What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-04-30 compared with 2026-01-29 · 112 added, 103 removed, 301 unchanged (42% of the section changed)

15 unchanged sentences

our ability to maintain our current credit ratings and the impact on our funding costs and profitability;

security or cyber breaches, fraudulent acts, and system interruptions and failures;

security or cyber breaches including as a result of artificial intelligence, fraudulent acts, and system interruptions and failures;

employment and wage levels;

16 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 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:

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

We continued to leverage our data advantages, domain expertise, and trusted brand to lead the HCM industry through its AI transformation.

Our ADP Assist agents are applying advanced intelligence to real workforce challenges across payroll and HR, and since their launch in January, our clients have seen meaningful time savings for each payroll processed.

ADP Lyric HCM is also saving time for our clients, with one company replacing a dozen disparate systems to achieve a leaner payroll operations model.

Additionally, we expanded our AI ecosystem by launching a dedicated space within ADP Marketplace for our partner companies’ AI agents.

On the service front, we scaled our GenAI capabilities across our service operations, transforming how our client-facing teams engage, serve, and support our clients across the full lifecycle.

Finally, we remained focused on benefiting our clients through our global scale by delivering compliant HCM solutions, local expertise, and trusted relationships wherever they operate.

Highlights from the nine months ended March 31, 2026 include:

• Revenue growth of 7% to $16,473.6 million;

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• Earnings before income taxes margin expansion of 50 bps, and adjusted EBIT margin expansion of 50 bps

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

• Diluted and adjusted diluted earnings per share ("EPS") growth of 10% and 9%, to $8.49 and $8.48, respectively

• Cash returned via shareholder friendly actions of $3.4B, including $1.9B of dividends and $1.5B of share repurchases

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.

For the nine months ended March 31, 2026, 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 nine months ended March 31, 2026 as compared to the nine months ended March 31, 2025.

PEO average worksite employees increased 2% for the nine months ended March 31, 2026, as compared to the nine months ended March 31, 2025.

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.

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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.

Our financial condition remains solid at March 31, 2026 and we remain well positioned to support our associates and our clients.

RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS

Total Revenues

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2026 2025 2026 2025

2 unchanged sentences

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

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 revenues increased for the three and nine months ended March 31, 2026 due to new business started from new business bookings, strong client retention, an increase in zero-margin benefits pass-throughs, the impact of foreign currency, an increase in pricing, and an increase in interest on funds held for clients.

Total revenues for the three months ended March 31, 2026 include interest on funds held for clients of $403.9 million, as compared to $355.2 million for the three months ended March 31, 2025.

The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 8.5% to $48.3 billion for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, coupled with an increase in our average interest rate earned to 3.3% for the three months ended March 31, 2026, as compared to 3.2% for the three months ended March 31, 2025.

Total revenues for the nine months ended March 31, 2026 include interest on funds held for clients of $999.4 million, as compared to $881.3 million for the nine months ended March 31, 2025.

The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 7.3% to $40.2 billion for the nine months ended March 31, 2026 as compared to the nine months ended March 31, 2025, coupled with an increase in our average interest rate earned to 3.3% for the nine months ended March 31, 2026, as compared to 3.1% for the nine months ended March 31, 2025.

Total Expenses

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

Change 2026 2025 %

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Total expenses $ 4,232.4 $ 3,994.8 6 % $ 12,292.0 $ 11,571.2 6 %

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.

Operating expenses increased for the three months ended March 31, 2026 due to an increase of $80.0 million of PEO Services zero-margin benefits pass-through costs to $1,170.0 million from $1,090.0 million for the three months ended March 31, 2025.

Additionally, for the three months ended March 31, 2026, operating expenses increased by $50.4 million due to higher service and implementation costs in support of our growing revenue and by $18.9 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.

Operating expenses increased for the nine months ended March 31, 2026 due to an increase of $232.8 million of PEO Services zero-margin benefits pass-through costs to $3,427.2 million from $3,194.4 million for the nine months ended March 31, 2025.

Additionally, for the nine months ended March 31, 2026, operating expenses increased by $159.9 million due to higher service

and implementation costs in support of our growing revenue and by $31.9 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 March 31, 2026 due to increased costs to develop, support, and maintain our new and existing products.

Research and development expenses increased for the nine months ended March 31, 2026 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 March 31, 2026 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 nine months ended March 31, 2026 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 nine months ended March 31, 2026 primarily due to increases in selling and marketing expenses of $63.5 million and $180.4 million, respectively, as a result of investments in our sales organization.

Interest expense increased for the three months ended March 31, 2026 primarily due to net increases in interest expense of $3.7 million related to the senior notes issued and redeemed during the year ended June 30, 2025, coupled with an increase of $0.5 million related to commercial paper and reverse repurchase borrowings as a result of increases in average daily commercial paper borrowings and average reverse repurchase outstanding balances of $0.5 billion and $0.2 billion, respectively.

This increase was offset by decreases in average interest rates on commercial paper issuances and reverse repurchases of 70 and 30 basis points, respectively, as compared to the three months ended March 31, 2025.

Interest expense decreased for the nine months ended March 31, 2026 primarily due to a decrease of $23.6 million related to commercial paper and reverse repurchase borrowings as a result of decreases in average interest rates on commercial paper issuances and reverse repurchases of 80 and 70 basis points, respectively, offset by an increase in average reverse repurchase outstanding balances of $0.5 billion, as compared to the nine months ended March 31, 2025.

This decrease was partially offset by net increases in interest expense of $20.0 million related to the senior notes issued and redeemed during the year ended June 30, 2025.

Other (Income)/Expense, net

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2026 2025 $ Change 2026 2025 $ Change

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Other (income)/loss, net $ (75.0) $ (63.7) $ 11.3 $ (290.9) $ (256.5) $ 34.4

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.

Interest income on corporate funds increased for the three months ended March 31, 2026 due to higher average investment balances of $7.3 billion as compared to $6.3 billion for the three months ended March 31, 2025, offset by a decrease in average interest rates of 10 basis points, as compared to the three months ended March 31, 2025.

Interest income on corporate funds increased for the nine months ended March 31, 2026 due to higher average investment balances of $9.9 billion as compared to $9.0 billion for the nine months ended March 31, 2025, coupled with an increase in average interest rates of 10 basis points, as compared to the nine months ended March 31, 2025.

During the three and nine months ended March 31, 2026, the Company recognized a net gain of $2.1 million and $4.3 million, respectively, 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 Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2026 2025 YoY Growth 2026 2025 YoY Growth

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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.

Earnings before income taxes increased for the three and nine months ended March 31, 2026 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 March 31, 2026 due to contributions from client funds interest revenues, lower amortization of client contracts and lists, and operating efficiencies related to research and development, service, and implementation expenses, partially offset by increased selling and marketing expenses.

EBIT Margin increased for the nine months ended March 31, 2026 due to contributions from client funds interest revenues, lower interest expense related to commercial paper and reverse repurchase borrowings, lower amortization of client contracts and lists, 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

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Provision for Income Taxes

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.

The effective tax rate for the three months ended March 31, 2026 and 2025 was 23.7% and 23.0%, respectively.

The increase in the effective tax rate is primarily due to an increase in uncertain tax positions and a lower excess tax benefit on stock-based compensation in the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

The effective tax rate for the nine months ended March 31, 2026 and 2025 was 23.2% and 23.1%, respectively.

The increase in the effective tax rate is primarily due to a lower excess tax benefit on stock-based compensation offset by a decrease in uncertain tax positions for the nine months ended March 31, 2026 as compared to the nine months ended March 31, 2025.

Adjusted Provision for Income Taxes

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

The adjusted effective tax rate for the three months ended March 31, 2026 and 2025 was 23.7% and 23.0%, 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 adjusted effective tax rate for the nine months ended March 31, 2026 and 2025 was 23.2% 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 Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2026 2025 YoY Growth 2026 2025 YoY Growth

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Adjusted diluted EPS $ 3.37 $ 3.06 10 % $ 8.48 $ 7.75 9 %

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.

In addition to the increase in net earnings, diluted EPS increased for the three and nine months ended ended March 31, 2026 as a result of the impact of fewer shares outstanding resulting from share repurchases under our authorized share repurchase program, partially offset by the issuances of shares under our employee benefit plans.

The Company repurchased 2.6 million and 1.0 million shares in the three months ended March 31, 2026 and 2025, respectively, and repurchased 5.7 million and 3.4 million shares in the nine months ended March 31, 2026 and 2025, respectively .

Adjusted net earnings and adjusted diluted EPS reflect the changes in the components described above for the three and nine months ended March 31, 2026.

ANALYSIS OF REPORTABLE SEGMENTS

Three Months Ended % Change Six Months Ended % Change

December 31, December 31,

Three Months Ended % Change Nine Months Ended % Change

March 31, March 31,

Reported Organic constant currency 2026 2025 As

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Three Months Ended %

Change Six Months Ended %

December 31, December 31,

Change Nine Months Ended %

March 31, March 31,

2026 2025 As Reported 2026 2025 As

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$ 1,781.8 $ 1,621.9 10 % $ 4,472.5 $ 4,119.4 9 %

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2026 2025 YoY Growth 2026 2025 YoY Growth

5 unchanged sentences

Employer Services

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%.

Employer Services' revenues increased for the three months ended March 31, 2026 due to new business started from new business bookings, strong client retention, the impact of foreign currency, an increase in pricing, an increase in interest earned on funds held for clients, and an increase in our pays per control when measured on a same-store-sales basis of 1%.

Employer Services' revenues increased for the nine months ended March 31, 2026 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 when measured on a same-store-sales basis of 1%.

Earnings before Income Taxes

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,

Employer Services' earnings before income taxes increased for the three and nine months ended March 31, 2026 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, and increased selling and marketing expenses.

Employer Services' margin increased for the three months ended March 31, 2026 due to contributions from client funds interest revenues, lower amortization of client contracts and lists, and operating efficiencies related to research and development, service, and implementation expenses, partially offset by increased selling and marketing expenses.

Employer Services' margin increased for the nine months ended March 31, 2026 due to contributions from client funds interest revenues, and lower amortization of client contracts and lists, partially offset by increased selling and marketing expenses and the impact from the WorkForce Software acquisition in October 2024.

Three Months Ended Change Nine Months Ended Change

March 31, March 31,

2026 2025 $ % 2026 2025 $ %

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PEO Services' revenues excluding zero-margin benefits pass-throughs $ 736.0 $ 698.5 $ 37.5 5 % $ 1,921.5 $ 1,831.9 $ 89.6 5 %

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.

PEO Services' revenues increased for the three months ended March 31, 2026 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 March 31, 2025.

PEO Services' revenues increased for the nine months ended March 31, 2026 due to the increase in zero-margin benefits pass-throughs, and an increase in average worksite employees of 2%, as compared to the nine months ended March 31, 2025.

Earnings before Income Taxes

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.

PEO Services' earnings before income taxes decreased for the three and nine months ended March 31, 2026 due to increased selling and marketing expenses, increases in zero-margin benefits pass-through costs, and increased operating costs related to state unemployment insurance, partially offset by increased revenues discussed above.

PEO Services' margin decreased for the three months ended March 31, 2026, due to increased selling and marketing expenses, increased operating costs related to state unemployment insurance, a decrease in the pre-tax benefit from ADP Indemnity, and increases in zero-margin benefits pass-through costs, partially offset by increased revenues discussed above.

PEO Services' margin decreased for the nine months ended March 31, 2026, due to increased selling and marketing expenses, increases in zero-margin benefit pass through costs, increased operating costs related to state unemployment insurance, and a decrease in the pre-tax benefit from ADP Indemnity, 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.

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

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 recorded a pre-tax benefit of approximately $2.4 million and $4.4 million for the three and nine months ended March 31, 2026, respectively, as compared to approximately $5.6 million and $9.7 million for the three and nine months ended March 31, 2025, 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.

The primary components of “Other” are certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, severance costs, non-recurring gains and losses, the elimination of intercompany transactions, and all other interest income and expense.

The primary components of “Other” are certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, legal settlements, company-wide severance initiatives, non-recurring gains and losses, the elimination of intercompany transactions, and all other interest income and expense.

Non-GAAP Financial Measures

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

Three Months Ended % Change Six Months Ended % Change

December 31, December 31,

Three Months Ended % Change Nine Months Ended % Change

March 31, March 31,

2026 2025 As Reported 2026 2025 As Reported

4 unchanged sentences

Optimization initiatives (b) (0.3) — (1.5) —

Transformation initiatives — 0.1 — 0.1

Net (gain)/loss on ADP Ventures' investments (c) (2.1) — (4.3) —

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Income tax provision for optimization initiatives (e) 0.1 — 0.4 —

Transformation initiatives — 0.1 — 0.1

Net (gain)/loss on ADP Ventures' investments (c) (2.1) — (4.3) —

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

(Gains)/losses on these investments may result from observable price changes, changes in ownership interest, accrued interest income, 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.

(d) In the nine months ended March 31, 2025, 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.

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

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

Consolidated revenue growth as reported 7 % 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 December 31, 2025, cash and cash equivalents were $2.4 billion, which were primarily invested in time deposits and money market funds.

As of March 31, 2026, cash and cash equivalents were $3.2 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 December 31, 2025 and we have sufficient liquidity.

Our financial condition remains solid at March 31, 2026 and we have sufficient liquidity.

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

4 unchanged sentences

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 six months ended December 31, 2025 and 2024, respectively, are summarized as follows:

Six Months Ended

Our cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows for the nine months ended March 31, 2026 and 2025, respectively, are summarized as follows:

Nine Months Ended

2026 2025 $ Change

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Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents $ 7,543.3 $ (1,886.8) $ 9,430.1

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.

Net cash flows provided by operating activities increased due to growth in our business and a net favorable change in the components of operating assets and liabilities primarily due to timing of collections and payments, as compared to the nine months ended March 31, 2025.

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 $1,359.7 million, offset by a net decrease in acquisitions of businesses, primarily related to the Workforce Software acquisition, with a cash disbursement of $1,165.1 million during the nine months ended March 31, 2025.

Net cash flows provided by/(used in) financing activities changed primarily due to a net increase in the cash flow from client funds obligations of $14,896.8 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 5.7 million shares of our common stock at an average price per share of $257.01 during the nine months ended March 31, 2026, as compared to purchases of 3.4 million shares at an average price per share of $283.14 during the nine months ended March 31, 2025.

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

As of March 31, 2026, the Company had no commercial paper outstanding.

As of June 30, 2025

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

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2026 2025 2026 2025

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

As of March 31, 2026, we had $7.5 billion available to us on a committed basis under the U.S.

reverse repurchase agreements.

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.

As of March 31, 2026, the Company had no outstanding obligations related to reverse repurchase agreements.

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

Details of the reverse repurchase agreements are as follows:

Three Months Ended Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2026 2025 2026 2025

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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 December 31, 2025 under the credit facilities.

We had no borrowings through March 31, 2026 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 December 31, 2025.

All collateral on asset-backed securities is performing as expected through March 31, 2026.

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

Capital expenditures for the nine months ended March 31, 2026 were $124.6 million, as compared to $139.9 million for the nine months ended March 31, 2025.

We expect capital expenditures in fiscal 2026 to be between $160.0 million and $180.0 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 December 31, 2025) and available borrowings under our $10.6 billion committed credit facilities.

as of March 31, 2026) 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 Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2026 2025 2026 2025

9 unchanged sentences

Realized (gains)/losses on available-for-sale securities, net $ (1.9) $ 0.1 $ (3.1) $ 0.8

December 31, 2025 June 30, 2025

March 31, 2026 June 30, 2025

Net unrealized pre-tax gains/(losses) on available-for-sale securities $ (361.4) $ (425.7)

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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 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.

The annu alized interest rate earned on ou r entire portfolio increased from 3.2% for the nine months ended March 31, 2025 to 3.4% for the nine months ended March 31, 2026.

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 $20.0 million impact to earnings before income taxes over the ensuing twelve-month period ending March 31, 2027.

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 $8.0 million impact to earnings before income taxes over the ensuing twelve-month period ending March 31, 2027.

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.

15 unchanged sentences

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