ADP · Q2 2026 Earnings

Q3 FY25 macro caution → Q4 FY25 bookings reset & disclosure retreat → Q1 FY26 reaffirmation with quiet visibility trim → Q2 FY26 raise on Lyric/international with PEO trim.

Two quarters ago, ADP withdrew point margin forecasts for ES and PEO. Last quarter, ADP withdrew the PEO ex-pass-through growth guide. This quarter, that disclosure returns — and the revenue and EPS guides are raised on the back of demonstrable enterprise wins. The arc has rotated from defensive disclosure retreat to selective re-disclosure paired with confident raises, with management's posture summed up by Peter's prepared-remarks line that "the environment's stable" and "pipelines are healthy as we step into the back half."

Lyric has shifted from emerging pipeline story to landed enterprise wins. A quarter ago, Maria's framing of NextGen and Lyric was about platform readiness and bookings acceleration in the abstract. This quarter the anchor evidence is concrete: "Among our many Lyric new business wins in the second quarter were two companies with more than 20,000 employees, which represents two of our largest clients sold on the platform to date," with "more than 70% of its new business bookings and overall pipeline related to new logos as it continues to fare favorably against our competitors." The shift from "platform momentum" language to "two of our largest deals ever" with a 70% new-logo composition signals competitive displacement of legacy enterprise HCM incumbents — the load-bearing thesis for ADP's upmarket move.

International has been reframed from a long-cycle margin headwind to a near-term bookings driver. Through FY25 and into Q1, international was a "build" story. This quarter Maria flagged that "the performance we saw specifically in the second quarter with respect to the enterprise space and international or Lyric and our global payroll offers were a larger contributor to the bookings narrative than perhaps in previous [quarters]," anchored by a 75,000-employee European bank win. International is now a current contributor to the bookings line, not a future option.

PEO is where the tone turned defensive against an otherwise bullish print. Peter directly acknowledged: "PEO new business bookings growth was solid in Q2, but did come in slightly below our expectations. This impact along with some further moderation in PEO pays-per-control growth, weighed on our average worksite employee growth in the quarter. Accordingly, we are now expecting average worksite employee growth of about 2% in fiscal 2026." This is the second consecutive quarter of softer-than-expected PEO signals, and the WSE cut from +2–3% to "about 2%" is the only consequential trim on this print. Against the Lyric upmarket strength, the message is that ADP's growth mix is rotating toward enterprise and international, with PEO settling into a lower-velocity equilibrium than Investor Day framing implied.

Retention framing remains cautious despite record client satisfaction. Peter's continued framing of "a bit of moderation as it relates to things like out of business" alongside reaffirmed -10 to -30bps retention guidance shows management is still planning for normalization of pandemic-era retention benefits — a posture that hasn't loosened despite the broader confidence on the print.