Payroll services company Paychex ( PAYX )  stock slid after it reported mixed fiscal first-quarter 2026 results on Tuesday.

The company reported sales growth of 17% year-over-year (Y/Y) to $1.540 billion, topping the analyst consensus estimate of $1.538 billion.

Management Solutions’ revenue rose 21% Y/Y to $1.2 billion, primarily driven by an increase in the number of clients served. This growth was led by the acquisition of Paycor and a higher number of client worksite employees for HR Solutions.

Also Read: Paychex Faces Growth Gap: Can It Deliver On 2026 Targets?

Higher revenue per client also contributed to the growth, driven by Paycor’s upmarket client base, price realization, and increased product penetration, including HR Solutions and Retirement.

Professional Employer Organization (PEO) and Insurance Solutions revenue increased 3% year-over-year to $329.1 million. This was primarily driven by growth in the average number of PEO worksite employees, as well as an increase in PEO insurance revenues and interest on funds held for clients.

Adjusted EPS of $1.22 beat the analyst consensus estimate of $1.21.

Operating income declined 1% to $541.9 million, and the margin contracted by 630 basis points to 35.2%.

Adjusted operating income grew 15% to $626.7 million, and the margin declined by 80 basis points to 40.7%.

Adjusted EBITDA increased 16% to $680.0 million.

As of August 31, 2025, the balance sheet showed $1.7 billion in cash, restricted cash, and total corporate investments. Total short-term and long-term borrowings, net of debt issuance costs, stood at $5.0 billion. Additionally, the company generated $718.4 million in cash flow from operations for the first quarter.

John Gibson, CEO, stated that the company began fiscal 2026 with strong double-digit revenue growth, driven by sustained demand for its human capital management solutions and continued progress in integrating Paycor.

He noted that the early realization of cost and revenue synergies from the Paycor acquisition supports the strategic rationale of the deal, including cross-selling opportunities.

He emphasized that ongoing investments in AI and technology are driving innovation, enhancing the client experience, and increasing operational efficiency.

Outlook

Paychex ( PAYX ) raised fiscal 2026 adjusted EPS guidance (from $5.40-$5.50) to $5.43-$5.53 (compared to $5.45 analyst consensus estimate).

The company reaffirmed fiscal 2026 sales guidance of $6.491 billion-$6.602 billion (against $6.538 billion analyst consensus estimate).

Price Action: PAYX shares were trading lower by 5.52% to $121.43 at last check Tuesday.

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