AI Takeaway
Paychex grew FY2026 revenue 16.9% to $6.51B primarily via the Paycor acquisition, but rising interest expense, acquisition-related costs, and SG&A caused net income to grow at a slower 6.2% pace and operating margin to compress slightly to 38.6%.
Revenue
$6.51B
++16.88% YoY
EPS (Basic)
$4.90
++6.52% YoY
Operating Income
$2.51B
++13.72% YoY
Filed · Analysis updated · Source: SEC EDGAR 10-K filing
Total revenue increased 17% to $6.51 billion in fiscal 2026, with Paycor (acquired April 14, 2025) contributing approximately 12 percentage points to total revenue growth. Management Solutions revenue grew 20% to $4.87 billion, with Paycor contributing about 15 points of that growth, driven by an upmarket customer base, price realization, and product penetration.
Source: 10-K Item 7 MD&A, p.23
Adjusted operating income rose 19% to $2.81 billion (43.2% adjusted operating margin) versus 14% GAAP operating income growth, and adjusted diluted EPS grew 11% to $5.51 versus 7% GAAP diluted EPS growth to $4.89, reflecting $304.2 million of acquisition-related costs (including $242.0 million of intangible amortization) tied to the Paycor deal.
Source: 10-K Item 7 MD&A, p.25-26
Interest expense increased $164.1 million to $269.5 million in fiscal 2026, primarily due to $4.2 billion of fixed-rate Corporate Bonds issued in April 2025 to finance the Paycor acquisition.
Source: 10-K Item 7 MD&A, p.25
Paychex served approximately 840,000 total customers (about 800,000 payroll clients) in fiscal 2026, with payroll client retention of 82%-83%. The company's WISE AI engine now powers approximately 600 AI features and agents across its solutions, and PEO worksite employees grew 6% to 2.6 million.
Source: 10-K Item 7 MD&A, p.22
Effective January 23, 2026, Paychex amended its JPM credit facilities, increasing the 2017 JPM facility from $750 million to $1.0 billion and extending its maturity to January 2031, while terminating the $250 million PNC facility; total unused credit capacity stood at $2.0 billion as of May 31, 2026.
Source: 10-K Item 7 MD&A, p.27
Paychex has incorporated AI capabilities via its WISE engine (powering ~600 features/agents), but the filing warns AI tools could produce inaccurate results, hallucinations, or biased outputs, and that failure to integrate AI as expected or customers using competitors' AI instead could adversely affect business, financial condition, and results of operations.
Source: 10-K Item 1A, p.9
Paychex issued $4.2 billion in Corporate Bonds in April 2025 to fund the Paycor acquisition, subject to covenants including a maximum leverage ratio of 3.5:1.0 and minimum interest coverage ratio of 2.0:1.0; failure to comply could materially adversely affect operating results and financial condition, and future acquisitions could push the company closer to these thresholds.
Source: 10-K Item 1A, p.12
The company collects and retains large volumes of sensitive personal and financial data (bank accounts, SSNs, tax and health information) making it a potential target for cyberattacks and ransomware; a breach could result in liability, regulatory fines, reputational harm, and loss of customers.
Source: 10-K Item 1A, p.10
Within its PEO business, Paychex may be exposed to liability for violations of employment or discrimination laws by customers or their employees acting as agents, even without Paychex's participation, and indemnification from customers may not be fully enforceable or collectible.
Source: 10-K Item 1A, p.11
The filing notes acquisitions like Paycor involve risks including increased debt, unforeseen liabilities, and integration difficulties; failure to achieve anticipated synergies or loss of customers/key employees during integration could materially adversely impact operating results and stock price. Acquisition-related costs already totaled $304.2 million in fiscal 2026, up 87% year-over-year.
Source: 10-K Item 1A, p.11-12
Reported EPS of $1.32 versus the $1.33 analyst consensus — a -0.8% miss for FY2026.
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue | $6.51B | $5.57B | +16.88% |
Cost of Revenue | $1.67B | $1.54B | +8.71% |
Operating Income | $2.51B | $2.21B | +13.72% |
Net Income | $1.76B | $1.66B | +6.20% |
EPS (Basic) | $4.90 | $4.60 | +6.52% |
EPS (Diluted) | $4.89 | $4.58 | +6.77% |
SG&A Expense | $2.33B | $1.82B | +27.60% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Total Assets | $16.17B | $16.56B | -2.35% |
Current Assets | $8.61B | $8.92B | -3.40% |
Total Liabilities | $12.44B | $12.44B | +0.03% |
Current Liabilities | $6.84B | $6.96B | -1.66% |
Stockholders' Equity | $3.74B | $4.13B | -9.52% |
Cash & Equivalents | $1.09B | $1.63B | -33.18% |
Long-Term Debt | $4.56B | $4.95B | -7.92% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Operating Cash Flow | $2.56B | $1.9B | +34.50% |
Investing Cash Flow | $-1.15B | $-3.36B | +65.67% |
Financing Cash Flow | $-2.65B | $2.29B | -215.72% |
Share Buybacks | $611M | $104.5M | +484.69% |
D&A | $442.6M | $209.5M | +111.26% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Operating Margin | 38.6% | 39.6% | -1.07% |
Net Margin | 27.0% | — | — |
ROE | 47.1% | — | — |
ROA | 10.9% | — | — |
Current Ratio | $1.259 | — | — |
Debt to Equity | $3.33 | — | — |
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The filing does not disclose analyst consensus estimates, but Paychex reported GAAP diluted EPS of $4.89 (up 7% YoY) and adjusted diluted EPS of $5.51 (up 11% YoY) for FY2026, alongside revenue of $6.51 billion, up 16.9% from $5.57 billion in FY2025.
Paychex's total revenue grew 16.9% (17% as rounded in the filing) to $6.51 billion in FY2026 from $5.57 billion in FY2025, with the Paycor acquisition contributing approximately 12 percentage points of that growth. Management Solutions revenue grew 20% to $4.87 billion while PEO and Insurance Solutions revenue grew 7% to $1.43 billion.
Key takeaways include 16.9% revenue growth to $6.51 billion driven by the Paycor acquisition, operating income growth of 13.7% to $2.51 billion, and net income growth of 6.2% to $1.76 billion, with the smaller net income growth attributable to a $164.1 million increase in interest expense and $304.2 million in acquisition-related costs. Operating cash flow rose 34.5% to $2.56 billion, and the company maintained an unqualified audit opinion with effective internal controls.
Paychex highlighted risks including leverage from the $4.2 billion Corporate Bonds issued to fund the Paycor acquisition (subject to a 3.5:1.0 maximum leverage covenant), cybersecurity threats given its handling of sensitive customer data (SSNs, bank accounts, health information), and risks from integrating AI capabilities via its WISE platform, which could produce inaccurate results or hallucinations. PEO co-employment liability and acquisition integration risk were also flagged as company-specific concerns.
As of May 31, 2026, Paychex had total assets of $16.17 billion (down 2.4% YoY), long-term debt of $4.56 billion, and stockholders' equity of $3.74 billion (down 9.5% YoY), resulting in a debt-to-equity ratio of 3.33. Cash and equivalents fell 33.2% to $1.09 billion, reflecting cash used for the Paycor acquisition financing, dividends, and $611 million in share buybacks.