Automatic Data Processing’s first quarter results beat Wall Street’s revenue and profit expectations, reflecting steady demand for payroll and HR services despite a mixed macroeconomic backdrop. Management attributed performance to growth in its U.S. Employer Services business, continued client retention improvements, and strong momentum in its Professional Employer Organization (PEO) segment. CEO Maria Black highlighted that new business bookings in the U.S. were robust across small, mid-sized, and enterprise clients while international bookings softened due to macro uncertainty. Black said, “Employer Services retention again modestly exceeded our expectations, declining slightly compared to the prior year.”
Is now the time to buy ADP? Find out in our full research report (it’s free).
ADP (ADP) Q1 CY2025 Highlights:
- Revenue: $5.55 billion vs analyst estimates of $5.49 billion (5.7% year-on-year growth, 1.1% beat)
- Adjusted EPS: $3.06 vs analyst estimates of $2.97 (2.9% beat)
- Adjusted EBITDA: $1.76 billion vs analyst estimates of $1.73 billion (31.6% margin, 1.2% beat)
- Operating Margin: 29.4%, in line with the same quarter last year
- Worksite Employees: 751,000, up 25,000 year on year
- Market Capitalization: $126.4 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions ADP’s Q1 Earnings Call
-
Ramsey El-Assal (Barclays) asked about the international bookings slowdown and future embedded payroll opportunities. CEO Maria Black attributed softness to macro uncertainty but emphasized strong pipelines and the potential of the Fiserv partnership to expand distribution.
-
Dan Dolev (Mizuho) questioned the degree of client hesitation versus actual hiring slowdown. CFO Don McGuire clarified that, while economic uncertainty is present, core client activity and hiring remain stable, and ADP’s base is holding up well.
-
Mark Marcon (Baird) inquired about PEO demand and integration progress of WorkForce Software. Black reported continued PEO growth and strong client interest in new integrated offerings, with recent wins driven by combined solutions.
-
Tien-tsin Huang (JPMorgan) pressed for details on Employer Services revenue deceleration and the impact of the PEI Mexico acquisition. McGuire explained expected calendar effects, foreign exchange, and confirmed the acquisition is small but strategically valuable for Latin American expansion.
-
James Faucette (Morgan Stanley) asked about client PEO behavior amid macro pressure and ADP’s competitive differentiation. Black pointed to strong PEO retention and highlighted the benefits of ADP’s fully insured model and extensive distribution engine.
Catalysts in Upcoming Quarters
In future quarters, the StockStory team will be monitoring (1) trends in international bookings and the pace at which large, multi-country deals convert from pipeline to closed business, (2) progress toward integrating technology solutions like Workforce Software and generative AI features across core platforms, and (3) the traction of embedded payroll partnerships, particularly with Fiserv, as a driver of incremental client growth. We will also watch for further developments in leadership transition and updates on client hiring trends.
ADP currently trades at $311.49, up from $295.68 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
Our Favorite Stocks Right Now
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
