ADP · 10-Q · 2026Q3 · Full report

Operating Expense Trends

AUTOMATIC DATA PROCESSING INC · 2026-10-30 · Importance 30 · Surprise 14 · In source text

Total expenses increased $198.3 million to $4,176.1 million for the three months ended September 30, 2026 from $3,977.8 million a year earlier. Operating expenses rose $123.3 million, primarily because PEO zero-margin benefits pass-through costs increased $97.6 million to $1,228.6 million and workers’ compensation and state unemployment costs increased $10.2 million. Selling, general, and administrative expenses increased $56.5 million, including a $40.0 million increase in selling and marketing investment; research and development expense was essentially flat at $251.3 million.

Key facts

• ADP Indemnity paid a $327.8 million premium in July 2026 to Chubb for reinsurance covering substantially all ADP Indemnity losses for the fiscal 2027 policy year. source
• ADP Indemnity provides workers' compensation deductible reimbursement insurance for PEO Services worksite employees up to $1 million per occurrence. source
• ADP Indemnity recorded a pre-tax actuarial gain of $3.1 million in the three months ended September 30, 2026, compared with a $4.3 million gain in 2025, due to less favorable workers' compensation reserve loss development. source
• ADP operating expenses increased by $97.6 million in PEO Services zero-margin benefits pass-through costs, to $1,228.6 million from $1,131.0 million. source
• ADP selling and marketing expenses increased by $40.0 million due to investments in its sales organization. source
• Employer Services earnings before income taxes increased, partially offset by $33.6 million in higher selling and marketing expenses. source
• PEO Services earnings before income taxes increased, partially offset by $97.6 million in zero-margin benefits pass-through costs and a $10.2 million net increase in operating costs for workers' compensation coverage and state unemployment insurance. source
• ADP research and development expenses were flat for the three months ended September 30, 2026, as increased product development, support, and maintenance costs were offset by increased capitalizable internally developed software spend. source

Impact estimates