Paycom's Q4 Earnings Surpass Expectations, Revenues Rise Y/Y

Paycom Software, Inc. PAYC reported better-than-expected fourth-quarter 2025 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate. The online payroll and human resource technology provider reported non-GAAP earnings of $2.45 per share, which beat the Zacks Consensus Estimate of $2.44.

Paycom’s bottom line increased 5.6% year over year, mainly driven by higher revenues, operating efficiency and lower income taxes. Paycom’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing once, the average surprise being 5.7%.

Paycom reported revenues of $544.3 million, which beat the consensus mark of $542.7 million. The top line increased 10.2% year over year, primarily benefiting from increased sales momentum, international expansion and artificial intelligence (AI) integration in its products.

Paycom Software, Inc. Price, Consensus and EPS Surprise

Paycom Software, Inc. price-consensus-eps-surprise-chart | Paycom Software, Inc. Quote

Paycom’s Q4 in Detail

Paycom’s Recurring revenues (representing 95% of the total revenues) improved 11.2% to $517.1 million in the fourth quarter. Our estimate for the company’s Recurring revenues was pegged at $515.2 million.

Paycom’s revenues from the Implementation and Other segment decreased to $27.2 million from $29 million in the year-ago quarter and contributed 5% to total sales. Our estimate for the segment’s revenues was pegged at $27.1 million.

Adjusted gross profits increased 11.3% from the year-ago period to $459.4 million. The adjusted gross margin expanded 80 basis points (bps) on a year-over-year basis to 84.4%.

Paycom’s adjusted EBITDA rose 9.9% year over year to $236.3 million. The adjusted EBITDA margin contracted 10 bps from 43.5% to 43.4%.

Paycom’s Balance Sheet & Cash Flow

Paycom exited the fourth quarter with cash and cash equivalents of $370 million compared with $375 million recorded in the previous quarter. The company had no debt as of Dec. 31, 2025.

In the fourth quarter of 2025, PAYC generated operating cash flow of approximately $196.1 million, paid out $20.6 million in dividends and bought back $108.8 million worth of its common stock. In 2025, it generated an operating cash flow of $678.9 million, paid out $84.8 million in dividends and bought back $325.5 million worth of its common stock.

The company had $1.1 billion remaining under its buyback authorization as of Dec. 31, 2025. Earlier on Feb. 10, Paycom declared its upcoming quarterly dividend of 37.5 cents per share, payable on March 23, 2026.

Paycom Initiates 2026 Guidance

Paycom initiated its revenue guidance for 2026. It forecasts revenues to be in the band of $2.175-$2.195 billion. The Zacks Consensus Estimate is pegged at $2.23 billion, indicating year-over-year growth of 8.8%.

The company projects recurring revenues to grow 7% year over year. PAYC forecasts revenues from interest on funds held for clients to be $103 million.

Paycom expects its 2026 adjusted EBITDA to be between $950 million and $970 million, translating to an EBITDA margin of approximately 44% at the midpoint.

Paycom’s Zacks Rank & Stocks to Consider

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

Amphenol APH, Applied Materials AMAT and Analog Devices ADI are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. Amphenol, Applied Materials and Analog Devices carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Amphenol’s earnings for 2026 has been revised upwards by 6.4% to $4.32 per share over the past 30 days and suggests a year-over-year increase of 29.3%. Amphenol shares have jumped 31.1% in the past six months.

The Zacks Consensus Estimate for Applied Materials’ fiscal 2026 earnings is pegged at $9.62 per share, up from the prior estimate of $9.54 per share over the past 30 days, calling for a year-over-year surge of 2.1%. Applied Materials shares have returned 79.2% in the past six months.

The Zacks Consensus Estimate for Analog Devices’ fiscal 2026 earnings is pegged at $9.97 per share, up from the prior estimate of $9.76 per share over the past 30 days, suggesting year-over-year growth of 27.9%. Analog Devices shares have surged 41.8% in the past six months.

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

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