Paylocity Q2 Earnings Beat Estimates, Revenues Increase Y/Y

Paylocity PCTY reported second-quarter fiscal 2026 non-GAAP net income of $1.85 per share, beating the Zacks Consensus Estimate by 17.83%. Paylocity's revenues rose 10.4% year over year to $416.1 million and surpassed the Zacks Consensus Estimate by 1.78%.

Top-line growth can be attributed to an 11.3% increase in recurring and other revenues (93% of the total revenues) to $387 million. Interest income on funds held for clients (7% of total revenues) declined 0.4% year over year to $29.2 million.

Paylocity Holding Corporation Price, Consensus and EPS Surprise

Paylocity Holding Corporation price-consensus-eps-surprise-chart | Paylocity Holding Corporation Quote

Quarterly Details of PCTY

Paylocity's adjusted gross profit was $309.5 million, up 11.2% from the year-ago period. The adjusted gross margin expanded 50 basis points (bps) to 74.4%. The non-GAAP operating income rose 17.8% year over year to $119.1 million. The non-GAAP operating margin expanded 180 bps to 28.6%. Adjusted EBITDA rose 13.1% from the year-ago quarter to $142.7 million. The adjusted EBITDA margin for the second quarter of fiscal 2026 is up 90 bps to 34.3%.

Balance Sheet & Cash Flow Details

As of Dec. 31, 2025, Paylocity's cash and cash equivalents were $162.5 million compared with $398.1 million as of June 30, 2025. Long-term debt totaled $81.3 million as of the second quarter of fiscal 2026, representing borrowings under the credit facility to fund the acquisition of Airbase Inc. on Oct. 1, 2024. This reflects approximately $81.3 million repaid on the outstanding balance during the first six months of fiscal year 2026. 

Net cash provided by operations for the first six months of fiscal 2026 was $203.5 million compared to $145.7 million for the first six months of fiscal year 2025. 

Paylocity repurchased shares worth $100 million during the fiscal second quarter.

PCTY Provides Q2 & FY26 Updated Guidance

For the second quarter of fiscal 2026, the company expects total revenues of $405.5-$410.5 million, indicating 8% growth from the year-ago period's actual. 

Adjusted EBITDA is projected to be in the range of $131.5-$135.5 million. 

For fiscal 2026, Paylocity projects total revenues between $1.715 billion and $1.730 billion, implying 8% growth from the year-ago period's actual. 

Adjusted EBITDA is expected to be between $615 million and $625 million.

Long-Term Financial Targets Update

Paylocity announced updated long-term financial targets reflecting sustained revenue growth, increasing profitability and scale. The company raised its total revenue target from $2 billion or more to $3 billion. Adjusted gross profit margin targets increased to 80% or higher from the previous range of 75-80%. Non-GAAP research and development remains targeted at 10-15% of revenue, while non-GAAP sales and marketing was reduced to a 15-20% target from the previous 20-25% range. Non-GAAP general and administrative expenses are targeted at 5-7%, narrowed from the previous 5-10% range. Adjusted EBITDA margin targets were increased to 40-45% from 35-40%, and free cash flow margin targets expanded to 25-30% from 20-25%. Stock-based compensation is targeted at 5% of revenue, down from the previous target of less than 10%.

PCTY’s Zacks Rank & Stocks to Consider

PCTY currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Computer and Technology sector include Arista Networks ANET, Advanced Energy AEIS and Amkor Technology AMKR.

While Amkor Technology sports a Zacks Rank #1 (Strong Buy), Arista Networks and Advanced Energy currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Arista Networks have declined 7.7% in the trailing six-month period. Arista Networks is set to report fourth-quarter 2025 results on Feb. 12.

Shares of Advanced Energy have surged 75.8% in the trailing six-month period. Advanced Energy is slated to report fourth-quarter 2025 results on Feb. 10.

Amkor Technology shares have surged 93.5% in the trailing six-month period. Amkor Technology is set to report fourth-quarter 2025 results on Feb. 9.

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

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