Paychex Q3 Results: Revenue Soars 20% As Small Businesses Turn To AI, Advisory Services

Paychex, Inc. (NASDAQ:PAYX) reported upbeat fiscal third-quarter results on Wednesday, highlighted by an 20% year-over-year increase in total revenue to $1.81 billion. The Street expected a quarterly revenue of $1.79 billion. • What’s next for PAYX stock? Adjusted diluted earnings per share were $1.71, up from 1.49 a year ago, which topped the analyst consensus estimate of $1.67. Operating income rose 14% to $792 million. Adjusted operating income jumped 22% to $863.2 million. The quarterly operating margin fell to 43.8% from 45.8% a year earlier, while adjusted operating margin improved to 47.7%, up from 46.9% in the prior-year period. Segment Performance Management Solutions revenue climbed 23% to $1.35 billion, driven by client growth, product adoption, and the Paycor HCM acquisition. Professional Employer Organization and Insurance Solutions revenue increased 9% to $397.5 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 33% to $56.8 million, boosted by the Paycor deal and investment gains. Fiscal Year-To-Date Financial Performance For the nine months ended Feb. 28, 2026, revenue rose 18% to $4.9 billion. Operating income was up 7% to $1.9 billion; adjusted operating income climbed 19% to $2.1 billion. Diluted EPS fell 1% to $3.71; adjusted EPS rose 11% to $4.19. As of Feb. 28, 2026, Paychex had $1.8 billion in cash and investments and $5 billion in net borrowings. Nine-month operating cash flow was $2 billion. During the nine months, the company returned capital to stockholders by paying cumulative dividends of $3.24 per share, totaling $1.2 billion, and repurchasing 2.9 million shares for $361.6 million. John Gibson, president and CEO of Paychex, said the company delivered strong double-digit revenue and operating income growth while accelerating organic growth through effective execution and progress on strategic priorities. He noted that clients are increasingly turning to Paychex's advisory and benefits solutions to navigate complex regulatory and workforce challenges, highlighting the value of its technology and expertise. Gibson added that the company continues to invest in innovation across its business, including using AI to strengthen its leadership in human capital management. He said Paychex's compliance capabilities, domain expertise, and data advantages position it for sustained growth, while returning $1.5 billion to shareholders this fiscal year reflects its financial strength and long-term confidence. Outlook Paychex reiterated its fiscal 2026 adjusted EPS growth outlook of 10%-11%, with guidance ranging from $5.48 to $5.53 per share. PAYX Price Action: Paychex shares were up 0.54% at $91.10 at publication on Wednesday, according to Benzinga Pro data. Image via Shutterstock