Paychex Reports Strong Q4 Revenue Growth

Paychex (NASDAQ:PAYX) reported fourth quarter 2025 earnings on June 25, 2025, posting 10% total revenue growth in the fourth quarter, driven by the completed Paycor acquisition, 6% revenue growth for the full year, 6% adjusted diluted EPS growth for the year, and 60 basis points of adjusted operating income margin expansion despite significant ERTC headwinds.

Integration progress outpaced management expectations, with cost synergy targets raised and guidance for fiscal 2026 projects total revenue growth of 16.5%-18.5%, adjusted operating margins of approximately 43%, and adjusted diluted EPS growth of 8.5%-10.5%.

Transformational Integration and Segmentation Strategy

Paycor, acquired prior to the fourth quarter earnings call, added more than 50,000 clients. Paychex Flex is now focused on companies with up to 99 employees, Paycor serves the enterprise segment above 100 employees, and SurePayroll is positioned for the smallest "do-it-yourself" businesses. The Paycor buyout contributed approximately 12 to 13 percentage points to consolidated revenue growth in fiscal 2026. Over 1,000 brokers have enrolled in the new Partner Plus program, which is designed to solidify referral channels and accelerate cross-selling opportunities across the expanded suite of HR and payroll solutions.

"During the quarter, we defined how our HCM platforms will generally serve our market segments moving forward. Paychex Flex will focus on companies with up to 99 employees, and the Paycor platform will target the upmarket enterprise segment above a 100 employees. SurePayroll will continue to serve the small business do it yourself marketplace."
-- John Gibson, President and CEO

This clear market segmentation and multi-brand platform structure improves the company's operational focus and deepen client penetration opportunities.

improveCost Synergy Realization and Reinvestment Momentum

Integration activities from the Paycor acquisition have enabled management to raise cost synergy expectations for fiscal 2026 to $90 million, with most synergy actions completed within just six to eight weeks after the close of the Paycor acquisition; management also signaled that freed-up resources will be partially reinvested in R&D, platform enhancement, and salesforce expansion. Adjusted operating income margins excluding Paycor expanded by 110 basis points in the fourth quarter and by 250 basis points for the full year, highlighting the company’s scalable operational discipline amidst major change.

"Based upon our early progress on the integration, and our increased understanding of the opportunities we have gained since closing, we are raising our cost synergy expectations to approximately $90,000,000 fiscal year twenty six. The actions we have already taken give us high confidence in achieving the synergies. In addition, have identified a list of additional synergy opportunities that we are actively pursuing. We also believe that there are additional opportunities to invest for future growth. And we will strategically accelerate those investments as the year progresses."
-- John Gibson, President and CEO

Accelerated synergy capture and disciplined realignment of integration savings into future growth vectors strengthen long-term operating leverage and competitiveness.

Channel Ecosystem Expansion and Early Revenue Synergy Signals

More than half of all new business now originates from channel partners; initial cross-sell achievements—such as the first Paycor client signing with Paychex's ASO (Administrative Services Organization) and PEO (Professional Employer Organization) solutions -- demonstrate tangible near-term revenue synergies and validate the combined referral-driven go-to-market framework. The Paychex Partner Plus and Partner Pro initiatives are receiving early positive feedback and support from brokers, CPAs, and banks, reinforcing the referral network’s growth momentum.

"Following the acquisitions, we introduced the Paychex Partner Plus program, to brokers to foster relationships and drive mutual growth. Together, we now have a broader suite of solutions to offer brokers which can supplement their offerings to clients. And the partner plus program provides a structured framework designed to safeguard mutual clients from competing products. To date, over 1,000 brokers are enrolled in the program and we are hearing positive feedback which we believe indicates a strong foundation for retaining and expanding this important referral channel."
-- John Gibson, President and CEO

Increasing the total addressable market across the combined company's ecosystem.

Looking Ahead

For fiscal 2026, management guides for total revenue growth of 16.5%-18.5%, with 12%-13% of that growth coming from the Paycor acquisition and 30-50 basis points from revenue synergies. Management Solutions is expected to grow 20%-22%, PEO and Insurance Solutions 6%-8%, and the adjusted operating income margin is expected to be approximately 43%. Adjusted diluted EPS is expected to increase 8.5%-10.5%.

Most cost synergy actions have already been executed, and incremental cost reductions or investments will be balanced to maximize long-term growth and margin opportunities. No additional explicit long-term quantitative guidance was provided beyond fiscal 2026.

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