Paychex Inc. (NASDAQ: PAYX) reported its second‑quarter results for fiscal year 2026, with total revenue rising 18% year‑over‑year to $1.56 billion. Operating income increased 6% to $571.9 million, while adjusted operating income—excluding $77.1 million of Paycor acquisition‑related costs—grew 21% to $649.0 million. Diluted earnings per share fell 4% to $1.10, but adjusted diluted EPS increased 11% to $1.26, beating the consensus estimate of $1.24 by $0.02.
The revenue growth was driven largely by the Paycor acquisition, which added $200 million in Management Solutions revenue and a 21% increase in that segment. PEO and insurance solution revenues also grew 12%, bringing the total to $1.56 billion from $1.32 billion in the same quarter a year earlier. The mix shift toward higher‑margin Management Solutions contracts helped lift overall revenue while keeping cost growth in check.
Adjusted operating margin expanded to 41.7% from 40.9% a year earlier, reflecting disciplined cost management and the scale benefits of the Paycor integration. The company’s AI‑enabled platform has increased pricing power in its core segments, while operational leverage from the acquisition has offset the one‑time acquisition costs that were excluded from the adjusted figure.
The adjusted EPS beat expectations by $0.02, a 1.6% lift, largely because the company successfully contained operating expenses and leveraged the higher‑margin mix from Paycor. The decline in reported EPS was driven by the $77.1 million of acquisition‑related charges, which were excluded from the adjusted metric.
Management raised its full‑year fiscal 2026 adjusted EPS growth guidance to a range of 10%–11%, up from the previous 8%–9% range. The update signals confidence in continued revenue momentum and margin expansion as the Paycor integration matures and AI capabilities drive additional value.
John Gibson, Paychex’s President and CEO, said the quarter “demonstrates disciplined cost management and productivity improvements, driven in part by our expanding AI capabilities.” He added that the Paycor acquisition “unites two industry leaders with unrivaled AI‑enabled technology, strengthening our competitive position and unlocking new revenue opportunities.”
Investors responded positively to the earnings, citing the adjusted EPS beat and raised guidance as evidence of strong execution. The reaction was tempered by the higher acquisition‑related expenses, which raised short‑term cost pressure concerns but were viewed as a necessary investment for long‑term growth.
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