ADP · 10-Q · 2026Q3 · Full report

Margin Drivers

AUTOMATIC DATA PROCESSING INC · 2026-10-30 · Importance 36 · Surprise 40

Earnings before income taxes increased to $1,454.9 million for the three months ended September 30, 2026 from $1,307.5 million, and the pretax margin expanded 120 basis points to 26.5%. Adjusted EBIT increased to $1,470.0 million from $1,318.3 million, while adjusted EBIT margin expanded 130 basis points to 26.8%. Margin improvement reflected servicing and implementation efficiencies, higher corporate-funds interest income, and client-funds interest revenue, partly offset by zero-margin benefits pass-through costs; Employer Services margin rose 130 basis points to 36.5%, while PEO Services margin remained 13.0%.

Key facts

• For the three months ended September 30, 2026, ADP earnings before income taxes margin expanded 120 basis points and adjusted EBIT margin expanded 130 basis points. source
• ADP EBIT margin increased to 26.5% from 25.3%, an expansion of 120 basis points. source
• ADP adjusted EBIT margin increased to 26.8% from 25.5%, an expansion of 130 basis points. source
• PEO Services margin was flat for the three months ended September 30, 2026, as lower state unemployment insurance costs were offset by higher zero-margin benefit pass-through costs. source
• ADP EBIT margin increased due to servicing and implementation efficiencies, increased corporate funds interest income, and client funds interest revenue, partially offset by increased zero-margin benefit pass-through costs. source
• Employer Services margin increased due to operating efficiencies and contributions from client funds interest revenues. source