ADP

Industrials

Automatic Data Processing

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Market Data

Financials

XBRL · SEC EDGAR

2008–2025(18yr)

Revenue

Net Income

Free CF

Metric	FY 2008	FY 2009	FY 2010	FY 2011	FY 2012	FY 2013	FY 2014	FY 2015	FY 2016	FY 2017	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022	FY 2023	FY 2024	FY 2025Latest	YoY
Revenue	$8.7B	$8.8B	$8.9B	$9.9B	$10.7B	$11.3B	$12.2B	$10.9B	$11.7B	$12.4B	$13.3B	$14.2B	$14.6B	$15.0B	$16.5B	$18.0B	$19.2B	$20.6B	+7.1%
Gross Profit	$4.1B	$4.0B	$3.9B	$4.1B	$4.4B	$4.7B	$5.0B	$4.5B	$4.8B	$5.1B	$5.5B	$6.1B	$6.1B	$6.4B	$7.0B	$8.1B	$8.7B	$9.5B	+8.5%
Gross Margin	46.7%	45.4%	43.7%	42.0%	41.5%	41.2%	40.8%	41.2%	41.4%	41.5%	41.4%	43.0%	42.1%	42.4%	42.6%	44.7%	45.4%	46.0%	+0.6pp
Net Income	$1.2B	$1.3B	$1.2B	$1.3B	$1.4B	$1.4B	$1.5B	$1.5B	$1.5B	$1.7B	$1.6B	$2.3B	$2.5B	$2.6B	$2.9B	$3.4B	$3.8B	$4.1B	+8.7%
Net Margin	14.1%	15.1%	13.6%	12.7%	13.0%	12.4%	12.4%	13.3%	12.8%	14.0%	12.2%	16.2%	16.9%	17.3%	17.9%	18.9%	19.5%	19.8%	+0.3pp
Free Cash Flow	$1.6B	$1.4B	$1.6B	$1.5B	$1.8B	$1.4B	$1.6B	$1.7B	$1.7B	$1.9B	$2.3B	$2.5B	$2.9B	$2.9B	$2.9B	$4.0B	$3.9B	$4.8B	+20.8%
FCF Margin	18.2%	15.9%	17.7%	15.4%	16.6%	12.4%	13.1%	16.0%	14.5%	15.2%	17.3%	17.8%	19.6%	19.4%	17.7%	22.2%	20.6%	23.2%	+2.6pp
EPS (Diluted)	$2.34	$2.63	$2.40	$2.52	$2.82	$2.89	$3.14	$3.05	$3.25	$3.85	$3.66	$5.24	$5.70	$6.07	$7.00	$8.21	$9.10	$9.98	+9.7%

Total Debt$4.0B

Cash & Equiv.$3.3B

Net Debt$626.9M

4 min read

1. THE BIG PICTURE

Automatic Data Processing is attempting a high-stakes transition from a legacy service provider to an "agentic AI" powerhouse, using its massive scale—covering 42 million workers—as a proprietary data moat that pure-software competitors cannot easily replicate. While its growth is slower than cloud-native peers, its ability to integrate generative AI into the "hire to retire" employee lifecycle suggests it is focused on defending its 1.1 million-client base through deep operational integration rather than raw market share acquisition.

2. WHERE THE RISKS HIT HARDEST

The "industry-leading data set" that Automatic Data Processing cites as its primary competitive advantage is also its greatest liability; a cybersecurity breach or system disruption threatens this core strength because Automatic Data Processing handles vast volumes of personal information and client funds (10-K Item 1A). Furthermore, Automatic Data Processing’s "unmatched global footprint" across 140 countries is threatened by the risk of regulatory and compliance failure, where a single lapse in navigating complex foreign laws could lead to the "suspension of services" and significant reputational damage (10-K Item 1A). Finally, the strategic priority of "leading with best-in-class HCM technology" is directly challenged by the risk of technological obsolescence, as the emergence of AI could render current products obsolete if Automatic Data Processing fails to innovate at the pace of the broader market.

3. WHAT THE NUMBERS SAY TOGETHER

The financial data reveals a business that prioritizes earnings quality and shareholder returns over aggressive top-line expansion. While Automatic Data Processing is the revenue leader in its peer group at $21.1 billion, its 7.1% TTMTTMTrailing Twelve Months — the most recent full year of financial data, updated on a rolling basis each quarter revenue growth ranks 5th of 6, trailing high-growth firms like ServiceNow (+20.9%) and Intuit (+15.6%) (Peer Benchmarking). However, Automatic Data Processing successfully converts this growth into higher profits; in the most recent quarter, net earnings grew 10% despite revenue only increasing 6%, reflecting strong execution and margin discipline (8-K).

This divergence between revenue and earnings growth is structural, supported by management’s guidance for 50 to 70 basis points of adjusted EBIT margin expansion in fiscal 2026 (8-K). With a net debt of $1.6 billion against $4.3 billion in annual free cash flow, the balance sheet is exceptionally lean, carrying a net leverage ratio of just 0.4x (CAPM analysis). Short interest remains low at 2.8% of the float, suggesting the market views Automatic Data Processing’s steady-state trajectory as credible.

4. IS IT WORTH IT AT THIS PRICE?

At 18.1x Forward P/EP/EPrice-to-Earnings ratio — share price divided by annual earnings per share; how much investors pay per dollar of profit. Higher P/E = higher growth expectations, Automatic Data Processing is valued exactly in line with the peer median (Peer Benchmarking). The market is pricing in approximately 3.7% long-term growth, which appears well-supported by Automatic Data Processing’s actual trajectory of 7.1% TTMTTMTrailing Twelve Months — the most recent full year of financial data, updated on a rolling basis each quarter revenue growth and its raised guidance for 9% to 10% adjusted EPSEPSEarnings Per Share — the company's net profit divided by its share count; the most common per-share profitability metric growth (CAPM analysis, 8-K).

The valuation is further supported by a 3.0% dividend yield—the second-highest among its peers—and a 1.7% buyback yield, offering a total shareholder return profile that is more attractive than more expensive peers like Cintas, which trades at 36.4x Forward P/EP/EPrice-to-Earnings ratio — share price divided by annual earnings per share; how much investors pay per dollar of profit. Higher P/E = higher growth expectations (Peer Benchmarking). While its 46.2% gross margin is lower than pure-software peers like Intuit (80.9%), this is a function of its high-touch service model and PEO segment, which includes zero-margin benefits pass-throughs (10-Q). The current price is justified if Automatic Data Processing can maintain its 20.4% FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders margin while successfully rolling out its AI-enabled "Lyric HCM" platform to its massive client base.

5. WHAT WOULD CHANGE THIS VIEW?

Cautious if PEO average worksite employee growth (currently 2%) turns negative, which would signal that economic volatility is beginning to impact the small-to-mid-sized business sector (8-K).
Constructive if the average yield on client funds exceeds the anticipated 3.4%, as the projected $1.31 billion to $1.33 billion in interest income provides a high-margin buffer to the bottom line (8-K).
Cautious if "U.S. pays per control" growth (currently 1%) stalls, indicating that the core Employer Services segment is losing momentum in a softening labor market (10-Q).

6. BOTTOM LINE

Structural Advantage: Unmatched data scale derived from 42 million workers and a global compliance infrastructure that creates significant switching costs for multinational corporations. Bottom Line: Automatic Data Processing is a premier defensive compounder that is fairly valued for its ability to deliver consistent earnings growth and superior capital returns.

Source: Synthesis · LLM Analysis

3 min read

1. Top 5 Material Risks

Regulatory and Compliance: Automatic Data Processing is subject to a wide range of U.S. and foreign laws; failure to comply can lead to the suspension of services, civil and criminal penalties, and substantial costs.
Cybersecurity and Data Privacy: Automatic Data Processing is a frequent target for unauthorized parties due to the volume of personal information and client funds it handles; a successful breach could result in the loss of data or theft of funds.
System Disruptions: Automatic Data Processing relies on complex data processing systems; any failure or disablement of these systems, including those operated by third-party vendors, could disrupt operations and lead to financial loss.
Technological Obsolescence: The Human Capital Management (HCM) industry is subject to rapid change, including the emergence of artificial intelligence; failure to upgrade technology to meet client preferences could diminish demand for services.
Economic and Market Volatility: A slowdown in the economy or changes in employment levels can negatively impact Automatic Data Processing’s business, as many contracts blend base fees with per-employee fees.

2. Company-Specific Risks

Professional Employer Organization (PEO) Liability: As a co-employer, Automatic Data Processing may be liable for wages and taxes of worksite employees if clients fail to remit payments, a risk that intensifies during banking system stress.
Client Funds Investment Strategy: Automatic Data Processing invests client funds in marketable securities; a reduction in employment levels or financial market disruption may force the sale of these securities, potentially resulting in recognized losses.
Activist Stockholder Actions: Proposals from activist stockholders may divert the attention of senior management and the Board of Directors, potentially disrupting business strategies and creating uncertainty for partners and clients.
Dependency on Banking Partners: Because Automatic Data Processing relies on financial institutions to execute money movement, stricter regulatory requirements on banks regarding money services businesses may limit the scope of services available to Automatic Data Processing.

3. Regulatory/Legal Risks

Anti-Corruption and Anti-Money Laundering: Automatic Data Processing is subject to the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010, and the Bank Secrecy Act; violations could result in significant fines and restricted business activities.
Data Protection Frameworks: Automatic Data Processing must comply with the EU General Data Protection Regulation (GDPR) and the California Privacy Rights Act (CPRA), which impose strict requirements on the transfer and processing of personal information.
Artificial Intelligence Regulation: Emerging legislation, such as the EU Artificial Intelligence Act, may impose costly requirements or product liability risks on Automatic Data Processing’s ability to leverage AI and machine learning.
Tax Credit Services: Changes in federal, state, or local tax laws regarding tax credits could adversely impact the revenue generated by Automatic Data Processing’s Tax Credit Services business.

4. Financial Impact Map

Regulatory Non-Compliance → Results of Operations and Financial Condition → Potential for civil and criminal penalties, fines, and suspension of services. Cybersecurity Breach → Results of Operations → Potential for liability, litigation, regulatory sanctions, and loss of client confidence leading to churn. System/Data Center Disruption → Results of Operations and Financial Condition → Potential for financial loss, liability to clients, and loss of clients. Technological Obsolescence → Earnings → Potential for impairment of goodwill or intangibles and significant charges to earnings if product development investments fail. Economic Slowdown/Employment Decline → Interest Income and Revenue → Decline in client fund obligations reduces interest income; per-employee fee structures lead to lower revenue.

Source: 10-K Item 1A · LLM Analysis

Recent Filings

Form	Filed	Period
10-Q	Jan 2026	Dec 2025
8-K	Jan 2026	—
14A	Sep 2025	—
10-K	Aug 2025	Jun 2025