ADP Reports 6% Revenue Growth to $5.55 Billion in Q3 Fiscal 2025

Automatic Data Processing, Inc. (ADP) reported a strong financial performance for the third quarter of fiscal 2025, with total revenues reaching $5.55 billion, a 6% increase from $5.25 billion in the same period last year. For the nine months ended March 31, 2025, revenues totaled $15.43 billion, reflecting a 7% growth compared to $14.43 billion for the prior year. The company's net earnings for the quarter were $1.25 billion, or $3.06 per diluted share, up from $1.18 billion, or $2.88 per diluted share, in the previous year. For the nine-month period, net earnings increased to $3.17 billion, or $7.75 per diluted share, compared to $2.92 billion, or $7.07 per diluted share, in the prior year.

The growth in revenue was attributed to several factors, including new business bookings, strong client retention, and an increase in pricing. Additionally, the company benefited from an increase in interest on funds held for clients, which rose to $355.2 million for the quarter, up from $320.8 million a year earlier. The increase in interest income was driven by a 6.7% rise in average client funds balances to $44.5 billion and a slight increase in the average interest rate earned. The company also noted that the acquisition of WorkForce Software, completed in October 2024, contributed positively to revenue growth.

In terms of operational metrics, ADP reported a 1% increase in its "pays per control" metric, which measures the number of employees on ADP clients' payrolls, and a 3% increase in average worksite employees for its Professional Employer Organization (PEO) services. The company’s employee headcount remained stable, with a focus on enhancing its workforce management capabilities through strategic acquisitions, including the recent purchase of PEI in Mexico, which aims to bolster its global payroll services.

ADP's total expenses for the quarter were $3.99 billion, up from $3.77 billion in the prior year, primarily due to increased operating expenses and higher selling, general, and administrative costs. The company reported a 19% increase in interest expense, attributed to the issuance of $1 billion in senior notes in September 2024. Despite the rise in expenses, the company achieved an earnings before income taxes margin of 29.2%, slightly down from 29.4% a year ago, while the adjusted EBIT margin expanded by 60 basis points to 29.3%.

Looking ahead, ADP remains optimistic about its growth trajectory, emphasizing its commitment to investing in technology and enhancing client services. The company plans to continue leveraging its scale and expertise in Human Capital Management (HCM) solutions to drive future growth. With a solid financial foundation, including $2.68 billion in cash and cash equivalents and access to $10.3 billion in credit facilities, ADP is well-positioned to meet its operational and strategic objectives in the coming quarters.