earnings Yield + Dividend Yield, Earnings Yield = Net Income / Market Cap Dividend Yield = Total Dividends / Market Cap is 8.0%, Dividend Yield is 3.0%, ERPEquity Risk Premium (ERP) = Total Yield - Risk Free Rate, Reflects the premium above risk free assets offered by the investment. is 3.7%, FCF Yield is 5.6% Attractive operating marginsOp Mgn LTMOperating Margin = Operating Income / Revenue Reflects profitability before taxes and before impact of capital structure (interest payments). is 27% Attractive cash flow generationCFO/Rev LTMCash Flow from Operations / Revenue (Sales), Last Twelve Months (LTM) is 25%, FCF/Rev LTMFree Cash Flow / Revenue (Sales), Last Twelve Months (LTM) is 22%, CFO LTM is 5.5 Bil, FCF LTM is 4.8 Bil Stock buyback supportStock Buyback 3Y Total is 4.3 Bil Low stock price volatilityVol 12M is 22% Megatrend and thematic driversMegatrends include Cloud Computing, Fintech & Digital Payments, Automation & Robotics, Cybersecurity, Show more. | Weak multi-year price returns2Y Excs Rtn is -49%, 3Y Excs Rtn is -69% | Key risksADP key risks include [1] growth headwinds from increased competition by scaled competitors, Show more. |
| Attractive yieldTotal YieldTotal Yield = Earnings Yield + Dividend Yield, Earnings Yield = Net Income / Market Cap Dividend Yield = Total Dividends / Market Cap is 8.0%, Dividend Yield is 3.0%, ERPEquity Risk Premium (ERP) = Total Yield - Risk Free Rate, Reflects the premium above risk free assets offered by the investment. is 3.7%, FCF Yield is 5.6% |
| Attractive operating marginsOp Mgn LTMOperating Margin = Operating Income / Revenue Reflects profitability before taxes and before impact of capital structure (interest payments). is 27% |
| Attractive cash flow generationCFO/Rev LTMCash Flow from Operations / Revenue (Sales), Last Twelve Months (LTM) is 25%, FCF/Rev LTMFree Cash Flow / Revenue (Sales), Last Twelve Months (LTM) is 22%, CFO LTM is 5.5 Bil, FCF LTM is 4.8 Bil |
| Stock buyback supportStock Buyback 3Y Total is 4.3 Bil |
| Low stock price volatilityVol 12M is 22% |
| Megatrend and thematic driversMegatrends include Cloud Computing, Fintech & Digital Payments, Automation & Robotics, Cybersecurity, Show more. |
| Weak multi-year price returns2Y Excs Rtn is -49%, 3Y Excs Rtn is -69% |
| Key risksADP key risks include [1] growth headwinds from increased competition by scaled competitors, Show more. |
Qualitative Assessment
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1. Negative Analyst Sentiment Despite Earnings Beats.
ADP reported robust financial results for both the second fiscal quarter of 2026 (Q2 FY26) on January 28, 2026, and the third fiscal quarter of 2026 (Q3 FY26) on April 29, 2026. Q2 FY26 earnings per share (EPS) of $2.62 surpassed analyst expectations of $2.57 by 1.95%, with revenue also exceeding projections at $5.4 billion. For Q3 FY26, revenue increased 7% to $5.94 billion and diluted EPS rose 10% to $3.38, prompting ADP to raise its full-year 2026 EPS guidance to a range of $11.01-$11.11 and authorize a $6 billion share buyback. However, despite these positive company-specific announcements, multiple analysts lowered their price targets for ADP following these reports, indicating a cautious outlook. For example, Cantor Fitzgerald cut its target from $306 to $244, Morgan Stanley from $311 to $274, Citigroup from $265 to $230, and Stifel Nicolaus from $270 to $240. This negative re-rating by analysts, despite strong company performance, likely contributed to downward pressure on the stock.
2. Weakening Macroeconomic Indicators and Slowing Economic Growth.
Broad macroeconomic signals indicated a slowdown in the U.S. economy, impacting overall market sentiment and potentially affecting demand for ADP's services. The Conference Board Leading Economic Index (LEI) for the U.S. declined by 0.6% in March 2026, largely reversing its 0.3% increase in February, and fell by 1.0% over the six months ending March 2026, signaling an impending economic slowdown. The Conference Board also revised its U.S. GDP growth forecast for 2026 downward to 1.6% year-over-year. This broader economic caution, including factors like weakening consumer expectations and higher oil prices, likely led investors to reduce exposure to economically sensitive stocks, including ADP.
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Stock Movement Drivers
Fundamental Drivers
The -12.5% change in ADP stock from 1/31/2026 to 5/3/2026 was primarily driven by a -15.2% change in the company's P/E Multiple.| (LTM values as of) | 1312026 | 5032026 | Change |
|---|---|---|---|
| Stock Price ($) | 244.80 | 214.09 | -12.5% |
| Change Contribution By: | |||
| Total Revenues ($ Mil) | 21,214 | 21,600 | 1.8% |
| Net Income Margin (%) | 20.0% | 20.1% | 0.8% |
| P/E Multiple | 23.3 | 19.8 | -15.2% |
| Shares Outstanding (Mil) | 404 | 402 | 0.5% |
| Cumulative Contribution | -12.5% |
Market Drivers
1/31/2026 to 5/3/2026| Return | Correlation | |
|---|---|---|
| ADP | -12.5% | |
| Market (SPY) | 3.6% | 13.5% |
| Sector (XLI) | 4.8% | -19.3% |
Fundamental Drivers
The -16.5% change in ADP stock from 10/31/2025 to 5/3/2026 was primarily driven by a -21.2% change in the company's P/E Multiple.| (LTM values as of) | 10312025 | 5032026 | Change |
|---|---|---|---|
| Stock Price ($) | 256.51 | 214.09 | -16.5% |
| Change Contribution By: | |||
| Total Revenues ($ Mil) | 20,903 | 21,600 | 3.3% |
| Net Income Margin (%) | 19.8% | 20.1% | 1.7% |
| P/E Multiple | 25.1 | 19.8 | -21.2% |
| Shares Outstanding (Mil) | 405 | 402 | 0.8% |
| Cumulative Contribution | -16.5% |
Market Drivers
10/31/2025 to 5/3/2026| Return | Correlation | |
|---|---|---|
| ADP | -16.5% | |
| Market (SPY) | 5.5% | 16.4% |
| Sector (XLI) | 12.2% | -7.2% |
Fundamental Drivers
The -27.0% change in ADP stock from 4/30/2025 to 5/3/2026 was primarily driven by a -34.9% change in the company's P/E Multiple.| (LTM values as of) | 4302025 | 5032026 | Change |
|---|---|---|---|
| Stock Price ($) | 293.23 | 214.09 | -27.0% |
| Change Contribution By: | |||
| Total Revenues ($ Mil) | 19,903 | 21,600 | 8.5% |
| Net Income Margin (%) | 19.8% | 20.1% | 1.8% |
| P/E Multiple | 30.4 | 19.8 | -34.9% |
| Shares Outstanding (Mil) | 408 | 402 | 1.5% |
| Cumulative Contribution | -27.0% |
Market Drivers
4/30/2025 to 5/3/2026| Return | Correlation | |
|---|---|---|
| ADP | -26.9% | |
| Market (SPY) | 30.4% | 22.5% |
| Sector (XLI) | 33.6% | 8.9% |
Fundamental Drivers
The 4.2% change in ADP stock from 4/30/2023 to 5/3/2026 was primarily driven by a 25.2% change in the company's Total Revenues ($ Mil).| (LTM values as of) | 4302023 | 5032026 | Change |
|---|---|---|---|
| Stock Price ($) | 205.39 | 214.09 | 4.2% |
| Change Contribution By: | |||
| Total Revenues ($ Mil) | 17,247 | 21,600 | 25.2% |
| Net Income Margin (%) | 18.2% | 20.1% | 10.3% |
| P/E Multiple | 27.0 | 19.8 | -26.8% |
| Shares Outstanding (Mil) | 414 | 402 | 3.1% |
| Cumulative Contribution | 4.2% |
Market Drivers
4/30/2023 to 5/3/2026| Return | Correlation | |
|---|---|---|
| ADP | 4.3% | |
| Market (SPY) | 78.7% | 41.1% |
| Sector (XLI) | 80.9% | 40.5% |
Price Returns Compared
| 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Total [1] | |
|---|---|---|---|---|---|---|---|
| Returns | |||||||
| ADP Return | 43% | -1% | -0% | 28% | -10% | -17% | 35% |
| Peers Return | 22% | -20% | 11% | 19% | -12% | -25% | -16% |
| S&P 500 Return | 27% | -19% | 24% | 23% | 16% | 5% | 92% |
Monthly Win Rates [3] | |||||||
| ADP Win Rate | 67% | 50% | 50% | 75% | 42% | 25% | |
| Peers Win Rate | 55% | 40% | 52% | 58% | 45% | 25% | |
| S&P 500 Win Rate | 75% | 42% | 67% | 75% | 67% | 50% | |
Max Drawdowns [4] | |||||||
| ADP Max Drawdown | -9% | -20% | -12% | -0% | -14% | -26% | |
| Peers Max Drawdown | -16% | -34% | -18% | -16% | -23% | -33% | |
| S&P 500 Max Drawdown | -1% | -25% | -1% | -2% | -15% | -7% | |
[1] Cumulative total returns since the beginning of 2021
[2] Peers: PAYX, WDAY, ORCL, PAYC, PCTY. See ADP Returns vs. Peers.
[3] Win Rate = % of calendar months in which monthly returns were positive
[4] Max drawdown represents maximum peak-to-trough decline within a year
[5] 2026 data is for the year up to 5/1/2026 (YTD)
How Low Can It Go
| Event | ADP | S&P 500 |
|---|---|---|
| 2025 US Tariff Shock | ||
| % Loss | -11.2% | -18.8% |
| % Gain to Breakeven | 12.6% | 23.1% |
| Time to Breakeven | 37 days | 79 days |
| Summer-Fall 2023 Five Percent Yield Shock | ||
| % Loss | -12.1% | -9.5% |
| % Gain to Breakeven | 13.7% | 10.5% |
| Time to Breakeven | 42 days | 24 days |
| 2022 Inflation Shock & Fed Tightening | ||
| % Loss | -19.6% | -24.5% |
| % Gain to Breakeven | 24.3% | 32.4% |
| Time to Breakeven | 161 days | 427 days |
| 2020 COVID-19 Crash | ||
| % Loss | -39.5% | -33.7% |
| % Gain to Breakeven | 65.2% | 50.9% |
| Time to Breakeven | 269 days | 140 days |
| Q4 2018 Fed Policy Error / Growth Scare | ||
| % Loss | -19.1% | -19.2% |
| % Gain to Breakeven | 23.6% | 23.7% |
| Time to Breakeven | 59 days | 105 days |
| 2015-2016 China Devaluation / Global Growth Scare | ||
| % Loss | -13.2% | -12.2% |
| % Gain to Breakeven | 15.2% | 13.9% |
| Time to Breakeven | 44 days | 62 days |
In The Past
Automatic Data Processing's stock fell -11.2% during the 2025 US Tariff Shock. Such a loss loss requires a 12.6% gain to breakeven.
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| Event | ADP | S&P 500 |
|---|---|---|
| 2020 COVID-19 Crash | ||
| % Loss | -39.5% | -33.7% |
| % Gain to Breakeven | 65.2% | 50.9% |
| Time to Breakeven | 269 days | 140 days |
| 2008-2009 Global Financial Crisis | ||
| % Loss | -30.2% | -53.4% |
| % Gain to Breakeven | 43.3% | 114.4% |
| Time to Breakeven | 378 days | 1085 days |
In The Past
Automatic Data Processing's stock fell -11.2% during the 2025 US Tariff Shock. Such a loss loss requires a 12.6% gain to breakeven.
Preserve Wealth
Limiting losses and compounding gains is essential to preserving wealth.
Asset Allocation
Actively managed asset allocation strategies protect wealth. Learn more.
About Automatic Data Processing (ADP)
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Here are 1-3 brief analogies for Automatic Data Processing (ADP):
ADP is like Intuit (TurboTax or QuickBooks) for business payroll and HR.
ADP is like Salesforce, but for human resources and workforce management.
AI Analysis | Feedback
- Payroll Services: Manages employee compensation, deductions, and tax filings.
- Benefits Administration: Administers employee health, welfare, and other fringe benefits programs.
- Talent Management Solutions: Provides tools for recruiting, onboarding, performance management, and employee development.
- HR Management Solutions: Offers cloud-based platforms and outsourcing for core human resources functions.
- Workforce Management Solutions: Assists with time tracking, scheduling, and labor cost optimization.
- Insurance Services: Facilitates various business and employee insurance offerings.
- Retirement Services: Helps businesses manage and administer retirement plans for their employees.
- Compliance Services: Ensures businesses meet regulatory and legal HR requirements.
- Professional Employer Organization (PEO) Services: Provides comprehensive HR outsourcing through a co-employment model, including benefits, compliance, and talent services for small and mid-sized businesses.
AI Analysis | Feedback
Automatic Data Processing (ADP) primarily sells its human capital management and HR outsourcing solutions to other companies. Due to the nature of its business model, which involves serving a vast and highly diversified client base across nearly all industries and company sizes (from small businesses to large enterprises), ADP does not have a few specific "major customers" that are publicly identified or constitute a significant concentration of its revenue. Therefore, it is not possible to list individual customer companies or their symbols.
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Maria Black, President and Chief Executive Officer
Maria Black was appointed President and CEO of ADP in 2023. She joined ADP in 1996 as a sales associate. Throughout her tenure, she has held various leadership roles, including President of TotalSource, President of Small Business Solutions and Human Resources Outsourcing, and President of Worldwide Sales and Marketing.
Peter Hadley, Chief Financial Officer
Peter Hadley will assume the role of Chief Financial Officer of ADP, effective July 1, 2025. He joined ADP in 2002 and has held increasingly senior executive leadership positions. Since 2022, he has served as Corporate Vice President and Treasurer of ADP, overseeing capital structure, client funds investment portfolio, and global operations funding. In 2017, he was appointed President – Asia Pacific. Prior to that, he served as CFO for ADP's Global Enterprise Solutions and Employer Services International. Before joining ADP, he worked at KPMG in the United Kingdom and Arthur Andersen in Australia.
Joe DeSilva, Executive Vice President, North America and Chief of Operations
Joe DeSilva is the Executive Vice President, North America and Chief of Operations for ADP, a role effective January 1, 2025. He joined ADP in 2003, beginning his career in benefits sales. He has held various leadership positions in sales, operations, and client services, including President of Global Sales, and President of Small Business Services, Retirement Services and Insurance Services. Before joining ADP, he worked in benefits with Mellon HR Solutions and started his career with PwC in their Benefits Outsourcing group.
Sreeni Kutam, President, Global Product & Innovation
Sreeni Kutam is the President of Global Product & Innovation at ADP, responsible for leading product strategy and management and driving new innovations. Prior to this role, he served as ADP's Chief Human Resources Officer. Earlier in his career at ADP, he led the alignment between HR initiatives, workforce planning, and business objectives. Before joining ADP in 2014, he led HR transformation at Medco Health Solutions and Express Scripts. He had the experience of being an ADP client in North America and Europe for over 10 years before joining the company.
Brian Michaud, Executive Vice President, Human Resources Outsourcing & Smart Compliance Solutions
Brian Michaud is the Executive Vice President responsible for ADP's Smart Compliance Solutions, Human Resources Outsourcing, and Employee Financial Solutions businesses. He joined ADP in 1991 as a sales representative in Small Business Services and later joined ADP TotalSource in 1999, contributing to its growth. Throughout his tenure, he has held various roles of increasing responsibility in sales, operations, and service leadership. He is a former member of the board of directors for the National Association of Professional Employer Organizations (NAPEO).
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The key risks to Automatic Data Processing (ADP) are primarily related to cybersecurity, intense competition and technological disruption, and the complexities of regulatory compliance.
- Cybersecurity and Data Breaches: ADP handles vast amounts of sensitive personal and financial data for its clients and their employees worldwide. This makes the company a prime target for cyberattacks and data breaches. A significant security incident could lead to severe financial losses, substantial legal and regulatory penalties, reputational damage, and a significant erosion of client trust, directly impacting its revenue and market position.
- Competition and Technological Disruption (including AI): The Human Capital Management (HCM) market in which ADP operates is highly competitive. The company faces continuous innovation from rivals, including established players and emerging companies offering specialized HR technology and AI-driven solutions. Failure to adapt to new technologies, such as generative AI, or to innovate at a competitive pace, could lead to market share erosion, pressure on pricing, and challenges in client retention.
- Regulatory Changes and Compliance: ADP's core services, including payroll, tax, and benefits administration, are deeply intertwined with complex and constantly evolving labor laws, tax regulations, and data privacy mandates across more than 140 countries. Keeping pace with these regulatory changes requires continuous and costly system updates and expert interpretation. Non-compliance could result in significant fines, legal liabilities, and damage to ADP's reputation as a trusted compliance partner.
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The emergence of integrated platforms that consolidate HR, IT, and finance management into a single system of record represents a clear emerging threat. Companies like Rippling are pioneering this approach, offering businesses a unified platform to manage everything from payroll, benefits, and HR to IT provisioning (device management, software access) and financial tools (expense management, corporate cards). This holistic, "employee system of record" model simplifies operations and vendor management, particularly for small to mid-sized businesses and tech-forward companies. It challenges ADP's traditional, primarily HR-centric human capital management (HCM) solutions by offering a broader, more streamlined, and deeply integrated approach to employee lifecycle management that extends beyond the scope of typical HCM, potentially making standalone or less integrated HR solutions less appealing. ```htmlThe emergence of integrated platforms that consolidate HR, IT, and finance management into a single system of record represents a clear emerging threat. Companies like Rippling are pioneering this approach, offering businesses a unified platform to manage everything from payroll, benefits, and HR to IT provisioning (device management, software access) and financial tools (expense management, corporate cards). This holistic, "employee system of record" model simplifies operations and vendor management, particularly for small to mid-sized businesses and tech-forward companies. It challenges ADP's traditional, primarily HR-centric human capital management (HCM) solutions by offering a broader, more streamlined, and deeply integrated approach to employee lifecycle management that extends beyond the scope of typical HCM, potentially making standalone or less integrated HR solutions less appealing.
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Automatic Data Processing (ADP) operates within several significant addressable markets for its human capital management (HCM) solutions and Professional Employer Organization (PEO) services.
Human Capital Management (HCM)
- The global human capital management market size was estimated at USD 27.5 billion in 2024 and is projected to reach USD 41.3 billion by 2029, growing at a CAGR of 8.5% from 2024 to 2029. Other estimates place the global HCM market at USD 31.34 billion in 2024, projected to reach USD 64.97 billion by 2032. Another report projects the global HCM market at USD 34.12 billion in 2025, reaching USD 76.22 billion by 2034 with a CAGR of 9.40%.
- North America holds the largest share of the Human Capital Management market. The HCM market in North America is experiencing robust growth due to increased adoption of HCM solutions in HR processes and advancements in AI and IT. In 2025, North America accounted for 38.9% of the market share.
- Globally, companies are projected to spend USD 34.3 billion on HCM solutions in the next 12 months. Nearly 45% of this spending comes from the AMER (Americas) region.
Payroll Services
- The global payroll services market size is estimated at USD 35.32 billion in 2026 and is projected to reach USD 52.75 billion by 2031, growing at an 8.35% CAGR over 2026-2031.
- Another estimate states the global payroll services market is projected to reach USD 18.24 billion by 2030, increasing from USD 12.94 billion in 2024, with a 6.01% CAGR from 2025-2030.
- The payroll services market is expected to increase from USD 71.23 billion in 2024 to USD 73.25 billion in 2025, with a compound annual growth rate (CAGR) of 2.8%, and is forecasted to reach USD 84.83 billion in 2029 with a CAGR of 3.7%.
- North America contributed 38.12% of the global payroll services market size in 2025.
- The global payroll and HR solution and services market size was valued at USD 30.8 billion in 2024 and is expected to reach USD 157.9 billion by 2032, growing at a CAGR of 22.69% during 2025-2032. The U.S. Payroll and HR Solution and Services Market is expected to grow from USD 9.1 billion in 2024 to USD 45.9 billion by 2032.
Human Resource Outsourcing (HRO) / HR Business Process Outsourcing (HR BPO)
- The global Human Resource Outsourcing Service market size was valued at USD 10.52 billion in 2025 and is projected to grow to USD 16.78 billion by 2034, exhibiting a CAGR of 7.0%.
- The global HR outsourcing market is expected to reach a value of USD 112.2 billion by 2027. In 2022, the global HRO services market size was estimated to be worth USD 115 billion.
- The global human resource outsourcing market size is forecasted to be worth USD 42,694.52 million in 2026, expected to achieve USD 62,652 million by 2035 with a CAGR of 4.3%.
- The global human resource business process outsourcing market size was valued at US$ 36,365.9 million in 2025 and is estimated to grow at a CAGR of 10.6% from 2025 to 2033, reaching USD 80,759.6 million by 2033.
Professional Employer Organization (PEO) Services
- The global Professional Employer Organization (PEO) market size was valued at USD 66.23 billion in 2024 and is projected to reach USD 170.8 billion by 2033, growing at a CAGR of 11.10% during the forecast period (2025-2033). Another report estimates the global PEO services market at USD 17.2 billion in 2025, projected to reach USD 44.4 billion by 2034 at a CAGR of 11.1%.
- In the United States, the PEO Services Market was valued at USD 174.70 million in 2024 and is projected to reach USD 420.10 million by 2032, at a CAGR of 10.80%.
- The U.S. PEO industry market size is also reported as $254.8 billion in 2026. There are 523 U.S.-based PEOs managing 4.5 million worksite employees across 208,000 client companies. This represents about 17% of U.S. employers with 10–99 staff.
- North America leads the global market for PEO services, contributing about 58% of the global PEO share. The North American PEO market was valued at approximately USD 10 billion in 2023 and is expected to grow at a CAGR of 6.5%.
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Here are 3-5 expected drivers of future revenue growth for Automatic Data Processing (ADP) over the next 2-3 years:
- Strong New Business Bookings Growth: ADP anticipates continued revenue growth driven by solid new business bookings across both its Employer Services and Professional Employer Organization (PEO) segments. This growth is particularly strong in international markets, U.S. enterprise, and compliance businesses, as well as its small business and mid-market offerings. The company maintains healthy pipelines for new business, indicating ongoing client acquisition.
- Product Innovation and Technology Enhancements, including AI Integration: Investments in next-generation payroll engines, product innovation, and the enhancement of its Workforce Now platform are expected to drive revenue. ADP is actively integrating generative AI functionality, exemplified by the launch of "ADP assist payroll, HR, analytics, and tax agents" to expand AI capabilities and automation. The rebranding of Next-Gen HCM to ADP Lyric signifies its market readiness, human-centric design, and enhanced AI integration, with new business bookings for ADP Lyric HCM substantially increasing and its pipeline doubling.
- Expansion of Global Reach and International Business: ADP plans to expand its GlobalView and Celergo platforms and extend GlobalView's reach into additional countries. The company has observed strong performance and the fastest growth in new business bookings within its international segments, indicating a continued focus on geographical expansion as a revenue driver.
- Growth in Professional Employer Organization (PEO) Services: The PEO Services segment is a significant driver, with expected revenue increases stemming from growth in average worksite employees and the strong value proposition of its PEO offerings. These offerings, particularly in benefits and competitive workers' compensation programs, contribute to robust new business bookings in this segment.
- Client Funds Interest Revenue: Interest earned on client funds is a substantial, high-margin contribution to ADP's revenue. With an increased average client funds balance and an expanded average interest yield on these funds, this stable revenue stream is expected to continue supporting overall revenue growth.
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```htmlShare Repurchases
- ADP's Board of Directors authorized a new $6 billion common stock repurchase program on January 14, 2026, which replaced a prior $5 billion authorization from 2022.
- The company executed $1.28 billion in annual share repurchases in 2025 and $1.232 billion in 2024.
- Share buybacks for the quarter ending December 31, 2025, amounted to $515.8 million.
Share Issuance
- As of December 31, 2025, Automatic Data Processing had approximately 403 million common shares outstanding.
- The number of shares outstanding decreased by 0.74% in the year leading up to March 14, 2026.
Outbound Investments
- In October 2025, ADP acquired Pequity, an innovative compensation management software provider, to expand its global compensation management offering.
- ADP acquired WorkForce Software, a premier workforce management solutions provider, in October 2024 for approximately $1.2 billion ($1.17 billion net of cash). This acquisition is intended to expand ADP's global workforce management solutions and drive innovation.
- ADP launched ADP Ventures in Fall 2023, a corporate venture capital arm, to invest in and partner with early-stage and scaling tech startups that align with its innovation strategy.
Capital Expenditures
- Capital expenditures were $176.8 million in fiscal year 2025 and $211.7 million in fiscal year 2024.
- For fiscal year 2026, ADP anticipates capital expenditures to be between $225.0 million and $250.0 million.
- The primary focus of capital expenditures includes investments in artificial intelligence (AI) to enhance HR and payroll solutions, expand sales force headcount, invest in partner channels, and augment digital marketing efforts.
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| 04172026 | RSG | Republic Services | Monopoly | MY | Getting CheaperMonopoly-Like with P/S DeclineLarge cap with monopoly-like margins or cash flow generation and getting cheaper based on P/S multiple | 0.8% | 0.8% | -1.1% |
| 04102026 | VRSK | Verisk Analytics | Dip Buy | DB | FCFY OPMDip Buy with High FCF Yield and High MarginBuying dips for companies with high FCF yield and meaningfully high operating margin | 12.3% | 12.3% | 0.0% |
| 04102026 | UHAL | U-Haul | Monopoly | MY | Getting CheaperMonopoly-Like with P/S DeclineLarge cap with monopoly-like margins or cash flow generation and getting cheaper based on P/S multiple | 0.3% | 0.3% | -1.0% |
| 03272026 | ADP | Automatic Data Processing | Dip Buy | DB | FCFY OPMDip Buy with High FCF Yield and High MarginBuying dips for companies with high FCF yield and meaningfully high operating margin | 5.3% | 5.3% | -6.2% |
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Peer Comparisons
| Peers to compare with: |
Financials
| Median | |
|---|---|
| Name | |
| Mkt Price | 129.53 |
| Mkt Cap | 33.3 |
| Rev LTM | 7,943 |
| Op Inc LTM | 1,680 |
| FCF LTM | 1,247 |
| FCF 3Y Avg | 1,109 |
| CFO LTM | 2,629 |
| CFO 3Y Avg | 2,290 |
Growth & Margins
| Median | |
|---|---|
| Name | |
| Rev Chg LTM | 12.6% |
| Rev Chg 3Y Avg | 12.3% |
| Rev Chg Q | 12.5% |
| QoQ Delta Rev Chg LTM | 3.0% |
| Op Inc Chg LTM | 12.2% |
| Op Inc Chg 3Y Avg | 15.1% |
| Op Mgn LTM | 27.1% |
| Op Mgn 3Y Avg | 27.8% |
| QoQ Delta Op Mgn LTM | 0.3% |
| CFO/Rev LTM | 31.9% |
| CFO/Rev 3Y Avg | 29.9% |
| FCF/Rev LTM | 23.0% |
| FCF/Rev 3Y Avg | 21.2% |
Valuation
| Median | |
|---|---|
| Name | |
| Mkt Cap | 33.3 |
| P/S | 3.8 |
| P/Op Inc | 16.3 |
| P/EBIT | 15.8 |
| P/E | 22.6 |
| P/CFO | 13.4 |
| Total Yield | 5.9% |
| Dividend Yield | 1.2% |
| FCF Yield 3Y Avg | 3.5% |
| D/E | 0.1 |
| Net D/E | 0.0 |
Returns
| Median | |
|---|---|
| Name | |
| 1M Rtn | 4.1% |
| 3M Rtn | -11.2% |
| 6M Rtn | -25.7% |
| 12M Rtn | -38.6% |
| 3Y Rtn | -17.4% |
| 1M Excs Rtn | -4.7% |
| 3M Excs Rtn | -15.4% |
| 6M Excs Rtn | -30.6% |
| 12M Excs Rtn | -67.7% |
| 3Y Excs Rtn | -95.8% |
Comparison Analyses
Price Behavior
| Market Price | $214.21 | |
| Market Cap ($ Bil) | 86.5 | |
| First Trading Date | 04/06/1983 | |
| Distance from 52W High | -32.8% | |
| 50 Days | 200 Days | |
| DMA Price | $206.45 | $253.74 |
| DMA Trend | down | down |
| Distance from DMA | 3.8% | -15.6% |
| 3M | 1YR | |
| Volatility | 32.7% | 22.4% |
| Downside Capture | 0.51 | 0.38 |
| Upside Capture | 11.91 | 12.29 |
| Correlation (SPY) | 10.9% | 20.2% |
| 1M | 2M | 3M | 6M | 1Y | 3Y | |
|---|---|---|---|---|---|---|
| Beta | -0.45 | -0.07 | 0.25 | 0.27 | 0.37 | 0.53 |
| Up Beta | -0.59 | -0.52 | -0.58 | -0.35 | 0.18 | 0.54 |
| Down Beta | -4.22 | -0.23 | 0.05 | 0.15 | 0.32 | 0.52 |
| Up Capture | 0% | -5% | 11% | 15% | 10% | 17% |
| Bmk +ve Days | 15 | 22 | 31 | 66 | 141 | 428 |
| Stock +ve Days | 11 | 23 | 30 | 63 | 126 | 398 |
| Down Capture | 312% | 49% | 121% | 93% | 89% | 82% |
| Bmk -ve Days | 4 | 18 | 30 | 56 | 108 | 321 |
| Stock -ve Days | 11 | 20 | 34 | 62 | 126 | 354 |
[1] Upside and downside betas calculated using positive and negative benchmark daily returns respectively
Based On 1-Year Data
| Annualized Return | Annualized Volatility | Sharpe Ratio | Correlation with ADP | |
|---|---|---|---|---|
| ADP | -27.0% | 22.3% | -1.48 | - |
| Sector ETF (XLI) | 33.7% | 15.4% | 1.68 | 8.9% |
| Equity (SPY) | 30.6% | 12.5% | 1.88 | 22.5% |
| Gold (GLD) | 39.5% | 27.2% | 1.20 | -18.0% |
| Commodities (DBC) | 51.5% | 17.9% | 2.20 | -8.3% |
| Real Estate (VNQ) | 13.1% | 13.5% | 0.67 | 24.9% |
| Bitcoin (BTCUSD) | -17.1% | 42.2% | -0.33 | 10.1% |
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Based On 5-Year Data
| Annualized Return | Annualized Volatility | Sharpe Ratio | Correlation with ADP | |
|---|---|---|---|---|
| ADP | 4.1% | 21.8% | 0.13 | - |
| Sector ETF (XLI) | 13.0% | 17.4% | 0.59 | 55.6% |
| Equity (SPY) | 12.8% | 17.1% | 0.59 | 58.8% |
| Gold (GLD) | 20.5% | 17.9% | 0.94 | 1.7% |
| Commodities (DBC) | 14.3% | 19.1% | 0.61 | 9.8% |
| Real Estate (VNQ) | 3.5% | 18.8% | 0.09 | 52.3% |
| Bitcoin (BTCUSD) | 7.7% | 56.2% | 0.35 | 20.6% |
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Based On 10-Year Data
| Annualized Return | Annualized Volatility | Sharpe Ratio | Correlation with ADP | |
|---|---|---|---|---|
| ADP | 11.5% | 24.3% | 0.46 | - |
| Sector ETF (XLI) | 13.8% | 19.9% | 0.61 | 65.2% |
| Equity (SPY) | 14.9% | 17.9% | 0.71 | 69.0% |
| Gold (GLD) | 13.6% | 15.9% | 0.71 | 0.8% |
| Commodities (DBC) | 9.7% | 17.7% | 0.46 | 19.5% |
| Real Estate (VNQ) | 5.7% | 20.7% | 0.24 | 59.9% |
| Bitcoin (BTCUSD) | 67.7% | 66.9% | 1.07 | 13.8% |
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Returns Analyses
Earnings Returns History
Expand for More| Forward Returns | |||
|---|---|---|---|
| Earnings Date | 1D Returns | 5D Returns | 21D Returns |
| 4/29/2026 | 8.0% | ||
| 1/28/2026 | -1.5% | -7.6% | -14.2% |
| 10/29/2025 | -6.6% | -7.3% | -9.0% |
| 7/30/2025 | 0.7% | -3.0% | -1.8% |
| 4/30/2025 | 1.6% | 2.6% | 9.6% |
| 1/29/2025 | 0.8% | 2.1% | 4.4% |
| 10/30/2024 | 1.7% | 1.1% | 6.6% |
| 7/31/2024 | 1.9% | 0.7% | 5.8% |
| ... | |||
| SUMMARY STATS | |||
| # Positive | 14 | 14 | 13 |
| # Negative | 10 | 9 | 10 |
| Median Positive | 2.1% | 2.5% | 6.6% |
| Median Negative | -4.7% | -5.6% | -4.3% |
| Max Positive | 8.0% | 14.0% | 19.2% |
| Max Negative | -9.2% | -9.2% | -14.2% |
SEC Filings
Expand for More| Report Date | Filing Date | Filing |
|---|---|---|
| 03/31/2026 | 04/30/2026 | 10-Q |
| 12/31/2025 | 01/29/2026 | 10-Q |
| 09/30/2025 | 10/31/2025 | 10-Q |
| 06/30/2025 | 08/06/2025 | 10-K |
| 03/31/2025 | 05/01/2025 | 10-Q |
| 12/31/2024 | 01/30/2025 | 10-Q |
| 09/30/2024 | 11/01/2024 | 10-Q |
| 06/30/2024 | 08/07/2024 | 10-K |
| 03/31/2024 | 05/02/2024 | 10-Q |
| 12/31/2023 | 02/01/2024 | 10-Q |
| 09/30/2023 | 11/02/2023 | 10-Q |
| 06/30/2023 | 08/03/2023 | 10-K |
| 03/31/2023 | 05/01/2023 | 10-Q |
| 12/31/2022 | 02/02/2023 | 10-Q |
| 09/30/2022 | 11/02/2022 | 10-Q |
| 06/30/2022 | 08/03/2022 | 10-K |
Recent Forward Guidance [BETA]
Latest: Q3 2026 Earnings Reported 4/29/2026
| Forward Guidance | Guidance Change | ||||||
|---|---|---|---|---|---|---|---|
| Metric | Low | Mid | High | % Chg | % Delta | Change | Prior |
| 2026 Revenue Growth | 6.0% | 6.5% | 7.0% | 8.3% | 0.5% | Raised | Guidance: 6.0% for 2026 |
| 2026 Adjusted EBIT Margin Expansion | 0.7% | 0.75% | 0.8% | 25.0% | 0.2% | Raised | Guidance: 0.6% for 2026 |
| 2026 Adjusted Diluted EPS Growth | 10.0% | 10.5% | 11.0% | 10.5% | 1.0% | Raised | Guidance: 9.5% for 2026 |
| 2026 Employer Services Revenue Growth | 6.0% | 6.5% | 7.0% | 8.3% | 0.5% | Raised | Guidance: 6.0% for 2026 |
| 2026 PEO Services Revenue Growth | 6.0% | 6.5% | 7.0% | 8.3% | 0.5% | Raised | Guidance: 6.0% for 2026 |
| 2026 Interest on funds held for clients | 1.34 Bil | 1.34 Bil | 1.35 Bil | 1.9% | Raised | Guidance: 1.32 Bil for 2026 | |
Prior: Q2 2026 Earnings Reported 1/28/2026
| Forward Guidance | Guidance Change | ||||||
|---|---|---|---|---|---|---|---|
| Metric | Low | Mid | High | % Chg | % Delta | Change | Prior |
| 2026 Revenue Growth | 6.0% | 9.1% | 0.5% | Raised | Guidance: 5.5% for 2026 | ||
| 2026 Adjusted EBIT Margin Expansion | 0.6% | 0 | 0 | Affirmed | Guidance: 0.6% for 2026 | ||
| 2026 Adjusted Diluted EPS Growth | 9.5% | 5.6% | 0.5% | Raised | Guidance: 9.0% for 2026 | ||
| 2026 Employer Services Revenue Growth | 6.0% | 9.1% | 0.5% | Raised | Guidance: 5.5% for 2026 | ||
| 2026 PEO Services Revenue Growth | 6.0% | 0 | 0 | Affirmed | Guidance: 6.0% for 2026 | ||
| 2026 Client Funds Interest Revenue | 1.32 Bil | 0.8% | Raised | Guidance: 1.31 Bil for 2026 | |||
Insider Activity
Expand for More| # | Owner | Title | Holding | Action | Filing Date | Price | Shares | Transacted Value | Value of Held Shares | Form |
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | D'Ambrosio, Christopher | Corp. VP | Direct | Sell | 4152026 | 195.74 | 543 | 106,287 | 1,638,193 | Form |
| 2 | D'Ambrosio, Christopher | Corp. VP | Direct | Sell | 3172026 | 208.45 | 543 | 113,188 | 1,857,754 | Form |
| 3 | D'Ambrosio, Christopher | Corp. VP | Direct | Sell | 2182026 | 212.43 | 543 | 115,349 | 2,008,575 | Form |
| 4 | Michaud, Brian L | Executive VP | Direct | Sell | 2092026 | 234.18 | 1,000 | 234,180 | 3,585,378 | Form |
| 5 | Foskett, David | Corp. VP | Direct | Sell | 2092026 | 237.00 | 266 | 63,042 | 2,595,984 | Form |
ADP Trade Sentinel
ACCUMULATE (Score 7-8)
CONVICTION RATIONALE
The probability-adjusted skew of 1.93x indicates a favorable risk/reward profile. Although the most probable scenario is a period of macro-induced weakness (60% probability), the potential downside is relatively contained (-9%) due to the company's strong profitability and cash flow. The upside (+26%), driven by a potential sentiment shift and continued execution, is mathematically superior, making the stock a compelling, albeit not high-conviction, long position.
STOCK ARCHETYPE
Mature Cash CowADP exhibits the core traits of a Mature Cash Cow: moderate mid-single-digit revenue growth, high margins (~26% Adj. EBIT), strong free cash flow conversion (~20% FCF margin), a dominant market position, and a focus on shareholder returns through dividends and buybacks rather than hyper-growth.
INVESTMENT THESIS
The primary long thesis for ADP is not top-line re-acceleration but its elite operational efficiency and commitment to shareholder returns. The company is guiding for 50-70 bps of adjusted EBIT margin expansion in FY26 and has a new $6B buyback authorization, allowing EPS to grow at a structurally higher rate (9-10% guidance) than revenue (~6% guidance). This demonstrates a durable, high-quality compounder that can generate alpha through margin improvement and share count reduction, even in a soft macroeconomic environment.
- Management guidance for FY2026 includes 50 to 70 basis points of adjusted EBIT margin expansion.
- FY2026 Adjusted EPS growth is forecasted at 9-10%, significantly outpacing the forecasted revenue growth of ~6%.
- Free cash flow per share has grown at an average of 21.10% per year over the last three years, demonstrating accretive capital allocation.
- A new $6 billion share repurchase program was authorized in early 2026, signaling a continued focus on returning capital to shareholders.
PRIMARY RISK
The most significant risk to ADP's near-term performance is a sustained weakening of the US labor market. ADP's revenue is directly tied to the number of employees its clients pay for ('pays per control'). Recent data, including ADP's own January 2026 employment report, shows a 'dramatic slowdown' in job creation. A scenario of flat or negative net job growth would directly pressure ADP's organic volume growth, potentially causing a miss on revenue guidance and compressing the stock's valuation multiple.
- ADP's own management forecasts U.S. pays per control to be approximately flat for fiscal 2026, indicating a significant slowdown.
- The January 2026 ADP National Employment Report showed private employers added only 22,000 jobs, described as 'lackluster' and part of a 'continuous and dramatic slowdown'.
- Management has guided for a 10-30 basis point decline in Employer Services retention for FY2026, which could be exacerbated by a worsening macro environment.
| KPI | Threshold | Rationale |
|---|---|---|
| Employer Services (ES) Client Revenue Retention | Watch for deviation from the guided -10 to -30 bps range for FY26 | This is the single most important North Star metric. Any decline below the guided range would signal either accelerating competitive pressure or a worsening macro impact, breaking the core stability thesis. |
| U.S. Pays per Control Growth | Watch for a negative print versus the current 'about flat' guidance | This metric is the primary volume driver. A negative number would confirm the 'seat compression' bear case is fully materializing and would almost certainly lead to a revenue guidance cut. |
| New Business Bookings Growth | Watch for a downward revision of the 4-7% FY26 guidance | This is the leading indicator for future revenue growth. While retention is about keeping the base, bookings are about adding to it. A cut to this forecast would signal a deteriorating sales environment and put future growth in doubt. |
Resilient Compounder vs. Macro Headwinds
BULL VIEW
Elite management, high retention, and margin expansion will allow ADP to outperform through a cycle, with shareholder returns buffering any temporary top-line softness.
CORE TENSION
Can ADP's high-quality business model and operational execution offset the tangible slowdown in the US labor market, which directly impacts its core growth metrics?
PREVAILING SENTIMENT
The company's own guidance for a 10-30 basis point decline in FY26 Employer Services retention is the key datapoint validating the market's current neutral-to-negative stance.
BEAR VIEW
Decelerating retention, moderating PEO growth, and flat 'pays per control' guidance are leading indicators that a cyclical 'seat compression' wave is already starting to hit.
| Timeline | Event & Metric To Watch |
|---|---|
Late April 2026 | Q3 FY2026 Earnings Call Watch: FY26 Employer Services retention guidance. Watch if it holds the -10 to -30 bps range or is revised lower. |
Monthly | Monthly Macro Data (ADP/BLS Jobs Reports) Watch: Net change in private sector payrolls. A negative print would be a major red flag. |
Throughout 2026 | Major Tech Conference (e.g. Microsoft Ignite) Watch: Announcements of bundled, AI-driven payroll features from platform giants (Microsoft, Google). |
| Date | Event | Stock Impact |
|---|---|---|
Aug 20, 2025 | Product Launch Announcement Details: Company announced Workforce Now Next Gen and Lyric platforms. The stock saw a modest 1% gain as this strategic update signaled innovation to drive future wins. | 1.08% $302.18 -> $305.45 |
Oct 29, 2025 | Q1 FY2026 Earnings & Buyback Authorization Details: Stock crashed over 6% after Q1 results and forward guidance were only in-line with expectations, which the market interpreted as a loss of momentum. | -6.58% $277.83 -> $259.54 |
Jan 5, 2026 | Macro Data: December BLS Report Details: Despite data showing an elevated unemployment rate of 4.4% for December, the stock posted a modest gain, likely reflecting relief that the numbers were not worse. | 1.76% $252.88 -> $257.32 |
Jan 12, 2026 | Strategic Event: Major Corporate Layoff Announcements Details: Widespread layoff announcements from major corporations like Citi and Ericsson confirmed the 'seat compression' thesis, creating a slight stock pullback amid broader market concerns. | -1.21% $266.02 -> $262.80 |
Jan 29, 2026 | ADP National Employment Report (Jan Data) Details: Report showed a dramatic slowdown, with only 22,000 private jobs added. Stock saw a slight pullback as this fueled concerns about a weakening labor market. | -1.88% $250.69 -> $245.97 |
Feb 3, 2026 | Q2 FY2026 Earnings Details: Despite beating EPS/revenue estimates, stock plummeted over 5%. The market focused on negative forward guidance for declining client retention and flat 'pays per control' growth. | -5.04% $247.56 -> $235.08 |
Position Sizing
1% - 3%
CONSERVATIVE
Volatility is moderate, but fundamentals are constrained. The 'Slightly Eroding' moat signal (declining retention) and Neutral sentiment justify a conservative, 'watchlist' position until visibility on client churn improves.
Diversification Alternatives
TYL
SECTORAvoids the primary 'seat compression' risk facing ADP, as its revenue is driven by stable, multi-year government contracts, not private-sector employment levels.
VEEV
SECTOROffers exposure to a high-quality, vertical SaaS model but is decoupled from the broad labor market cycle. Growth is tied to non-cyclical life sciences R&D spending.
ADP is a mature, wide-moat compounder trading at a TTM P/E of ~21x, which offers steady high-single-digit revenue growth and margin expansion, driven by its entrenched position in payroll/HR outsourcing.
Filter all news through the lens of employment cycle trends and competitive threats from modern cloud-native HCM providers.
Sustained 'new business bookings' growth of 4-7% or higher, stable to improving client retention rates (currently seeing a minor 10-30 bps decline), and evidence that new platforms like Workforce Now Next Gen are successfully defending against competitors in the mid-market.
A significant downturn in the macroeconomic environment leading to widespread job losses (depressing 'pays per control' growth), market share losses to competitors like Workday or Paychex in key segments, or a compression in PEO margins that is not offset by growth in Employer Services.
Minor quarterly fluctuations in the 'U.S. Pays Per Control' metric (management guidance is for flat growth for the full year); stock price volatility related to broad market sentiment on AI disruption without specific evidence of client losses.
Repricing Catalyst
The primary catalyst is continued execution, delivering on guidance for ~6% revenue growth and 9-10% EPS growth for FY2026, supported by a new $6 billion share repurchase authorization. Successful adoption of new AI-enhanced products, driving operational efficiency and further embedding its services with clients, serves as a longer-term catalyst.
Employer Services (ES)
$14.4B TTM (67% of Total) · % MarginWhat It Is
Payroll services, benefits administration, talent management, HR management, time and attendance, compliance services, and retirement services delivered via cloud platforms like Workforce Now.
Who Pays & How
Businesses of all sizes, from small to large enterprises, pay recurring fees to offload complex, non-core HR and payroll functions. They stay with ADP due to high switching costs associated with migrating sensitive employee data and re-integrating systems, and to ensure compliance with complex, ever-changing regulations.
Competition
Professional Employer Organization (PEO) Services
$7.0B TTM (33% of Total) · % MarginWhat It Is
A co-employment model where ADP becomes the employer of record for clients, handling all HR functions including payroll, benefits, and workers' compensation.
Who Pays & How
Primarily small and mid-sized businesses pay ADP to act as their full HR department, gaining access to better benefits at a lower cost than they could obtain on their own and ensuring compliance.
Competition
External Quote Links
| Y Finance | Barrons |
| TradingView | Morningstar |
| SeekingAlpha | ValueLine |
| Motley Fool | Robinhood |
| CNBC | Etrade |
| MarketWatch | Unusual Whales |
| YCharts | Perplexity Finance |
| FinViz |
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