ADP Filings — Automatic Data Processing Inc - FilingSpy
ADP
Automatic Data Processing Inc
A maker of payroll and human-resources software, ADP runs platforms like RUN Powered by ADP for small businesses, ADP Workforce Now for mid-size and large firms, and ADP Lyric HCM for global enterprises, plus co-employment services through ADP TotalSource. It was founded in 1949 in Paterson, New Jersey, as Automatic Payrolls, Inc., and renamed itself Automatic Data Processing in 1958 after switching from manual bookkeeping to punched-card machines and mainframe computers. Fun fact: despite the "automatic" in its original name, the early work was done by hand with calculators and mechanical bookkeeping machines.
10-K · Fiscal year ended Jun 30, 2026 · SEC filing ↗
Client funds interest growth slowed to 13% in FY2026, and operating margin contracted year-over-year for the first time since FY2024.
The interest income that lifted ADP's margins for three years is fading. rose 6.7% to $21.9 billion and rose 9.6% to $10.94, but contracted 0.2 points in the second half as selling and marketing expenses rose $241.4 million. ADP's core business held its ground, but the company is now spending more to sustain growth as the rate-driven lift recedes.
Key takeaways
Interest on funds held for clients rose 13% to $1.19 billion, a deceleration from 16% growth in FY2025 and 26% in FY2024, as the average yield held at 3.3% for three consecutive quarters and average balances grew 6.5%.
contracted 0.2 points to 26.1%, the first annual contraction since FY2024, as total expenses rose faster than , driven by a $241.4 million increase in selling and marketing expenses.
Section summaries
Business
ADP is a global HCM leader providing AI-enabled payroll, HR, and outsourcing solutions to over 1.1M clients in 140+ countries.
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ADP operates through two segments: Employer Services (technology-based HCM and HR outsourcing) and PEO ( via ).
margin widened to 35.7% for the year, as the client funds interest lift and operating efficiencies outweighed increased investment spending, while margin contracted due to higher zero-margin benefits and less favorable in .
rose 9.6% to $10.94, aided by share repurchases of 8.6 million shares and a lower of 23.0% versus 23.1% a year ago; the company returned $4.7 billion to shareholders through dividends and buybacks.
The company acquired for $1.2 billion, adding $885.8 million in to the , and issued $1 billion in , bringing total long-term debt to $4.96 billion.
rose 10.2% to $5.44 billion, and client funds obligations increased to $44.4 billion, matched by $44.0 billion in funds held for clients.
What changed
The client funds interest flagged in every prior filing since FY2023 has begun to fade: growth decelerated from 16% in FY2025 to 13% in FY2026, and the average yield plateaued at 3.3% for three straight quarters after rising steadily from 1.4% in FY2022.
margin returned to contraction after a brief stabilization in Q3 FY2025, ending FY2026 lower as and higher persisted — the pressure flagged in FY2024 did not ease.
Selling and marketing expense growth, first flagged as a margin in Q1 FY2026, accelerated to a $241.4 million increase for the full year and was cited as the primary driver of the contraction.
growth remained at 1% for the full year, consistent with the deceleration flagged in FY2023 and FY2024, confirming client employment growth has stabilized at a low level.
The acquisition, flagged for integration watch in FY2025, closed in October 2024 and added $885.8 million in ; its impact on margins remains an open question as and integration costs flow through.
What to watch
Average client funds yield in Q1 FY2027: the yield held at 3.3% for three straight quarters; any decline would signal the interest income is reversing as the Federal Reserve holds or cuts rates.
Selling and marketing expense growth in Q1 FY2027: the $241.4 million increase drove the FY2026 margin contraction; whether this investment pace continues or moderates will determine near-term margin trajectory.
margin in Q1 FY2027: after contracting for the full year, whether the and pass-through cost pressures persist or ease into the new fiscal year.
new business in Q1 FY2027: to confirm the post-rebound sales pace is sustained as growth remains at 1% and the company increases selling investment.
Its HCM platforms include for small businesses, for mid/large firms, and for global enterprises.
The company embeds AI across its platforms, leveraging a dataset from 42M workers, and was named Fast Company's most innovative HR company in 2026.
ADP's strategy focuses on best-in-class HCM technology, unmatched expertise and outsourcing, and leveraging global scale with a 'final mile' ecosystem.
It serves as a compliance and funds-movement infrastructure, moving $3.5T in client funds in FY2026 and operating a regulated national trust bank.
Client retention is estimated at 13 years for Employer Services and 6 years for PEO, with no single client exceeding 2% of consolidated .
Legal, cybersecurity, and technology risks, including AI and co-employment liabilities, could materially impact ADP's operations and financial condition.
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ADP's PEO business faces material financial risk if clients fail to remit payroll and tax obligations, especially during banking disruptions, as ADP is a Certified PEO co-employer.
Cybersecurity threats, increasingly sophisticated due to AI, target ADP's vast personal and financial data, and a significant breach could cause client loss, liability, and reputational damage.
Rapid technological change, including generative and agentic AI, may render ADP's HCM solutions obsolete if it fails to innovate, risking diminished demand and potential .
Changes in laws governing PEOs, tax withholding, or AI could force business model changes, reduce interest income on client funds, or constrain data-driven insights.
ADP's client funds investment strategy relies on short-term financing; a credit market disruption could increase borrowing costs or force securities sales at a loss.
ADP owns 6 of its processing/print centers, and 10 other operational offices, sales offices, and its corporate headquarters in Roseland, New Jersey, which aggregate approximately 2,561,945 square feet. None of ADP’s owned facilities is subject to any material encumbrances. ADP l…
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ADP owns 6 of its processing/print centers, and 10 other operational offices, sales offices, and its corporate headquarters in Roseland, New Jersey, which aggregate approximately 2,561,945 square feet. None of ADP’s owned facilities is subject to any material encumbrances. ADP leases space for some of its processing centers, other operational offices, and sales offices. All of these leases, which aggregate approximately 5,935,575 square feet worldwide, expire at various times up to the year 2038. ADP believes its facilities are currently adequate for their intended purposes and are adequately maintained.
In the normal course of business, ADP is subject to various claims and litigation. While the outcome of any litigation is inherently unpredictable, ADP believes that it has valid defenses with respect to the legal matters pending against it and that the ultimate resolution of th…
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In the normal course of business, ADP is subject to various claims and litigation. While the outcome of any litigation is inherently unpredictable, ADP believes that it has valid defenses with respect to the legal matters pending against it and that the ultimate resolution of these matters will not have a materially adverse impact on its financial condition, results of operations, or cash flows.
ADP delivered 7% revenue growth and 80 bps adjusted EBIT margin expansion in fiscal 2026, driven by client funds interest and Employer Services.
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Total revenues grew 7% to $21.9B, with 6% growth, aided by a $165.7M increase in interest on client funds and $318.3M in higher .
rose 7% (5% ) on new business , strong retention, and pricing, while revenue grew 7% on a 2% increase in average worksite employees.
margin expanded 80 to 26.8%, benefiting from client funds interest and lower , partially offset by a $241.4M increase in selling and marketing expenses.
grew 10% to $10.94, and adjusted diluted EPS grew 11% to $11.12, supported by share repurchases of 8.6 million shares.
Cash returned to shareholders totaled $4.7B, including $2.6B in dividends and $2.1B in share repurchases, while increased $501.5M to $5.4B.
The company recorded a $91.1M charge for a business alignment program and a $67.2M cost for non-recurring company-wide initiatives, both excluded from adjusted results.
Quantitative and Qualitative Disclosures About Market Risk
The information called for by this item is provided under the caption “Quantitative and Qualitative Disclosures About Market Risk” under “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 41
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The information called for by this item is provided under the caption “Quantitative and Qualitative Disclosures About Market Risk” under “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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ADP received an unqualified audit opinion for FY2026, with critical audit matters focused on goodwill in Employer Services and client funds obligations.
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Total revenues grew 6.7% to $21.9 billion, driven by increases across HCM, HRO, Global, and interest on funds held for clients.
rose 8.2% to $4.4 billion, with increasing to $10.94 from $9.98 in the prior year.
, a current liability, increased to $44.4 billion, matched by $44.0 billion in funds held for clients.
The company acquired in October 2024 for $1.2 billion, adding $885.8 million to in the .
The annual test was completed using a quantitative approach, concluding no for any .
The decreased slightly to 23.0%, primarily due to a decrease in uncertain tax positions and an increase in tax credits.