Executive Summary
In Q3 2025, Automatic Data Processing Inc (ADP) demonstrated robust revenue performance with a reported $5.553 billion, marking a 10% quarter-over-quarter increase and a 5.69% year-over-year growth. The company's gross profit also rose significantly to $2.649 billion, reflecting a gross profit margin of 48% and underlining the efficiency of ADP's cloud-based human capital management solutions. However, operating income suffered a steep decline of 92.65% year-over-year, resulting in just $114 million, due primarily to increased operational expenses and higher interest costs due to debt repayments.
Moving forward, management has indicated a cautious outlook, emphasizing their intention to manage expenses carefully while continuing to invest in strategic initiatives that could enhance profitability in the coming quarters. The leadership underscored the necessity of short-term adjustments to return to a healthier operating income trajectory, pivotal for long-term investor confidence.
Key Performance Indicators
QoQ: -88.89% | YoY:-92.65%
Key Insights
**Revenue Growth**: ADP's revenue reached $5.553 billion in Q3 2025, a 10% increase from Q2 2025 and a 5.69% growth compared to Q3 2024.
**Gross Profit**: The gross profit for the quarter stood at $2.649 billion, up 14.87% from the previous quarter, reflecting a gross profit margin of 48%.
**Net Income**: The net income for the quarter was reported at $1.249 billion, showcasing an increase of 29.72% quarter-over-quarter and 5.45% year-over-year.
**Operating Income**: ADP's operating...
Financial Highlights
Revenue Growth: ADP's revenue reached $5.553 billion in Q3 2025, a 10% increase from Q2 2025 and a 5.69% growth compared to Q3 2024.
Gross Profit: The gross profit for the quarter stood at $2.649 billion, up 14.87% from the previous quarter, reflecting a gross profit margin of 48%.
Net Income: The net income for the quarter was reported at $1.249 billion, showcasing an increase of 29.72% quarter-over-quarter and 5.45% year-over-year.
Operating Income: ADP's operating income was significantly impacted, declining by 92.65% year-over-year to $114 million, highlighting challenges in operational efficiency amid rising costs.
Cash Flow: Operating cash flow provided was strong at $1.526 billion, with free cash flow also healthy at $1.489 billion, reflecting good cash management despite increased expenditures.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
5.55B |
5.69% |
10.00% |
| Gross Profit |
2.65B |
6.57% |
14.87% |
| Operating Income |
114.10M |
-92.65% |
-88.89% |
| Net Income |
1.25B |
5.45% |
29.72% |
| EPS |
3.07 |
6.23% |
30.08% |
Key Financial Ratios
operatingProfitMargin
29.4%
operatingCashFlowPerShare
$3.75
freeCashFlowPerShare
$3.66
dividendPayoutRatio
50.3%
Management Commentary
Market Position: Management emphasized, "We are committed to maintaining our leadership in the cloud-based HCM market while navigating current market challenges."
Future Strategy: On future investments, management stated, "To enhance our capability, we are focusing on strategic technological advancements that drive efficiency and create value for our clients. However, we understand that maintaining operational discipline is paramount during this investment phase."
Cost Management: Acknowledging rising costs, they remarked, "We have implemented operational excellence initiatives aimed at reducing waste and improving margins, but this will take time to reflect in our bottom line."
Management's outlook reflects a balancing act between necessary investments and controlling costs amid an evolving market.
"We are committed to maintaining our leadership in the cloud-based HCM market while navigating current market challenges."
â Management
"To enhance our capability, we are focusing on strategic technological advancements that drive efficiency and create value for our clients. However, we understand that maintaining operational discipline is paramount during this investment phase."
â Management
Forward Guidance
Management has provided cautious guidance for the upcoming quarters, anticipating continued revenue growth but highlighting the necessity of stringent cost management to bolster operating income. Key investment areas include cloud innovations and enhancements in service delivery, with a target to stabilize operating margins by Q1 2026. Longer-term, ADP remains focused on expanding its market share in small to medium enterprises. Investors are advised to monitor operational efficiency and any fluctuations in expenses closely as crucial indicators of ADP's financial health.