What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-01-29 compared with 2025-10-31 · 153 added, 110 removed, 251 unchanged (51% of the section changed)

34 unchanged sentences

Leading with Best-in-Class HCM technology, Providing Unmatched Expertise and Outsourcing Solutions, and Leveraging our Global Scale for the Benefit of our Clients.

During the first quarter, we made meaningful progress on our Strategic Priorities.

We continued to scale ADP Embedded Payroll to reach additional small business clients, accelerated the deployment of Workforce Now Next-Gen to a growing percentage of new mid-market clients, and experienced ongoing strong enterprise sales momentum for ADP Lyric HCM.

We continued to empower our associates to leverage their HR domain expertise by providing them with AI tools that further enhanced the client and associate experience.

Finally, we continued to build on our global scale by enhancing the services offered within our existing footprint of more than 140 countries and territories.

Highlights from the three months ended September 30, 2025 include:

During the second quarter, we made meaningful progress on our Strategic Priorities.

We experienced continued new business momentum for our Next Gen solutions, including Workforce Now Next Gen and ADP Lyric HCM.

We launched the ADP WorkForce Suite, our integrated workforce management solution, across our leading payroll and HCM platforms.

We also introduced our first Pooled Employer Plan in our Retirement Services business, enabling employers to offer robust retirement plan benefits without adding administrative burden.

Finally, we continue to enhance ADP Assist with additional persona-based agents.

Highlights from the six months ended December 31, 2025 include:

• Revenue growth of 7% to $10,534.5 million;

6% growth on an organic constant currency

• Diluted and adjusted diluted earnings per share ("EPS") growth of 6% and 7%, respectively, to $2.49

6% growth on an organic constant currency basis

• Earnings before income taxes margin expansion of 30 bps, and adjusted EBIT margin expansion of 40 bps

• Diluted and adjusted diluted earnings per share ("EPS") growth of 9%, to $5.12 and $5.11, respectively

• Cash returned via shareholder friendly actions of $2.1B, including $1.3B of dividends and $0.9B of share repurchases

For the three months ended September 30, 2025, we delivered strong revenue growth of 7%, 6% growth on an organic constant currency basis.

Our pays per control metric, which represents the number of employees on ADP clients' payrolls in the United States when measured on a same-store-sales basis for a subset of clients ranging from small to large businesses, remained stable for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

PEO average worksite employees increased 2% for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024.

For the six months ended December 31, 2025, we delivered strong revenue growth of 7%, 6% growth on an organic constant currency basis.

Our pays per control metric, which represents the number of employees on ADP clients' payrolls in the United States when measured on a same-store-sales basis for a subset of Employer Services clients ranging from small to large businesses, grew 1% for the six months ended December 31, 2025 as compared to the six months ended December 31, 2024.

PEO average worksite employees increased 2% for the six months ended December 31, 2025, as compared to the six months ended December 31, 2024.

We have a strong business model, generating significant cash flows with low capital intensity, and offer a suite of products that provide critical support to our clients’ HCM functions.

We generate sufficient free cash flow to satisfy our cash dividend and our modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our long-term strategy and commitments to shareholder friendly actions.

We are committed to building upon our past successes by investing in our business through enhancements in research and development of our products and services and by driving meaningful transformation in the way we operate.

Our financial condition remains solid at September 30, 2025 and we remain well positioned to support our associates and our clients.

We are committed to building upon our past successes by investing in research and development to enhance our products and services and by driving continuous improvement in the way we operate.

Our financial condition remains solid at December 31, 2025 and we remain well positioned to support our associates and our clients.

RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS

Total Revenues

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2025 2024 2025 2024

Total Revenues $ 5,359.3 $ 5,048.4 $ 10,534.5 $ 9,881.1

1 unchanged sentence

YoY Growth, Organic Constant Currency 5 % 8 % 6 % 7 %

Total revenues increased for the three months ended September 30, 2025 due to new business started from new business bookings, strong client retention, an increase in interest on funds held for clients, the impact from the WorkForce Software acquisition, and an increase in zero-margin benefits pass-throughs.

Total revenues for the three months ended September 30, 2025 include interest on funds held for clients of $286.8 million, as compared to $253.3 million for the three months ended September 30, 2024.

The increase in interest earned on funds held for

clients resulted from an increase in our average client funds balances of 6.5% to $34.9 billion for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, coupled with an increase in our average interest rate earned to 3.3% for the three months ended September 30, 2025, as compared to 3.1% for the three months ended September 30, 2024.

Total revenues increased for the three and six months ended December 31, 2025 due to new business started from new business bookings, strong client retention, an increase in zero-margin benefits pass-throughs, an increase in pricing, the impact of foreign currency, and an increase in interest on funds held for clients.

Total revenues for the three months ended December 31, 2025 include interest on funds held for clients of $308.6 million, as compared to $272.8 million for the three months ended December 31, 2024.

The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 6.5% to $37.6 billion for the three months ended December 31, 2025 as compared to the three months ended December 31, 2024, coupled with an increase in our average interest rate earned to 3.3% for the three months ended December 31, 2025, as compared to 3.1% for the three months ended December 31, 2024.

Total revenues for the six months ended December 31, 2025 include interest on funds held for clients of $595.5 million, as compared to $526.1 million for the six months ended December 31, 2024.

The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 6.5% to $36.2 billion for the six months ended December 31, 2025 as compared to the six months ended December 31, 2024, coupled with an increase in our average interest rate earned to 3.3% for the six months ended December 31, 2025, as compared to 3.1% for the six months ended December 31, 2024.

Total Expenses

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

Change 2025 2024 %

Costs of revenues:

6 unchanged sentences

Total expenses $ 4,081.9 $ 3,878.2 5 % $ 8,059.7 $ 7,576.4 6 %

Operating expenses increased for the three months ended September 30, 2025 due to an increase of $81.8 million of PEO Services zero-margin benefits pass-through costs to $1,131.0 million from $1,049.2 million for the three months ended September 30, 2024.

Additionally, operating expenses increased by $67.1 million due to higher service and implementation costs in support of our growing revenue and by $10.6 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.

Research and development expenses increased for the three months ended September 30, 2025 due to increased costs to develop, support, and maintain our new and existing products, including the integration costs associated with the WorkForce Software acquisition.

Depreciation and amortization expenses increased for the three months ended September 30, 2025 due to the amortization of intangible assets acquired in the WorkForce Software acquisition, amortization of investments in internally developed software primarily for our next-gen products, partially offset by lower amortization of customer contracts and lists.

Selling, general and administrative expenses increased for the three months ended September 30, 2025 primarily due to increases in selling and marketing expenses of $57.2 million as a result of investments in our sales organization.

Interest expense decreased for the three months ended September 30, 2025 primarily due to a decrease of $15.5 million related to commercial paper and reverse repurchase borrowings as a result of a decrease in average interest rates on commercial paper issuances and reverse repurchases of 90 basis points, coupled with a decrease in average daily commercial paper borrowings of $0.3 billion, offset by an increase in average reverse repurchase outstanding balances of $0.7 billion, as compared to the three months ended September 30, 2024.

Operating expenses increased for the three months ended December 31, 2025 due to an increase of $71.0 million of PEO Services zero-margin benefits pass-through costs to $1,126.2 million from $1,055.2 million for the three months ended December 31, 2024.

Additionally, for the three months ended December 31, 2025 operating expenses increased by $42.3 million due to higher service and implementation costs in support of our growing revenue.

Operating expenses increased for the six months ended December 31, 2025 due to an increase of $152.8 million of PEO Services zero-margin benefits pass-through costs to $2,257.2 million from $2,104.4 million for the six months ended December 31, 2024.

Additionally, for the six months ended December 31, 2025 operating expenses increased by $109.4 million due to higher service and implementation costs in support of our growing revenue and by $13.0 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.

Research and development expenses increased for the three months ended December 31, 2025 due to increased costs to develop, support, and maintain our new and existing products.

Research and development expenses increased for the six months ended December 31, 2025 due to increased costs to develop, support, and maintain our new and existing products, including the integration costs associated with the WorkForce Software acquisition.

Depreciation and amortization expenses decreased for the three months ended December 31, 2025 due to lower amortization of customer contracts and lists, partially offset by amortization of investments in internally developed software primarily for our next-gen products and purchased software.

Depreciation and amortization expenses increased for the six months ended December 31, 2025 due to the amortization of intangible assets acquired in the WorkForce Software acquisition and investments in internally developed software primarily for our next-gen products and purchased software, partially offset by lower amortization of customer contracts and lists.

Selling, general and administrative expenses increased for the three and six months ended December 31, 2025 primarily due to increases in selling and marketing expenses of $59.6 million and $117.0 million, respectively, as a result of investments in our sales organization.

Interest expense decreased for the three months ended December 31, 2025 primarily due to a decrease of $8.7 million related to commercial paper and reverse repurchase borrowings as a result of a decrease in average interest rates on commercial paper issuances and reverse repurchases of 70 and 60 basis points, respectively, coupled with a decrease in average daily commercial paper borrowings of $0.1 billion, offset by an increase in average reverse repurchase outstanding balances of $0.6 billion, as compared to the three months ended December 31, 2024.

This decrease was partially offset by net increases in interest expense of $3.7 million related to the senior notes issued and redeemed during the year ended June 30, 2025.

Interest expense decreased for the six months ended December 31, 2025 primarily due to a decrease of $24.2 million related to commercial paper and reverse repurchase borrowings as a result of a decrease in average interest rates on commercial paper issuances and reverse repurchases of 80 basis points, coupled with a decrease in average daily commercial paper borrowings of $0.2 billion, offset by an increase in average reverse repurchase outstanding balances of $0.7 billion, as compared to the six months ended December 31, 2024.

This decrease was partially offset by net increases in interest expense of $16.3 million related to the senior notes issued and redeemed during the year ended June 30, 2025.

Other (Income)/Expense, net

Three Months Ended

September 30,

2025 2024 $ Change

Three Months Ended Six Months Ended

December 31, December 31,

2025 2024 $ Change 2025 2024 $ Change

Interest income on corporate funds $ (96.8) $ (83.9) $ 12.9 $ (198.3) $ (175.5) $ 22.8

2 unchanged sentences

Non-service components of pension income, net (7.1) (7.8) (0.7) (14.2) (15.7) (1.5)

Other income, net $ (110.1) $ (101.7) $ 8.4

Interest income on corporate funds increased for the three months ended September 30, 2025 due to higher average investment balances of $11.4 billion as compared to $10.7 billion for the three months ended September 30, 2024, coupled with an increase in average interest rates of 20 basis points, as compared to the three months ended September 30, 2024.

Net (gain)/loss on ADP Ventures' investments (2.2) — 2.2 (2.2) — 2.2

Other (income)/loss, net $ (105.8) $ (91.1) $ 14.7 $ (215.9) $ (192.8) $ 23.1

Interest income on corporate funds increased for the three and six months ended December 31, 2025 due to higher average investment balances of $11.0 billion and $11.2 billion, respectively, as compared to $10.0 billion and $10.3 billion for the three and six months ended December 31, 2024, coupled with an increase in average interest rates of 20 and 10 basis points for the three and six months ended December 31, 2025, respectively, as compared to the three and six months ended December 31, 2024.

During the three and six months ended December 31, 2025, the Company recognized a gain of $2.2 million related to investments made through our Corporate Venture Capital arm, ADP Ventures.

See Note 12 of our Consolidated Financial Statements for further details on non-service components of pension income, net.

Earnings Before Income Taxes ("EBIT") and Adjusted EBIT

Three Months Ended

September 30,

2025 2024 YoY Growth

Three Months Ended Six Months Ended

December 31, December 31,

2025 2024 YoY Growth 2025 2024 YoY Growth

EBIT $ 1,383.2 $ 1,261.3 10 % $ 2,690.7 $ 2,497.5 8 %

EBIT Margin 25.8 % 25.0 % 80 bps

25.5 % 25.3 % 30 bps

Adjusted EBIT $ 1,392.8 $ 1,272.0 10 % $ 2,711.1 $ 2,504.5 8 %

Adjusted EBIT Margin 26.0 % 25.2 % 80 bps

Earnings before income taxes increased for the three months ended September 30, 2025, due to the increase in total revenues, partially offset by the increase in total expenses discussed above.

EBIT Margin decreased for the three months ended September 30, 2025, due to increased selling and marketing expenses and costs of servicing and implementing our clients on growing revenue, partially offset by contributions from client fund interest revenues discussed above and interest expense.

25.7 % 25.3 % 40 bps

Numbers may not foot due to rounding.

Earnings before income taxes increased for the three and six months ended December 31, 2025 due to the increase in total revenues, partially offset by the increase in total expenses discussed above.

EBIT Margin increased for the three months ended December 31, 2025 due to contributions from client funds interest revenues discussed above, decreased interest expense, the impact of foreign currency, decreased amortization and depreciation expenses, and increased interest income on corporate funds, partially offset by increased selling and marketing expenses.

EBIT Margin increased for the six months ended December 31, 2025 due to contributions from client funds interest revenues discussed above, decreased interest expense, the impact of foreign currency, and increased interest income on corporate funds, partially offset by increased selling and marketing expenses.

Adjusted EBIT and Adjusted EBIT margin exclude interest income and interest expense that are not related to our client funds

extended investment strategy, and net charges, including certain legal settlements, in the applicable periods.

extended investment strategy, and net charges, including certain legal matters, broad-based optimization initiatives, and (gains)/losses on ADP Ventures' investments, in the applicable periods.

Provision for Income Taxes

The effective tax rate for the three months ended September 30, 2025 and 2024 was 22.5% and 22.6%, respectively.

The decrease in the effective tax rate is primarily due to lower reserves for uncertain tax positions primarily offset by the cost of an intercompany transfer of certain assets and a lower excess tax benefit on stock-based compensation in the three months ended September 30, 2025.

The effective tax rate for the three months ended December 31, 2025 and 2024 was 23.2% and 23.6%, respectively.

The decrease in the effective tax rate is primarily due to lower reserves for uncertain tax positions and a benefit for adjustments to prior year tax liabilities partially offset by a lower excess tax benefit on stock-based compensation in the three months ended December 31, 2025.

The effective tax rate for the six months ended December 31, 2025 and 2024 was 22.9% and 23.1%, respectively.

The decrease in the effective tax rate is primarily due to lower reserves for uncertain tax positions partially offset by the cost of an intercompany transfer of certain assets and a lower excess tax benefit on stock-based compensation in the six months ended December 31, 2025.

Adjusted Provision for Income Taxes

The adjusted effective tax rate for the three months ended September 30, 2025 and 2024 was 22.5% and 22.6%, respectively.

The adjusted effective tax rate for the three months ended December 31, 2025 and 2024 was 23.2% and 23.6%, respectively.

The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.

The adjusted effective tax rate for the six months ended December 31, 2025 and 2024 was 22.9% and 23.1%, respectively.

The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.

Net Earnings and Diluted EPS, Unadjusted and Adjusted

Three Months Ended

September 30,

2025 2024 YoY Growth

Three Months Ended Six Months Ended

December 31, December 31,

2025 2024 YoY Growth 2025 2024 YoY Growth

Net earnings $ 1,062.0 $ 963.2 10 % $ 2,075.1 $ 1,919.5 8 %

2 unchanged sentences

Adjusted diluted EPS $ 2.62 $ 2.35 11 % $ 5.11 $ 4.69 9 %

In addition to the increase in net earnings, diluted EPS increased for the three months ended September 30, 2025 as a result of the impact of fewer shares outstanding resulting from the repurchase of approximately 1.2 million shares during the three months ended September 30, 2025, and 1.4 million shares during the three months ended September 30, 2024, partially offset by the issuances of shares under our employee benefit plans.

Adjusted net earnings and adjusted diluted EPS reflect the changes in the components described above for the three months ended September 30, 2025.

In addition to the increase in net earnings, diluted EPS increased for the three months ended December 31, 2025 as a result of the impact of fewer shares outstanding resulting from the repurchase of approximately 1.9 million shares during the three months ended December 31, 2025, and 0.9 million shares during the three months ended December 31, 2024, partially offset by the issuances of shares under our employee benefit plans.

In addition to the increase in net earnings, diluted EPS increased for the six months ended December 31, 2025 as a result of the impact of fewer shares outstanding resulting from the repurchase of approximately 3.2 million shares during the six months ended December 31, 2025, and 2.4 million shares during the six months ended December 31, 2024, partially offset by the issuances of shares under our employee benefit plans.

Adjusted net earnings and adjusted diluted EPS reflect the changes in the components described above for the three and six months ended December 31, 2025.

ANALYSIS OF REPORTABLE SEGMENTS

Three Months Ended % Change

September 30,

Three Months Ended % Change Six Months Ended % Change

December 31, December 31,

Reported Organic constant currency 2025 2024 As

Reported Organic constant currency

1 unchanged sentence

PEO Services 1,755.2 1,663.3 6 % 6 % 3,442.7 3,237.8 6 % 6 %

Other (3.5) (2.8) n/m n/m

Other (3.3) (3.4) n/m n/m (6.8) (6.2) n/m n/m

$ 5,359.3 $ 5,048.4 6 % 5 % $ 10,534.5 $ 9,881.1 7 % 6 %

1 unchanged sentence

Three Months Ended %

September 30,

2025 2024 As Reported

Change Six Months Ended %

December 31, December 31,

2025 2024 As Reported 2025 2024 As

Employer Services $ 1,278.8 $ 1,183.0 8 % $ 2,507.6 $ 2,347.3 7 %

PEO Services 252.9 251.7 — % 471.7 477.3 (1) %

Other (140.1) (153.7) n/m

Other (148.5) (173.4) n/m (288.6) (327.1) n/m

$ 1,383.2 $ 1,261.3 10 % $ 2,690.7 $ 2,497.5 8 %

Three Months Ended

September 30,

2025 2024 YoY Growth

Three Months Ended Six Months Ended

December 31, December 31,

2025 2024 YoY Growth 2025 2024 YoY Growth

Employer Services 35.4 % 34.9 % 50 bps

35.3 % 35.3 % 0 bps

PEO Services 14.4 % 15.1 % (70) bps

13.7 % 14.7 % (100) bps

n/m - not meaningful

Numbers may not foot due to rounding.

Employer Services

Employer Services' revenues increased for the three months ended September 30, 2025 due to new business started from new business bookings, strong client retention, an increase in pricing, the impact from the WorkForce Software acquisition, and an increase in interest earned on funds held for clients.

Employer Services' revenues increased for the three and six months ended December 31, 2025 due to new business started from new business bookings, strong client retention, an increase in pricing, the impact of foreign currency, an increase in interest earned on funds held for clients, and an increase in our pays per control of 1%.

Earnings before Income Taxes

Employer Services' earnings before income taxes increased for the three months ended September 30, 2025, due to increased revenues, including contributions from client funds interest, discussed above, partially offset by increased costs of servicing and implementing our clients on growing revenue, selling and marketing expenses, and costs to develop, support, and maintain our new and existing products.

Employer Services' margin decreased for the three months ended September 30, 2025, due to increased selling and marketing expenses, costs of servicing and implementing our clients on growing revenue, and costs to develop, support, and maintain our new and existing products, partially offset by contributions from client fund interest revenues discussed above.

Three Months Ended Change

September 30,

Employer Services' earnings before income taxes increased for the three and six months ended December 31, 2025 due to increased revenues, including contributions from client funds interest, discussed above, partially offset by increased costs of servicing and implementing our clients on growing revenue, selling and marketing expenses, and costs to develop, support, and maintain our new and existing products.

Employer Services' margin increased for the three months ended December 31, 2025 due to contributions from client funds interest revenues discussed above, decreased amortization and depreciation expenses, and operating efficiencies for costs of servicing and implementing our clients on growing revenue, partially offset by increased selling and marketing expenses.

Employer Services' margin remained flat for the six months ended December 31, 2025, due to contributions from client funds interest revenues discussed above, partially offset by increased selling and marketing expenses and the impact from the WorkForce Software acquisition.

Three Months Ended Change Six Months Ended Change

December 31, December 31,

2025 2024 $ % 2025 2024 $ %

2 unchanged sentences

PEO Services' revenues excluding zero-margin benefits pass-throughs $ 629.0 $ 608.1 $ 20.9 3 % $ 1,185.5 $ 1,133.4 $ 52.1 5 %

PEO Services' revenues increased for the three months ended September 30, 2025 due to the increase in zero-margin benefits pass-throughs, and an increase in average worksite employees of 2%, as compared to the three months ended September 30, 2024.

PEO Services' revenues increased for the three and six months ended December 31, 2025 due to the increase in zero-margin benefits pass-throughs, and an increase in average worksite employees of 2% for each period, as compared to the three and six months ended December 31, 2024.

Earnings before Income Taxes

PEO Services' earnings before income taxes decreased for the three months ended September 30, 2025 due to increased operating costs related to state unemployment insurance and selling and marketing expenses, partially offset by increased revenues discussed above.

PEO Services' margin decreased for the three months ended September 30, 2025, due to increased operating costs related to state unemployment insurance, selling and marketing expenses and zero-margin benefits pass-through costs, partially offset by increased revenues discussed above.

PEO Services' earnings before income taxes increased for the three months ended December 31, 2025 due to increased revenues discussed above, partially offset by increases in zero-margin benefits pass-through costs and selling and marketing expenses.

PEO Services' earnings before income taxes decreased for the six months ended December 31, 2025 due to increases in zero-margin benefits pass-through costs and selling and marketing expenses, partially offset by increased revenues discussed above.

PEO Services' margin decreased for the three months ended December 31, 2025, due to increased selling and marketing expenses and zero-margin benefits pass-through costs, partially offset by increased revenues discussed above.

PEO Services' margin decreased for the six months ended December 31, 2025, due to increased selling and marketing expenses and zero-margin benefits pass-through costs, and increased operating costs related to state unemployment insurance, partially offset by increased revenues discussed above.

ADP Indemnity provides workers’ compensation and employer's liability deductible reimbursement insurance protection for PEO Services’ worksite employees up to $1 million per occurrence.

4 unchanged sentences

The Company believes the likelihood of ultimate losses exceeding this limit is remote.

ADP Indemnity recorded a pre-tax benefit of approximately $4.7 million for the three months ended September 30, 2025, as compared to approximately $4.8 million for the three months ended September 30, 2024, which were primarily the results of more favorable actuarial loss development in workers’ compensation reserves.

ADP Indemnity recorded a pre-tax (loss)/benefit of approximately $(2.7) million and $1.9 million for the three and six months ended December 31, 2025, respectively, as compared to approximately $(0.8) million and $4.1 million for the three and six months ended December 31, 2024, respectively, which were primarily the results of less favorable actuarial loss development in workers’ compensation reserves.

ADP Indemnity paid a premium of $278 million in July 2025, to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for fiscal 2026 policy year on terms substantially similar to the fiscal 2025 reinsurance policy.

16 unchanged sentences

GAAP measures, and they may not be comparable to similarly titled measures at other companies.

Three Months Ended % Change

September 30,

2025 2024 As Reported

Three Months Ended % Change Six Months Ended % Change

December 31, December 31,

2025 2024 As Reported 2025 2024 As Reported

Net earnings $ 1,062.0 $ 963.2 10 % $ 2,075.1 $ 1,919.5 8 %

2 unchanged sentences

All other interest income (a) (19.8) (18.9) (42.7) (42.8)

Legal settlements (b) — (0.3)

Optimization initiatives (b) (1.2) — (1.2) —

Net (gain)/loss on ADP Ventures' investments (c) (2.2) — (2.2) —

Legal settlements (d) — — — (0.3)

Adjusted EBIT $ 1,392.8 $ 1,272.0 10 % $ 2,711.1 $ 2,504.5 8 %

1 unchanged sentence

Provision for income taxes $ 321.2 $ 298.1 8 % $ 615.6 $ 578.0 7 %

Legal settlements (c) — (0.1)

Optimization initiatives (e) (0.3) — (0.3) —

Net (gain)/loss on ADP Ventures' investments (e) (0.6) — (0.6) —

Legal settlements (e) — — — (0.1)

Adjusted provision for income taxes $ 320.3 $ 298.1 7 % $ 614.7 $ 577.9 6 %

Adjusted effective tax rate (d) 22.5 % 22.6 %

Adjusted effective tax rate (f) 23.2 % 23.6 % 22.9 % 23.1 %

Net earnings $ 1,062.0 $ 963.2 10 % $ 2,075.1 $ 1,919.5 8 %

Legal settlements (b) — (0.3)

Income tax provision for legal settlements (c) — 0.1

Optimization initiatives (b) (1.2) — (1.2) —

Income tax provision for optimization initiatives (e) 0.3 — 0.3 —

Net (gain)/loss on ADP Ventures' investments (c) (2.2) — (2.2) —

Income tax provision for net (gain)/loss on ADP Ventures' investments (e) 0.6 — 0.6 —

Legal settlements (d) — — — (0.3)

Income tax provision for legal settlements (e) — — — 0.1

Adjusted net earnings $ 1,059.5 $ 963.2 10 % $ 2,072.6 $ 1,919.3 8 %

Diluted EPS $ 2.62 $ 2.35 11 % $ 5.12 $ 4.69 9 %

Legal settlements (b) (c) — —

Net (gain)/loss on ADP Ventures' investments (c) (e) — — (0.01) —

Adjusted diluted EPS $ 2.62 $ 2.35 11 % $ 5.11 $ 4.69 9 %

Numbers may not foot due to rounding.

(a) In adjusted EBIT, we include the interest income earned on investments associated with our client funds extended investment strategy and interest expense on borrowings related to our client funds extended investment strategy as we believe these amounts to be fundamental to the underlying operations of our business model.

The adjustments in the table above represent the interest income and interest expense that are not related to our client funds extended investment strategy and are labeled as “All other interest expense” and “All other interest income.”

(b) In the three months ended September 30, 2024, this represents a reserve reversal of a legal reserve recorded during the year ended June 30, 2023.

(c) The income tax provision was calculated based on the annualized marginal rate in effect during the quarter of the adjustment.

(d) The adjusted effective tax rate is calculated as our adjusted provision for income taxes divided by the sum of our adjusted net earnings plus our adjusted provision for income taxes.

(b) Represents a partial reversal of the workforce optimization initiative from fiscal 2024.

Severance charges/(reversals) have been taken in the past and not included as an adjustment to get to adjusted results.

Unlike severance charges/(reversals) in prior periods, this specific reversal relates to a broad-based, company-wide initiative.

(Gains)/losses on these investments may result from observable price changes, changes in ownership interest, and impairment charges.

These adjustments may be highly variable, are predominantly non-cash, are outside our control, and are not fundamental to the underlying operations of our business model.

(d) In the six months ended December 31, 2024, this represents a reversal of a legal reserve recorded during the year ended June 30, 2023.

(e) The income tax provision was calculated based on the annualized marginal rate in effect during the quarter of the adjustment.

(f) The adjusted effective tax rate is calculated as our adjusted provision for income taxes divided by the sum of our adjusted net earnings plus our adjusted provision for income taxes.

The following table reconciles our reported growth rates to the non-GAAP measure of organic constant currency, which excludes the impact of acquisitions, the impact of dispositions, and the impact of foreign currency.

2 unchanged sentences

The PEO segment is not impacted by acquisitions, dispositions or foreign currency.

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

Consolidated revenue growth as reported 6 % 7 %

6 unchanged sentences

Employer Services revenue growth, organic constant currency 5 % 5 %

Numbers may not foot due to rounding.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCE S

As of September 30, 2025, cash and cash equivalents were $2.5 billion, which were primarily invested in time deposits and money market funds.

As of December 31, 2025, cash and cash equivalents were $2.4 billion, which were primarily invested in time deposits and money market funds.

For corporate liquidity, we expect existing cash, cash equivalents, marketable securities, cash flow from operations together with our $10.6 billion of committed credit facilities and our ability to access both long-term and short-term debt financing from the capital markets will be adequate to meet our operating, investing, and financing activities, such as regular quarterly dividends, share repurchases, and capital expenditures for the foreseeable future.

Our financial condition remains solid at September 30, 2025 and we have sufficient liquidity.

Our financial condition remains solid at December 31, 2025 and we have sufficient liquidity.

For client funds liquidity, we have the ability to borrow through our financing arrangements under our U.S.

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Operating, Investing and Financing Cash Flows

Our cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows for the three months ended September 30, 2025 and 2024, respectively, are summarized as follows:

Three Months Ended

September 30,

Our cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows for the six months ended December 31, 2025 and 2024, respectively, are summarized as follows:

Six Months Ended

2025 2024 $ Change

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Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents $ 28,607.1 $ 6,518.2 $ 22,088.9

Net cash flows provided by operating activities decreased primarily due to a net unfavorable change in the components of operating assets and liabilities partially offset by growth in our business, as compared to the three months ended September 30, 2024.

Net cash flows used in investing activities changed due to timing of net proceeds and purchases of corporate and client funds marketable securities of $203.7 million.

Net cash flows provided by financing activities changed due to a net increase in the cash flow from client funds obligations of $11,443.6 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, partially offset by a decrease in the net proceeds from the issuance of commercial paper and debt.

We purchased approximately 1.2 million shares of our common stock at an average price per share of $302.10 during the three months ended September 30, 2025, as compared to purchases of 1.4 million shares at an average price per share of $259.47 during the three months ended September 30, 2024.

Net cash flows provided by operating activities decreased primarily due to a net unfavorable change in the components of operating assets and liabilities primarily due to timing of payments partially offset by growth in our business, as compared to the six months ended December 31, 2024.

Net cash flows used in investing activities changed primarily due to timing of net proceeds and purchases of corporate and client funds marketable securities of $749.3 million, offset by a net decrease in acquisitions of businesses, primarily related to the Workforce Software acquisition, with a cash disbursement of 1,160.6 million during the six months ended December 31, 2024.

Net cash flows provided by financing activities changed primarily due to a net increase in the cash flow from client funds obligations of $27,182.7 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, partially offset by net payments of $4,769.5 million related to borrowings under the commercial paper program and a decrease in the net proceeds from the issuance of debt.

We purchased approximately 3.2 million shares of our common stock at an average price per share of $280.09 during the six months ended December 31, 2025, as compared to purchases of 2.4 million shares at an average price per share of $274.42 during the six months ended December 31, 2024.

From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase program.

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Maturities of commercial paper can range from overnight to up to 364 days.

As of September 30, 2025 and June 30, 2025 the Company had $5.2 billion and $4.8 billion of commercial paper outstanding, which were repaid in early October 2025 and July 2025, respectively.

As of December 31, 2025 the Company had no commercial paper outstanding.

As of June 30, 2025

the Company had $4.8 billion of commercial paper outstanding, which was repaid in early July 2025.

Details of the borrowings under the commercial paper program are as follows:

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2025 2024 2025 2024

Average daily borrowings (in billions) $ 4.4 $ 4.5 $ 4.5 $ 4.7

Weighted average interest rates 4.0 % 4.8 % 4.2 % 5.1 %

Weighted average maturity (approximately in days) 2 days 2 days

Weighted average maturity (approximately in days) 2 days 2 days 2 days 2 days

Our U.S., Canadian, and United Kingdom short-term funding requirements related to client funds obligations are sometimes obtained on a secured basis through the use of reverse repurchase agreements, which are collateralized principally by government and government agency securities, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities.

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We have successfully borrowed through the use of reverse repurchase agreements on an as-needed basis to meet short-term funding requirements related to client funds obligations.

As of September 30, 2025, we had $7.5 billion available to us on a committed basis under the U.S.

As of December 31, 2025, we had $7.5 billion available to us on a committed basis under the U.S.

reverse repurchase agreements.

As of September 30, 2025 and June 30, 2025, the Company had $247.4 million and $38.4 million of outstanding obligations related to reverse repurchase agreements, respectively.

As of December 31, 2025 and June 30, 2025, the Company had $45.8 million and $38.4 million of outstanding obligations related to reverse repurchase agreements, respectively.

Details of the reverse repurchase agreements are as follows:

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2025 2024 2025 2024

Average outstanding balances (in billions) $ 4.3 $ 3.7 $ 4.4 $ 3.7

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We have a $4.6 billion, 364-day credit agreement that matures in June 2026 with a one-year term-out option.

In addition, we have a five-year $3.5 billion credit facility and a five-year $2.5 billion credit facility maturing in June 2029 and June 2030, respectively, each with an

accordion feature under which the aggregate commitment can be increased by $500 million, subject to the availability of additional commitments.

In addition, we have a five-year $3.5 billion credit facility and a five-year $2.5 billion credit facility maturing in June 2029 and June 2030, respectively, each with an accordion feature under which the aggregate commitment can be increased by $500 million, subject to the availability of additional commitments.

The primary uses of the credit facilities are to provide liquidity to the commercial paper program and funding for general corporate purposes, if necessary.

We had no borrowings through September 30, 2025 under the credit facilities.

We had no borrowings through December 31, 2025 under the credit facilities.

We believe that we currently meet all conditions set forth in the revolving credit agreements to borrow thereunder, and we are not aware of any conditions that would prevent us from borrowing part or all of the $10.6 billion available to us under the revolving credit agreements.

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We own AAA-rated senior tranches of primarily fixed rate auto loan, credit card, and device payment plan agreement receivables, secured predominantly by prime collateral.

All collateral on asset-backed securities is performing as expected through September 30, 2025.

All collateral on asset-backed securities is performing as expected through December 31, 2025.

In addition, we own U.S.

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See Note 7 of our Consolidated Financial Statements for a description of our corporate investments and funds held for clients.

Capital expenditures for the three months ended September 30, 2025 were $44.9 million, as compared to $55.6 million for the three months ended September 30, 2024.

Capital expenditures for the six months ended December 31, 2025 were $73.2 million, as compared to $98.2 million for the six months ended December 31, 2024.

We expect capital expenditures in fiscal 2026 to be between $225.0 million and $250.0 million, as compared to $176.8 million in fiscal 2025.

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We also believe we have significantly reduced the risk of not having sufficient funds to satisfy our client funds obligations by consistently maintaining access to other sources of liquidity, including our corporate cash balances, available borrowings under o ur $10.6 billion commercial paper program (rated A-1+ by Standard and Poor’s, P-1 by Moody’s, and F1+ by Fitch, the highest possible short-term credit ratings), our ability to engage in reverse repurchase agreement transaction s ($7.5 billion of which is available on a committed basis in the U.S.

as of September 30, 2025) and available borrowings under our $10.6 billion committed credit facilities.

as of December 31, 2025) and available borrowings under our $10.6 billion committed credit facilities.

The reduced availability of financing during periods of economic turmoil, even to borrowers with the highest credit ratings, may limit our ability to access short-term debt markets to meet the liquidity needs of our business.

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Details regarding our overall investment portfolio are as follows:

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2025 2024 2025 2024

Average investment balances at cost:

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Realized (gains)/losses on available-for-sale securities, net $ 0.3 $ 0.6 $ (1.2) $ 0.8

September 30, 2025 June 30, 2025

Net unrealized pre-tax losses on available-for-sale securities $ (211.5) $ (425.7)

December 31, 2025 June 30, 2025

Net unrealized pre-tax gains/(losses) on available-for-sale securities $ (103.7) $ (425.7)

Total available-for-sale securities at fair value $ 36,318.8 $ 33,777.7

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This mix varies during the fiscal year and is impacted by daily interest rate changes.

The annu alized interest rate earned on ou r entire portfolio increased from 3.2% for the three months ended September 30, 2024 to 3.4% for the three months ended September 30, 2025.

A hy pothetical chan ge in both short-term interest rates (e.g., overnight interest rates or the federal funds rate) and intermediate-term interest rates of 25 basis points applied to the estimated average investment balances and any related short-term borrowings would result in approximately an $22 million impact to earnings before income taxes over the ensuing twelve-month period ending September 30, 2026.

A hypothetical change in only short-term interest rates of 25 basis points applied to the estimated average short-term investment balances and any related short-term borrowings would result in approximately an $7 million impact to earnings before income taxes over the ensuing twelve-month period ending September 30, 2026.

The annu alized interest rate earned on ou r entire portfolio increased from 3.2% for the six months ended December 31, 2024 to 3.3% for the six months ended December 31, 2025.

A hy pothetical chan ge in both short-term interest rates (e.g., overnight interest rates or the federal funds rate) and intermediate-term interest rates of 25 basis points applied to the estimated average investment balances and any related short-term borrowings would result in approximately a $23 million impact to earnings before income taxes over the ensuing twelve-month period ending December 31, 2026.

A hypothetical change in only short-term interest rates of 25 basis points applied to the estimated average short-term investment balances and any related short-term borrowings would result in approximately an $8 million impact to earnings before income taxes over the ensuing twelve-month period ending December 31, 2026.

We are exposed to credit risk in connection with our available-for-sale securities through the possible inability of the borrowers to meet the terms of the securities.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis