Paycom Stock Declines 8% as Q3 Earnings Miss Estimates, Sales Rise Y/Y

Paycom Software, Inc. PAYC shares plunged 8.5% during Wednesday’s extended trading session after the company reported lower-than-expected third-quarter 2025 results. The online payroll and human resource technology provider reported non-GAAP earnings of $1.94 per share, which missed the Zacks Consensus Estimate of $1.96.

However, the bottom line increased 16.2% year over year, mainly driven by higher revenues.

Paycom reported revenues of $493.3 million, which outpaced the consensus mark of $492.4 million. The top line increased 9.1% year over year, primarily benefiting from increased sales momentum, international expansion and artificial intelligence (AI) integration in its products.

Paycom’s Q3 in Detail

Paycom’s Recurring revenues (representing 94.6% of the total revenues) improved 10.6% to $466.5 million in the third quarter. Our estimate for the company’s Recurring revenues was pegged at $464.5 million.

Paycom’s revenues from the Implementation and Other segment decreased to $26.8 million from $30.1 million in the year-ago quarter and contributed 5.4% to total sales. Our estimate for the segment’s revenues was pegged at $27.1 million.

Adjusted gross profits increased 11.9% from the year-ago period to $411.3 million. Moreover, the adjusted gross margin expanded 210 basis points (bps) on a year-over-year basis to 83.4%.

Paycom’s adjusted EBITDA rose 13.4% year over year to $194.3 million. The adjusted EBITDA margin improved from 37.9% to 39.4%.

Paycom’s Balance Sheet & Cash Flow

Paycom exited the third quarter with cash and cash equivalents of $375 million compared with $532.2 million recorded in the previous quarter. The company had no debt as of Sept. 30, 2025.

In the third quarter, PAYC generated operating cash flow of approximately $177.8 million, paid out $21.1 million in dividends and bought back $223.4 million worth of its common stock. During the first nine months of 2025, it generated operating cash flow of $482.8 million, paid out $64.1 million in dividends and bought back $218.9 million worth of its common stock.

The company had $927 million remaining under its buyback authorization as of Sept. 30, 2025. Earlier on Nov. 3, Paycom declared its upcoming quarterly dividend of 37.5 cents per share, payable on Dec. 8, 2025.

Paycom Updates 2025 Guidance

Paycom reiterates its revenue guidance for 2025. It still forecasts revenues to be in the band of $2.045-$2.055 billion. The Zacks Consensus Estimate is pegged at $2.05 billion, indicating year-over-year growth of 8.9%.

The company now projects recurring revenues to grow 10% year over year, up from 9% forecasted earlier. However, it still forecasts revenues from interest on funds held for clients to be $113 million.

Paycom still expects its 2025 adjusted EBITDA between $872 million and $882 million, translating to an EBITDA margin of approximately 43% at the midpoint.

Paycom’s Zacks Rank & Stocks to Consider

Currently, PAYC carries a Zacks Rank #3 (Hold).

Reddit Inc. RDDT, DocuSign DOCU and Amphenol APH are some better-ranked stocks that investors can consider in the Zacks Computer and Technology sector. Reddit, DocuSign and Amphenol each sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Reddit’s full-year 2025 earnings is pegged at $2.35 per share, revised upward by 25% over the past seven days and suggests a year-over-year increase of 170.6%. Reddit shares have soared 20.1% year to date.

The Zacks Consensus Estimate for DocuSign’s fiscal 2026 earnings has been revised upward by 5 cents over the past 60 days to $3.69 per share, calling for an increase of 3.9% year over year. DocuSign shares have plunged 21.1% year to date.

The Zacks Consensus Estimate for Amphenol’s full-year 2025 earnings has headed northward to $3.22 per share from $3.03 over the past 30 days, implying 70.4% year-over-year growth. Amphenol shares have surged 99.9% year to date.

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

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