AI Takeaway
ADP delivered solid Q2 FY2026 results with revenue up 6.2% YoY to $5.36B and net income surging 10.3% to $1.06B, reflecting continued operating leverage and disciplined cost management.
Revenue
$5.36B
++6.16% YoY
EPS (Basic)
$2.63
++11.44% YoY
Filed · Analysis updated · Source: SEC EDGAR 10-Q filing
ADP grew total revenue by 6.2% YoY to $5.36B in Q2 FY2026, supported by consistent demand for payroll, HR, and benefits administration services. Cost of revenue grew at a slower pace of 5.4%, indicating improving gross efficiency.
Source: Source: 10-Q Income Statement
Net income rose 10.3% YoY to $1.06B, with diluted EPS increasing 11.5% to $2.62, outpacing revenue growth and suggesting meaningful operating leverage. The faster EPS growth relative to net income also reflects the benefit of share buybacks.
Source: Source: 10-Q Income Statement
Total assets surged 32.0% YoY to $84.64B and current liabilities rose 32.8% to $72.14B, primarily reflecting ADP's client funds model where payroll tax and wage funds held on behalf of clients are recorded on the balance sheet. This is a structural feature of ADP's business, not a sign of financial distress.
Source: Source: 10-Q Balance Sheet
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Upgrade to unlockADP's debt-to-equity ratio stands at approximately 12.2x, which appears elevated but is largely a function of the client funds model where client payroll and tax deposits inflate both assets and liabilities. However, long-term debt also rose 33.3% YoY to $3.98B, warranting monitoring of interest expense trends.
Source: Source: 10-Q Balance Sheet
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Upgrade to unlockReported EPS of $2.62 versus the $2.60 analyst consensus — a +0.8% beat for Q2 FY2026.
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue | $5.36B | $5.05B | +6.16% |
Cost of Revenue | $2.89B | $2.74B | +5.37% |
Net Income | $1.06B | $963.2M | +10.26% |
EPS (Basic) | $2.63 | $2.36 | +11.44% |
EPS (Diluted) | $2.62 | $2.35 | +11.49% |
R&D Expense | $257.8M | $239.5M | +7.64% |
SG&A Expense | $1.07B | $1.01B | +6.16% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Total Assets | $84.64B | $64.1B | +32.05% |
Current Assets | $74.47B | $54.25B | +37.26% |
Total Liabilities | $78.25B | $59.02B | +32.58% |
Current Liabilities | $72.14B | $54.3B | +32.85% |
Stockholders' Equity | $6.39B | $5.08B | +25.89% |
Cash & Equivalents | $2.42B | $2.22B | +9.40% |
Long-Term Debt | $3.98B | $2.98B | +33.35% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Operating Cash FlowYTD | $1.78B | $1.97B | -10.10% |
Investing Cash FlowYTD | $-2.54B | $-2.9B | +12.50% |
Financing Cash FlowYTD | $29.34B | $7.48B | +292.15% |
Dividends PaidYTD | $1.26B | $1.15B | +9.68% |
Share BuybacksYTD | $881.8M | $644.9M | +36.73% |
D&A | $145.6M | $151M | -3.58% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Net Margin | 19.8% | — | — |
ROE | 16.6% | — | — |
ROA | 1.3% | — | — |
Current Ratio | $1.032 | — | — |
Debt to Equity | $12.239 | — | — |
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ADP reported Q2 FY2026 revenue of $5.36B, up 6.2% YoY, and net income of $1.06B, up 10.3% YoY. Diluted EPS came in at $2.62, an 11.5% increase from the prior year period, reflecting solid operating leverage across the business.
ADP's 6.2% revenue growth in Q2 FY2026 was driven by continued demand for its payroll processing, HR outsourcing, and benefits administration services. Cost of revenue grew at a slower 5.4%, suggesting improving service delivery efficiency.
ADP's balance sheet shows total assets of $84.64B and total liabilities of $78.25B, resulting in stockholders' equity of $6.39B. The large asset and liability figures are primarily driven by client payroll funds held on ADP's balance sheet, which is a normal feature of its business model rather than a sign of financial stress.
On a fiscal year-to-date basis through Q2 FY2026, ADP paid $1.26B in dividends (up 9.7% YoY) and repurchased $881.8M in shares (up 36.7% YoY), totaling over $2.1B in shareholder returns. This reflects management's continued commitment to capital return programs.
Key risks include interest rate sensitivity on ADP's client funds portfolio, which generates float income that would decline in a lower-rate environment, and a 10.1% YTD decline in operating cash flow despite strong net income growth. Additionally, long-term debt rose 33.3% YoY to $3.98B, which warrants monitoring of ADP's leverage trajectory.