Payroll and HR services provider Automatic Data Processing (NASDAQ: ADP) met Wall Street’s revenue expectations in calendar Q3 2026 (fiscal Q1 2027), with revenue up 6.1% year on year to $5.49 billion. Its non-GAAP profit of $2.82 per share was 2% above analysts’ consensus estimates.

For more on ADP, read our free full research report.

Revenue growth

A company’s long-term revenue performance can indicate its overall quality. Any business can have a good quarter or two, but the best consistently grow over the long term.

With $22.26 billion in revenue over the past 12 months, ADP is a large company in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also gives it more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices.

ADP’s revenue grew at a solid 7.7% compounded annual growth rate over the last five years, showing its demand was higher than that of many business services companies.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. ADP’s annualized revenue growth of 6.8% over the last two years aligns with its five-year trend, suggesting its demand was stable.

This quarter, ADP grew its revenue by 6.1% year on year, and its $5.49 billion of revenue was in line with Wall Street’s consensus estimates.

Looking ahead, sell-side analysts expect revenue to grow 5.8% over the next 12 months, according to S&P, similar to its two-year rate. Its growth trajectory is satisfactory given its scale and suggests the market expects success for its products and services.

Adjusted operating margin

Adjusted operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. It also removes various one-time costs to paint a better picture of normalized profits.

ADP has performed well over the last five years. It demonstrated high profitability for a business services company, with an average adjusted operating margin of 25.6%.

Looking at the trend in its profitability, ADP’s adjusted operating margin rose by 3.5 percentage points over the last five years, as its revenue growth gave it operating leverage.

In Q3, ADP generated an adjusted operating margin of 27.9%, up 2.1 percentage points year on year. This was a positive development, reflecting greater efficiency.

Earnings per share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth. For example, a company could inflate its revenue through excessive spending on advertising and promotions.

ADP’s EPS grew at a 12.8% compounded annual growth rate over the last five years, higher than its 7.7% annualized revenue growth. This indicates the company became more profitable on a per-share basis as it expanded.

A closer look at ADP’s earnings helps explain its performance. As mentioned earlier, ADP’s adjusted operating margin expanded by 3.5 percentage points over the last five years. In addition, its share count shrank by 6.2%. These are positive signs for shareholders because improving profitability and share buybacks boost EPS growth relative to revenue growth.

As with revenue, examining EPS over a shorter period can reveal changes in the business.

For ADP, its two-year annual EPS growth of 10.2% was lower than its five-year trend. That was underwhelming, but the company performed well on other measures of financial health.

In Q3, ADP reported adjusted EPS of $2.82, up from $2.49 in the same quarter last year. The result beat analysts’ consensus estimates by 2%. Over the next 12 months, Wall Street expects ADP’s full-year EPS to grow 9.5% from $11.45 to $12.54, according to S&P.

Key takeaways from ADP’s Q3 results

ADP’s EPS beat analysts’ consensus estimates, giving the quarter some key positives. But the market seemed to be hoping for more: Shares fell 2.2% to $286.75 immediately after the results.

To assess ADP at its current price, it’s important to consider its valuation, business quality and what has happened in the latest quarter. For more on ADP, read the full research report here (it’s free).