Paycom Stock Jumps 10% as Q2 Earnings and Revenues Crush Estimates

Paycom Software, Inc.'s PAYC shares gained 9.7% during Wednesday’s extended trading session after the company reported better-than-expected second-quarter 2025 results. The online payroll and human resource technology provider reported non-GAAP earnings of $2.06 per share, which beat the Zacks Consensus Estimate of $1.78.

Moreover, the bottom line increased 27.2% year over year, mainly driven by higher revenues, operating efficiency and lower income taxes. Paycom has an impressive earnings surprise history. It beat on earnings in each of the trailing four quarters, the average surprise being 10.8%.

Paycom reported revenues of $483.6 million, which outpaced the consensus mark of $472 million. The top line increased 10.5% year over year, primarily benefiting from increased sales momentum, international expansion and artificial intelligence (AI) integration in its products.

Paycom’s Q2 in Detail

Paycom’s Recurring revenues (representing 94% of the total revenues) improved 12.2% to $455.1 million in the second quarter. Our estimate for the company’s Recurring revenues was pegged at $445.5 million.

Paycom’s revenues from the Implementation and Other segment decreased to $28.5 million from $32 million in the year-ago quarter and contributed 6% to total sales. Our estimate for the segment’s revenues was pegged at $26.8 million.

Adjusted gross profits increased 12.4% from the year-ago period to $402.3 million. Moreover, the adjusted gross margin expanded 140 basis points (bps) on a year-over-year basis to 83.2%.

Paycom’s adjusted EBITDA rose 24.2% year over year to $198.3 million. The adjusted EBITDA margin improved from 36.5% to 41%.

Paycom’s Balance Sheet & Cash Flow

Paycom exited the second quarter with cash and cash equivalents of $532.2 million compared with $520.8 million recorded in the previous quarter. The company had no debt as of June 30, 2025.

In the second quarter, PAYC generated operating cash flow of approximately $122.5 million, paid out $21.8 million in dividends and bought back $32.6 million worth of its common stock. During the first half of 2025, it generated operating cash flow of $305 million.

The company had $1.15 billion remaining under its buyback authorization as of June 30, 2025. Earlier on Aug. 4, Paycom declared its upcoming quarterly dividend of 37.5 cents per share, payable on Sept. 8, 2025.

Paycom Raises 2025 Guidance

Buoyed by stronger-than-expected second-quarter performance, Paycom raised its guidance for 2025. It now forecasts revenues to be in the band of $2.045-$2.055 billion, up from the previous projected range of $2.023-$2.038 billion. The Zacks Consensus Estimate is pegged at $2.03 billion.

The company still projects recurring revenues to grow 9% year over year. However, it raised the forecast for revenues from interest on funds held for clients to $113 million from $110 million.

Paycom now expects its 2025 adjusted EBITDA to be between $872 million and $882 million, translating to an EBITDA margin of approximately 43% at the midpoint. Earlier, it had forecasted adjusted EBITDA between $843 million and $858 million.

Paycom’s Zacks Rank & Stocks to Consider

Currently, PAYC carries a Zacks Rank #4 (Sell).

Some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector are Bumble BMBL, Arista Networks ANET and MongoDB MDB. Bumble sports a Zacks Rank #1 (Strong Buy) at present, while Arista Networks and MongoDB each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Bumble’s 2025 earnings has been revised upward by a penny to $1.05 per share in the past 30 days, implying a strong improvement from the loss of $4.61 reported in 2024. Bumble shares have declined 17.9% year to date.

The Zacks Consensus Estimate for Arista Networks’ 2025 earnings has been revised downward by a penny to $2.57 per share over the past seven days and suggests a year-over-year increase of 13.2%. Arista Networks shares have rallied 25.7% year to date.

The Zacks Consensus Estimate for MongoDB’s fiscal 2026 earnings has been revised upward by 4 cents to $3.07 per share in the past 60 days, calling for a 16.1% year-over-year decline. MongoDB shares have risen 1.2% year to date.

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This article originally published on Zacks Investment Research (zacks.com).

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