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Paychex

PAYX · Nasdaq

Flat costs turned 5.88% revenue growth into 14.26% operating growth

Total expenses rose only 1.32% and selling and administrative costs fell 0.53%, so operating margin widened 2.79 points to 37.98%.

Q1 FY2027, the quarter to Aug 31, 2026 (Paychex's fiscal 2027 ends in May 2027) · 10-Q filed Sep 24, 2026

Q1 FY2027 · revenue
$1.6B+5.9% on the year
Operating margin
38.0%
Net income
$429.7M
Free cash flow, quarter
$357.4M
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Where Paychex's money goes

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Key insights · Q1 FY2027
  1. 01

    Flat costs turned 5.88% revenue growth into 14.26% operating growth

    Total expenses rose only 1.32% and selling and administrative costs fell 0.53%, so operating margin widened 2.79 points to 37.98%.

    Why it matters

    Total revenue rose 5.88% to $1,630.5M while total expenses rose 1.32% to $1,011.3M. Cost of service revenue grew 3.94%. Selling, general and administrative expenses fell 0.53% to $581.2M, and their share of revenue dropped 2.3 points to 35.65%. Operating income rose to $619.2M from $541.9M, a margin of 37.98% against 35.19% a year earlier.1

    The filing attributes much of the restraint to lower acquisition-related costs from the Paycor acquisition: less amortization of intangibles acquired with Paycor, and less spent on integration compensation, severance and retention bonuses. Compensation-related expenses edged down, while PEO direct insurance costs, depreciation and other expenses rose with growth.1

    Over the longer run, the annual operating margin narrowed as Paycor was absorbed: from 41.2% in FY2024 ($2,174.1M on $5,278.3M) to 38.6% in FY2026 ($2,510.5M on $6,512.0M). This quarter's 37.98% compares with 35.19% in the same quarter a year earlier.1

    AnalysisAnalysis: part of this gain is a cost that is fading away rather than a business that is earning more per client. Once integration costs and acquired-intangible amortization stop falling, margin growth has to come from revenue outrunning ordinary operating costs. The filing's own adjusted measure, which excludes acquisition-related costs, grew more slowly than reported operating income.

  2. 02

    Profit rose, but operating cash flow came in below net income

    Operating cash flow was $413.5M, 96.2% of net income of $429.7M, down from $718.4M a year earlier; the filing attributes the gap to timing.

    Why it matters

    Net cash from operating activities was $413.5M, 57.6% of the $718.4M a year earlier, while net income rose to $429.7M from $383.8M. Capital spending barely moved, $56.1M against $55.9M, so free cash flow fell to $357.4M from $662.5M: 21.9% of revenue, against 43.0% a year earlier.1

    The filing attributes the swing to timing: net changes in PEO assets and liabilities as payroll taxes were settled, a decrease in refunds owed to clients under the CARES Act (a year earlier those refunds owed had increased, which lifted that quarter's cash), and the payment of the prior year's year-end bonuses. Higher accrued interest on the corporate bonds, payable in October, worked the other way.1

    Across a full year the pattern is different. In FY2026 operating cash flow was $2,556.7M, well above net income of $1,760.1M. Quarters swing widely: in Q2 FY2026 operating cash flow of $444.9M was 112.5% of net income of $395.4M.1

    AnalysisAnalysis: the timing explanation can be checked in the quarters that follow. If cash from operations catches up over the rest of the year, this quarter was a calendar effect. If it keeps trailing net income, money is being tied up in the PEO or in receivables, and earnings growth would be converting into cash more slowly than before.

  3. 03

    Client float covers 76.5% of the interest on debt

    Interest earned on client funds, $49.8M, falls short of $65.1M of interest expense, so the float does not pay for the borrowing on its own.

    Why it matters

    Interest on funds held for clients rose to $49.8M from $47.6M, 3.1% of total revenue and 8.0% of operating income. The filing attributes the rise to higher average rates on client funds. Interest expense eased to $65.1M from $68.2M on lower outstanding debt, so the float covered 76.5% of it, up from 69.8% a year earlier.1

    Corporate cash earned less too. Other income, net, fell 54.2% to $10.9M from $23.8M; the filing shows interest on corporate investments lower as corporate balances shrank and the rate earned on them fell. The average rate on combined client and corporate portfolios was 3.6%, against 3.7% a year earlier.1

    These lines, with a higher tax rate, explain why profit grew less further down the statement. Income before taxes rose 13.57% and income taxes 19.0%, lifting the effective rate to 24.0% from 22.9%. Net income grew 11.96%, against 14.26% for operating income.1

    Rates reach the float slowly. The filing says earnings from its longer bonds 'would not reflect increases in interest rates until the investments are sold or mature and the proceeds are reinvested at higher rates', and notes that the Federal Reserve raised its policy rate after the quarter ended.1

Sources

  1. 1.Paychex 10-Q for the period to 2026-08-31 (the filing), Sep 24, 2026, read Nov 2, 2026

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Business performance

Growth, profit and margin

Revenue went from $2.1B in FY2008 to $6.5B in FY2026, the operating margin from 40.1% to 38.6%, over 18 years.

  • Revenue$6.5B
  • Operating income$2.5B
  • Operating margin38.6%
Period
Q1 FY2027
Revenue
$1.6B
Operating income
$619.2M
Operating margin
38.0%
Net income
$429.7M
Free cash flow
$357.4M
Business performance

Does the profit turn into cash?

Q1 FY2027: free cash flow of $357.4M against net income of $429.7M in the quarter.

  • Operating cash flow$2.6B
  • Capital expenditure$234.9M
  • Free cash flow$2.3B
  • Net income$1.8B

Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.

Financial data and sources

The figures

Margins, cash and growth for the period, each with what it was computed from.

Gross margin
73.6%
Source10-Q, Derived from Total revenue and Cost of service revenue in the 10-Q filed 2026-09-24
Operating margin
38.0%
Source10-Q, Derived from Operating income and Total revenue in the 10-Q filed 2026-09-24
Net margin
26.4%
Source10-Q, Derived from Net income and Total revenue in the 10-Q filed 2026-09-24
Free cash flow, quarter
$357.4M
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-09-24
Free cash flow margin, quarter
21.9%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-09-24
Cash conversion, quarter
0.96x
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-09-24
Capital spending, quarter
3.4%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-09-24
Revenue growth
+5.9%
From the record's own history, against the prior year.

Where revenue comes from

Every breakdown the filing reports for the period, with each item's share.

This filing reports no breakdown of revenue by product, segment or region for the period.

What it costs

The cost lines beneath operating income, each as a share of revenue, then the operating result.

Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.

Cost lineQ1 FY2027Of revenueSource
Total expenses$1.0B62.0%Source10-Q, us-gaap:CostsAndExpenses, as reported in the 10-Q filed 2026-09-24
Operating income$619.2M38.0%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-09-24

Operating figures the company states

From the text of the filing rather than its statements, each with the sentence that states it.

Average interest rate earned on client funds and corporate investments
3.6%
As of Aug 31, 2026
View source
During the first quarter, the average interest rate earned on our combined funds held for clients and corporate cash equivalents and investment portfolios was 3.6% compared to 3.7% for the prior year period.
Item 2. M anagement's Discussion and Analysis of Financial Condition and Results of Operations, 10-Q filed Sep 24, 2026

The statements, as filed

The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.

Income statement20 lines, as presented in the 10-Q
LineQ1 FY2027A year earlierChangeOf revenueSource
Revenue:
Total service revenue$1.58B$1.49B+5.9%96.9%Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-09-24
Management Solutions$1.21B$1.16B+4.3%74.4%Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax [payx:ManagementSolutionsMember], as reported in the 10-Q filed 2026-09-24
PEO and Insurance Solutions$367.6M$329.1M+12%22.5%Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax [payx:PeoAndInsuranceSolutionsMember], as reported in the 10-Q filed 2026-09-24
Interest on funds held for clients$49.8M$47.6M+4.6%3.1%Source10-Q, us-gaap:InterestIncomeOperating, as reported in the 10-Q filed 2026-09-24
Total revenue$1.63B$1.54B+5.9%100%Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-09-24
Expenses:
Cost of service revenue$430.1M$413.8M+3.9%26.4%Source10-Q, us-gaap:CostOfRevenue, as reported in the 10-Q filed 2026-09-24
Selling, general and administrative expenses$581.2M$584.3M-0.5%35.6%Source10-Q, us-gaap:SellingGeneralAndAdministrativeExpense, as reported in the 10-Q filed 2026-09-24
Total expenses$1.01B$998.1M+1.3%62.0%Source10-Q, us-gaap:CostsAndExpenses, as reported in the 10-Q filed 2026-09-24
Income Statement
Operating income$619.2M$541.9M+14%38.0%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-09-24
Interest expense (shown as a deduction)($65.1M)$68.2M-4.5%4.0%Source10-Q, us-gaap:InterestExpenseNonoperating, as reported in the 10-Q filed 2026-09-24
Other income, net$10.9M$23.8M-54%0.7%Source10-Q, us-gaap:NonoperatingIncomeExpense, as reported in the 10-Q filed 2026-09-24
Income before income taxes$565.0M$497.5M+14%34.7%Source10-Q, us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest, as reported in the 10-Q filed 2026-09-24
Income taxes$135.3M$113.7M+19%8.3%Source10-Q, us-gaap:IncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-09-24
Net income$429.7M$383.8M+12%26.4%Source10-Q, us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic, as reported in the 10-Q filed 2026-09-24
Other comprehensive (loss)/income, net of tax-$31.4M$28.7M1.9%Source10-Q, us-gaap:OtherComprehensiveIncomeLossNetOfTaxPortionAttributableToParent, as reported in the 10-Q filed 2026-09-24
Comprehensive income$398.3M$412.5M-3.4%24.4%Source10-Q, us-gaap:ComprehensiveIncomeNetOfTax, as reported in the 10-Q filed 2026-09-24
Basic earnings per share$1$1+13%0.0%Source10-Q, us-gaap:EarningsPerShareBasic, as reported in the 10-Q filed 2026-09-24
Diluted earnings per share$1$1+14%0.0%Source10-Q, us-gaap:EarningsPerShareDiluted, as reported in the 10-Q filed 2026-09-24
Weighted-average common shares outstanding355,800,000360,100,000-1.2%Source10-Q, us-gaap:WeightedAverageNumberOfSharesOutstandingBasic, as reported in the 10-Q filed 2026-09-24
Weighted-average common shares outstanding, assuming dilution356,600,000361,900,000-1.5%Source10-Q, us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding, as reported in the 10-Q filed 2026-09-24
Cash flow statement36 lines, as presented in the 10-Q

Year to date, as a quarterly filing reports it.

LineQ1 FY2027A year earlierChangeSource
Operating activities
Net income$429.7M$383.8M+12%Source10-Q, us-gaap:ProfitLoss, as reported in the 10-Q filed 2026-09-24
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization$109.8M$109.3M+0.5%Source10-Q, us-gaap:DepreciationDepletionAndAmortization, as reported in the 10-Q filed 2026-09-24
Amortization of premiums and discounts on AFS securities and long-term debt, net (shown as a deduction)($2.2M)$2.1M+4.8%Source10-Q, us-gaap:AccretionAmortizationOfDiscountsAndPremiumsInvestments, as reported in the 10-Q filed 2026-09-24
Amortization of deferred contract costs$66.0M$60.4M+9.3%Source10-Q, us-gaap:CapitalizedContractCostAmortization, as reported in the 10-Q filed 2026-09-24
Stock-based compensation costs$19.3M$26.8M-28%Source10-Q, us-gaap:ShareBasedCompensation, as reported in the 10-Q filed 2026-09-24
Provision on deferred income taxes$9.3M$66.0M-86%Source10-Q, us-gaap:DeferredIncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-09-24
Provision for credit losses$8.6M$7.7M+12%Source10-Q, us-gaap:ProvisionForDoubtfulAccounts, as reported in the 10-Q filed 2026-09-24
Net realized (gains)/losses on sales of AFS securities (shown as a deduction)($0)$0Source10-Q, us-gaap:DebtSecuritiesAvailableForSaleRealizedGainLoss, as reported in the 10-Q filed 2026-09-24
Changes in operating assets and liabilities:
Interest receivable (shown as a deduction)($3.1M)$6.1M-49%Source10-Q, us-gaap:IncreaseDecreaseInAccruedInterestReceivableNet, as reported in the 10-Q filed 2026-09-24
Accounts receivable and PEO unbilled receivables, net (shown as a deduction)($73.3M)$18.9M+288%Source10-Q, us-gaap:IncreaseDecreaseInAccountsReceivable, as reported in the 10-Q filed 2026-09-24
Prepaid expenses and other current assets (shown as a deduction)($19.8M)-$29.5MSource10-Q, us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets, as reported in the 10-Q filed 2026-09-24
Accounts payable and other current liabilities-$56.7M$124.9MSource10-Q, us-gaap:IncreaseDecreaseInAccountsPayableAndAccruedLiabilities, as reported in the 10-Q filed 2026-09-24
Deferred costs (shown as a deduction)($86.1M)$68.5M+26%Source10-Q, us-gaap:IncreaseDecreaseInDeferredCharges, as reported in the 10-Q filed 2026-09-24
Net change in other long-term assets and liabilities (shown as a deduction)(-$12.0M)-$6.3M+90%Source10-Q, us-gaap:IncreaseDecreaseInOtherNoncurrentAssetsAndLiabilitiesNet, as reported in the 10-Q filed 2026-09-24
Net change in operating lease right-of-use assets and liabilities (shown as a deduction)($0)$700.0KSource10-Q, payx:IncreaseDecreaseInOperatingLeaseRightOfUseAssetsAndLiabilitiesNet, as reported in the 10-Q filed 2026-09-24
Operating activities
Net cash provided by operating activities$413.5M$718.4M-42%Source10-Q, us-gaap:NetCashProvidedByUsedInOperatingActivities, as reported in the 10-Q filed 2026-09-24
Investing activities
Purchases of AFS securities (shown as a deduction)($5.07B)$3.73B+36%Source10-Q, us-gaap:PaymentsToAcquireAvailableForSaleSecuritiesDebt, as reported in the 10-Q filed 2026-09-24
Proceeds from sales and maturities of AFS securities$4.88B$2.55B+92%Source10-Q, us-gaap:ProceedsFromSaleAndMaturityOfAvailableForSaleSecurities, as reported in the 10-Q filed 2026-09-24
Net purchases of short-term accounts receivable (shown as a deduction)($63.2M)$47.0M+34%Source10-Q, payx:NetPaymentsCollectionsShortTermAccountsReceivable, as reported in the 10-Q filed 2026-09-24
Purchases of property and equipment (shown as a deduction)($56.1M)$55.9M+0.4%Source10-Q, us-gaap:PaymentsToAcquirePropertyPlantAndEquipment, as reported in the 10-Q filed 2026-09-24
Acquisition of businesses, net of cash acquired (shown as a deduction)($18.1M)$200.0K+8,950%Source10-Q, us-gaap:PaymentsToAcquireBusinessesNetOfCashAcquired, as reported in the 10-Q filed 2026-09-24
Purchases of other assets, net (shown as a deduction)($6.9M)$15.0M-54%Source10-Q, us-gaap:PaymentsToAcquireOtherProductiveAssets, as reported in the 10-Q filed 2026-09-24
Net cash used in investing activities-$335.8M-$1.30B-74%Source10-Q, us-gaap:NetCashProvidedByUsedInInvestingActivities, as reported in the 10-Q filed 2026-09-24
Financing activities
Net change in client fund obligations-$443.9M$81.4MSource10-Q, payx:NetChangeInClientFundObligations, as reported in the 10-Q filed 2026-09-24
Dividends paid (shown as a deduction)($424.1M)$389.1M+9.0%Source10-Q, us-gaap:PaymentsOfDividendsCommonStock, as reported in the 10-Q filed 2026-09-24
Repurchases of common shares (shown as a deduction)($0)$160.1MSource10-Q, us-gaap:PaymentsForRepurchaseOfCommonStock, as reported in the 10-Q filed 2026-09-24
Contingent consideration paid for acquisitions (shown as a deduction)($15.0M)$0Source10-Q, us-gaap:PaymentForContingentConsiderationLiabilityFinancingActivities, as reported in the 10-Q filed 2026-09-24
Activity related to equity-based plans-$23.6M-$47.6M-50%Source10-Q, payx:EquityActivityRelatedToStockBasedAwards, as reported in the 10-Q filed 2026-09-24
Net cash used in financing activities-$906.6M-$515.4M+76%Source10-Q, us-gaap:NetCashProvidedByUsedInFinancingActivities, as reported in the 10-Q filed 2026-09-24
Statement of Cash Flows
Net change in cash, restricted cash, and equivalents-$828.9M-$1.10B-25%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsPeriodIncreaseDecreaseIncludingExchangeRateEffect, as reported in the 10-Q filed 2026-09-24
Cash, restricted cash, and equivalents, beginning of period$1.48BSource10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-09-24
Cash, restricted cash, and equivalents, end of period$655.9M$1.63B-60%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-09-24
Reconciliation of cash, restricted cash, and equivalents
Cash and cash equivalents$600.9M$809.0M-26%Source10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-09-24
Restricted cash$55.0M$50.4M+9.1%Source10-Q, us-gaap:RestrictedCash, as reported in the 10-Q filed 2026-09-24
Restricted cash and restricted cash equivalents included in funds held for clients$0$775.2MSource10-Q, payx:RestrictedCashAndRestrictedCashEquivalentsIncludedInFundsHeldForClients, as reported in the 10-Q filed 2026-09-24
Total cash, restricted cash, and equivalents$655.9M$1.63B-60%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-09-24
Balance sheet39 lines, as presented in the 10-Q
LineQ1 FY2027A year earlierChangeSource
Assets
Cash and cash equivalents$600.9M$809.0M-26%Source10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-09-24
Restricted cash$55.0MSource10-Q, us-gaap:RestrictedCashCurrent, as reported in the 10-Q filed 2026-09-24
Corporate investments$333.3MSource10-Q, us-gaap:DebtSecuritiesAvailableForSaleAccruedInterestAfterAllowanceForCreditLossCurrent, as reported in the 10-Q filed 2026-09-24
Interest receivable$39.2MSource10-Q, us-gaap:InterestReceivableCurrent, as reported in the 10-Q filed 2026-09-24
Accounts receivable, net of allowance for credit losses$1.62BSource10-Q, us-gaap:AccountsNotesAndLoansReceivableNetCurrent, as reported in the 10-Q filed 2026-09-24
PEO unbilled receivables, net of advance collections$680.2MSource10-Q, us-gaap:UnbilledReceivablesCurrent, as reported in the 10-Q filed 2026-09-24
Prepaid income taxes$11.5MSource10-Q, us-gaap:PrepaidTaxes, as reported in the 10-Q filed 2026-09-24
Prepaid expenses and other current assets$409.2MSource10-Q, us-gaap:PrepaidExpenseAndOtherAssetsCurrent, as reported in the 10-Q filed 2026-09-24
Current assets before funds held for clients$3.75BSource10-Q, payx:CurrentAssetsBeforeFundsHeldForClients, as reported in the 10-Q filed 2026-09-24
Funds held for clients$4.35BSource10-Q, us-gaap:FundsHeldForClients, as reported in the 10-Q filed 2026-09-24
Total current assets$8.09BSource10-Q, us-gaap:AssetsCurrent, as reported in the 10-Q filed 2026-09-24
Property and equipment, net of accumulated depreciation$614.6MSource10-Q, us-gaap:PropertyPlantAndEquipmentNet, as reported in the 10-Q filed 2026-09-24
Operating lease right-of-use assets, net of accumulated amortization$75.8MSource10-Q, us-gaap:OperatingLeaseRightOfUseAsset, as reported in the 10-Q filed 2026-09-24
Intangible assets, net of accumulated amortization$1.63BSource10-Q, us-gaap:IntangibleAssetsNetExcludingGoodwill, as reported in the 10-Q filed 2026-09-24
Goodwill$4.53BSource10-Q, us-gaap:Goodwill, as reported in the 10-Q filed 2026-09-24
Long-term deferred costs$571.0MSource10-Q, us-gaap:CapitalizedContractCostNetNoncurrent, as reported in the 10-Q filed 2026-09-24
Other long-term assets$145.4MSource10-Q, us-gaap:OtherAssetsNoncurrent, as reported in the 10-Q filed 2026-09-24
Total assets$15.66BSource10-Q, us-gaap:Assets, as reported in the 10-Q filed 2026-09-24
Liabilities
Accounts payable$141.4MSource10-Q, us-gaap:AccountsPayableCurrent, as reported in the 10-Q filed 2026-09-24
Accrued corporate compensation and related items$132.5MSource10-Q, us-gaap:EmployeeRelatedLiabilitiesCurrent, as reported in the 10-Q filed 2026-09-24
Accrued worksite employee compensation and related items$824.7MSource10-Q, payx:AccruedWorksiteEmployeeCompensationAndRelatedItems, as reported in the 10-Q filed 2026-09-24
Accrued income taxes$81.1MSource10-Q, us-gaap:AccruedIncomeTaxesCurrent, as reported in the 10-Q filed 2026-09-24
Deferred revenue$70.8MSource10-Q, us-gaap:ContractWithCustomerLiabilityCurrent, as reported in the 10-Q filed 2026-09-24
Other current liabilities$648.8MSource10-Q, us-gaap:OtherLiabilitiesCurrent, as reported in the 10-Q filed 2026-09-24
Current liabilities before client fund obligations$1.90BSource10-Q, payx:CurrentLiabilitiesBeforeClientFundObligations, as reported in the 10-Q filed 2026-09-24
Client fund obligations$4.44BSource10-Q, payx:ClientFundObligations, as reported in the 10-Q filed 2026-09-24
Total current liabilities$6.34BSource10-Q, us-gaap:LiabilitiesCurrent, as reported in the 10-Q filed 2026-09-24
Accrued income taxes$145.5MSource10-Q, us-gaap:AccruedIncomeTaxesNoncurrent, as reported in the 10-Q filed 2026-09-24
Deferred income taxes$537.6MSource10-Q, us-gaap:DeferredIncomeTaxLiabilitiesNet, as reported in the 10-Q filed 2026-09-24
Long-term borrowings, net of debt issuance costs$4.56BSource10-Q, us-gaap:LongTermDebtNoncurrent, as reported in the 10-Q filed 2026-09-24
Operating lease liabilities$62.9MSource10-Q, us-gaap:OperatingLeaseLiabilityNoncurrent, as reported in the 10-Q filed 2026-09-24
Other long-term liabilities$311.2MSource10-Q, us-gaap:OtherLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-09-24
Total liabilities$11.96BSource10-Q, us-gaap:Liabilities, as reported in the 10-Q filed 2026-09-24
Stockholders' equity
Common stock, $0.01 par value; Authorized: 600.0 shares; Issued and outstanding: 356.0 shares as of August 31, 2026 and 355.6 shares as of May 31, 2026$3.6MSource10-Q, us-gaap:CommonStockValue, as reported in the 10-Q filed 2026-09-24
Additional paid-in capital$1.99BSource10-Q, us-gaap:AdditionalPaidInCapitalCommonStock, as reported in the 10-Q filed 2026-09-24
Retained earnings$1.79BSource10-Q, us-gaap:RetainedEarningsAccumulatedDeficit, as reported in the 10-Q filed 2026-09-24
Accumulated other comprehensive loss-$81.3MSource10-Q, us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax, as reported in the 10-Q filed 2026-09-24
Total stockholders' equity$3.71B$3.97B-6.7%Source10-Q, us-gaap:StockholdersEquity, as reported in the 10-Q filed 2026-09-24
Statement of Financial Position
Total liabilities and stockholders' equity$15.66BSource10-Q, us-gaap:LiabilitiesAndStockholdersEquity, as reported in the 10-Q filed 2026-09-24

About this data

Source
Paychex 10-Q, accession 0000723531-26-000006, filed Sep 24, 2026, read on Nov 2, 2026.
History
From the SEC's XBRL company facts, the value from the latest filing that stated each period.
Reading
Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
Version
methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
Edge and risks

What holds Paychex's model up, and what could bend it

Competitive edge

  • Payroll data is the base for selling more per client

    Management Solutions earned $1,213.1M, 74.4% of revenue, and the filing credits higher revenue per client from price realization and product penetration.

    The detail

    Management Solutions revenue rose to $1,213.1M from $1,163.3M. The filing attributes the change to 'Higher revenue per client resulting from price realization and product penetration', and says the offerings 'often leverage the information gathered in its base payroll processing service'. Clients buy modules one by one or in bundles.1

    AnalysisAnalysis: a provider that already holds a client's employee, wage and tax data can add time tracking, HR, retirement and benefits with little new selling effort, and each added module makes leaving more work for the client. That is consistent with selling and administrative costs falling 0.53% while revenue rose 5.88%.

  • Delivery cost fell from 31.2% to 25.7% of revenue

    From FY2019 to FY2026 cost of revenue fell from 31.2% to 25.7% of revenue, and this quarter's gross margin was 73.6%.

    The detail

    Annual revenue rose from $3,772.5M in FY2019 to $6,512.0M in FY2026, while cost of revenue rose from $1,177.8M to $1,674.5M. This quarter cost of service revenue was 26.38% of revenue, 0.49 points lower than a year earlier, for a gross margin of 73.6%.1

    AnalysisAnalysis: payroll runs every pay period on the same software and service organization, so an added client or a price increase brings revenue with little added delivery cost. The advantage holds as long as clients stay and the platforms keep absorbing volume; it works in reverse if clients leave, because their revenue goes faster than the cost behind it.

  • Co-employment is taking a larger share of revenue

    PEO and Insurance Solutions reached $367.6M, 22.5% of total revenue against 21.4%, on more worksite employees and higher insurance volumes.

    The detail

    PEO and Insurance Solutions revenue rose to $367.6M from $329.1M, lifting its share of total service revenue to 23.3% from 22.1%. The filing credits growth in the average number of PEO worksite employees and higher PEO insurance volumes. The revenue is reported net of the wages and payroll taxes passed through, so it is a fee and insurance margin, not the payroll handled.1

    AnalysisAnalysis: as co-employer, Paychex gives small employers benefits priced on a large pooled group and takes over HR compliance. That ties the client in more deeply than payroll alone and earns more per client, at the price of carrying insurance risk.

What to watch

  • Every revenue line rides on small employers' payrolls

    The filing names the economy's effect on small and mid-sized clients as a risk; their headcount drives fees, worksite employees and client fund balances.

    The detail

    The filing lists 'the impact of macroeconomic factors on the U.S. and global economy, and in particular on our small- and medium-sized business customers', along with inflation and interest rate changes, among factors that could change results. It also names customers failing to reimburse payments Paychex makes on their behalf.1

    AnalysisAnalysis: all three revenue lines depend on the same thing. Management Solutions ($1,213.1M) is billed per payroll, PEO and Insurance Solutions ($367.6M) per worksite employee, and interest on client funds ($49.8M) on the payroll money in transit. Fewer hires or more closures among small employers would reach all three at once.

  • Faster PEO growth brings more retained insurance risk

    Where Paychex keeps health and workers' compensation risk, claims flow through its own costs and rest on actuarial reserve estimates.

    The detail

    The filing names co-employment risk and 'changes in health insurance and workers' compensation insurance rates and underlying claim trends'. Workers' compensation is mainly under high-deductible policies, and some health plans retain risk; for those, revenue and costs are recorded gross. PEO direct insurance costs rose with worksite employees and insurance volumes.1

    Reserves rest on an independent actuarial estimate, and the filing says the factors behind them 'could materially impact the reserves as reported'. Reserve adjustments were not material this quarter. PEO revenue rose to $367.6M from $329.1M, so the business carrying this exposure is the faster-growing one.1

  • Interest rates move float income and bond values

    Unrealized bond losses turned other comprehensive income to a $31.4M loss from $28.7M of income, leaving comprehensive income below net income.

    The detail

    Other comprehensive loss, mostly unrealized losses on the client and corporate bond portfolios, was $31.4M, against income of $28.7M a year earlier. Comprehensive income was $398.3M, below net income of $429.7M, and down from $412.5M. The average rate earned on the combined portfolios was 3.6%, against 3.7%.1

    Rates cut both ways. Lower rates reduce what the float earns; higher rates lower the market value of the longer bonds and raise the cost of overnight borrowing used to settle client obligations. The filing also lists its debt covenants and credit ratings among risk factors, with interest expense of $65.1M this quarter.1

Sources

  1. 1.Paychex 10-Q for the period to 2026-08-31 (the filing), Sep 24, 2026, read Nov 2, 2026
Go deeper

Paychex, further in

Member research, then your own questions on ChatGPT.

What could change the outlook

What Paychex's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.

  • How much of the margin gain lasts once Paycor costs fade?

    Which part of this quarter's wider margin comes from the core business and which from fading integration costs, and what the next quarters would show either way.

  • Float, debt and rates: what the money in transit is worth now

    How client funds, corporate cash and the borrowing behind Paycor fit together, and what a change in rates would do to each of them.

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Questions to start with
  • How much of Paychex's 14.26% operating income growth came from lower Paycor integration costs rather than from the core business?
  • Why was Paychex's operating cash flow below net income this quarter, and what would show the timing explanation is holding?
  • How would a change in interest rates move the gap between Paychex's interest on client funds and its interest expense?

Business Lens describes Paychex from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.