Key Highlights

● Fiscal first-quarter Revenue rose 6% to $5.49 billion, with adjusted EPS of $2.82.

● Adjusted EBIT Margin widened by 1.3 percentage points to 26.8%.

● Interest on client funds jumped 15% to $329.3 million at a 3.6% average yield.

● The company raised its outlook for revenue growth and adjusted EPS growth.

Automatic Data Processing (NASDAQ:ADP) shares were higher before Friday's open. A pre-market table showed the stock at $293.25, up 2.51%, as of 8:23 a.m. ET, with a note citing fiscal first-quarter Earnings of $2.82 per share and revenue of $5.5 billion as a double beat.

Payroll giant extends its gains

Those results came out before the market opened on Wednesday, Oct. 28, so Friday's gain is not a reaction to new numbers. No fresh company announcement on Friday was found. The move likely reflects continued buying after the report plus the market's rotation away from technology, although that is an inference.

Nasdaq-100 futures were down about 2.6% around 8 a.m. ET, according to market quotes, after Amazon (NASDAQ:AMZN) and Intel (NASDAQ:INTC) results revived fears about AI spending. ADP, which sells payroll, HR and benefits services, offers investors a steady, subscription-like Business that is not tied to the AI Capital spending cycle.

Inside the quarter

Revenue for the three months ended Sept. 30 rose 6% to $5.49 billion, according to ADP's earnings release. Diluted Earnings per Share rose 14% to $2.83, and adjusted EPS increased 13% to $2.82. Adjusted EBIT margin widened by 1.3 percentage points to 26.8%.

Employer Services revenue grew 6% to $3.69 billion, and PEO Services, which handles HR for small businesses as a co-employer, grew 7% to $1.81 billion. Interest earned on client funds, the money ADP holds briefly before paying it out to employees and tax authorities, jumped 15% to $329.3 million, with an average Yield of 3.6%. US pays per control, a measure of employment at client companies, rose 2%.

"ADP is off to a strong start in fiscal 2027 with first quarter results that reflect the resilience of our business model," President and CEO Maria Black said in the release.

ADP raised its full-year outlook. It now expects revenue growth of about 6%, up from 5% to 6%, and adjusted EPS growth of 10% to 12%, up from 9% to 11%. It lifted its forecast for client funds interest revenue to $1.59 billion to $1.61 billion from $1.54 billion to $1.56 billion, and reaffirmed expected adjusted EBIT margin expansion of 0.7 to 0.9 percentage points.

Rates, jobs and the risks

Interest rates are a key swing factor. Higher rates boost ADP's earnings on client funds, and the Federal Reserve has turned toward tightening this year: it raised rates in September and held them at 3.75% to 4.00% this week, with markets pricing high odds of another hike in December, according to media reports. The company now expects a client funds yield of about 3.8%.

The labor market is the other. ADP's own weekly preliminary data showed private employers adding an average of 18,500 jobs a week in the four weeks ending Oct. 3, down from 26,000 in the prior period. Slower hiring would eventually weigh on pays per control and new business. ADP narrowed its forecast for US pays per control growth to about 1%.

As a Nasdaq-100 member, ADP is one of the larger non-tech names in the index and often acts as a stabilizer during tech selloffs, alongside other steady payers in the index.

Next on the calendar is the government's October jobs report on Friday, Nov. 6, and ADP's annual Shareholder meeting on Nov. 11. Investors will also watch for any sign that falling bond yields, with the 10-year near 4.94% to 4.99% today, could trim interest income over time.