10-K – 2026-08-05 – adp-20260630.htm

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________

FORM 10-K
_________________
  ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Year Ended June 30 , 2026
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to    
Commission File Number 1-5397

AUTOMATIC DATA PROCESSING, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-1467904
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
One ADP Boulevard
Roseland, NJ 07068
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: ( 973 )- 974-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.10 Par Value
(voting) ADP NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ý
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes ý No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ý No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of the last business day of the Registrant’s most recently completed second fiscal quarter was approximately $ 103,569,897,016 . On July 31, 2026 there were 397,262,737 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for its 2026 Annual Meeting of Stockholders. Part III

Table of Contents

Page
Part I
Item 1. Business
3

Item 1A. Risk Factors
15

Item 1B. Unresolved Staff Comments
23

Item 1C. Cybersecurity
23

Item 2. Properties
24

Item 3. Legal Proceedings
24

Item 4. Mine Safety Disclosures
24

Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
25

Item 6. Selected Financial Data
26

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
26

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
41

Item 8. Financial Statements and Supplementary Data
42

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
81

Item 9A. Controls and Procedures
81

Item 9B. Other Information
85

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
85

Part III
Item 10. Directors, Executive Officers and Corporate Governance
86

Item 11. Executive Compensation
87

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
87

Item 13. Certain Relationships and Related Transactions, and Director Independence
88

Item 14. Principal Accounting Fees and Services
88

Part IV.
Item 15. Exhibits, Financial Statement Schedules
88

Signatures 93

2

Part I

Item 1. Business

CORPORATE BACKGROUND

General

In 1949, our founders established ADP with a simple, innovative idea: help clients focus on their business by solving their payroll challenges. In the 77 years since, we have led the Human Capital Management (“HCM”) industry in innovation. We were the first in HCM to deliver automation, move to the cloud, provide a mobile app, and create an online marketplace. Today, we continue that legacy with artificial intelligence (“AI”), building AI into the very core of how we orchestrate, govern and execute HR and pay processes for real-world outcomes.

As AI adds new layers of complexity to managing the workforce infrastructure that makes business possible, our clients need a partner they can trust. As the trusted, service-driven, and AI-enabled partner for HCM, we deliver services powered by deep domain expertise, workforce data, and global scale to help organizations manage their most critical workforce functions with precision, compliance and confidence. Today, we are a global leader in HR and payroll solutions, serving over 1.1 million clients and paying over 42 million workers in over 140 countries and territories. Our common stock is listed on the NASDAQ Global Select Market® under the symbol “ADP.”

3

When we refer to “we,” “us,” “our,” “ADP,” or the “Company” in this Annual Report on Form 10-K, we mean Automatic Data Processing, Inc. and its consolidated subsidiaries.
4

BUSINESS OVERVIEW

ADP’s Mission

Our mission is to help our clients manage the workforce infrastructure that makes business possible, whether they're a Fortune 500 ® company or a small local business.

AI is reshaping how work gets done at the task level, but that does not eliminate the need to manage it. In fact, AI has added new layers of complexity for business and ADP is purpose-built for this challenge.
ADP brings 77 years of workforce expertise and global scale to payroll, compliance, and workforce management, and these advantages set us apart. We support every HCM need of our clients from HR, payroll, time and benefits to HR outsourcing, talent, compliance and retirement, across the entire employee experience. Our industry-leading data, global scale and reach, and deep domain expertise shape our trusted service model and are at the core of our relationship with each one of our clients, which span over 140 countries and territories. Together, these strengths allow us to solve our clients' challenges with HCM solutions that reduce friction, deliver smart insights to drive decisions, and ultimately empower people at work without replacing their human judgment.
ADP’s Strategy
With a large and growing addressable market, we are focused on our core growth areas and further enhancing our market position by executing against our three strategic priorities rooted in our structural advantages:
• Lead with Best-in-Class HCM Technology. We design and develop world-class, AI-enabled HCM platforms that simplify work and help organizations manage their most critical workforce functions with precision, compliance and confidence in the AI era. Unlike generalized AI tools, our AI is built into the very core of how we orchestrate, govern, and execute HR and pay processes for real-world outcomes. Our global data platform, named “2026 Data Solution of the Year for HR” in the Data Breakthrough Awards, is the foundation of the advantage we bring to our clients. Spanning over 1.1 million clients and 42 million workers across roles, industries and geographies, we have the industry's largest workforce dataset. In the U.S., we pay one in six workers and moved $3.5 trillion in fiscal year 2026, giving us unique insights into the workforce and its emerging trends. AI is only as good as the data it is trained on, and this advantage compounds over time. Every ADP Assist AI Agent is grounded in ADP's institutional knowledge. The result is persona-based agents tailored for employees, managers, HR and payroll practitioners, all informed by ADP's data advantage.
Our approach to AI agents earned ADP recognition as one of Fast Company's 2026 “Most Innovative Companies,” with ADP earning the number one spot among HR companies for its purpose-built approach to designing AI tools that solve real client challenges and empower people at work.
• Provide Unmatched Expertise and Outsourcing Solutions. Our products, services, and solutions are built on 77 years of hands-on experience with HR processes, workflows, exceptions and regulatory nuance. Our clients look to us as a source of expertise to understand key HR trends and best practices, employment and related legislation and regulations, and to offer thoughtful strategies to utilize HCM technology to achieve their business objectives and support their workforce. Many of our clients also ask us to take on responsibility for a portion or all of their HCM workflows via one of our Human Resources Outsourcing (“HRO”) solutions. ADP pairs AI-driven efficiency with expert human judgment. Our clients have access to real experts for unique and unprecedented situations and we are designed to execute with precision when it matters most.

• Benefit our Clients with Our Global Scale. Our clients benefit from our unmatched global footprint and scale in the HCM industry. ADP serves clients in over 140 countries and territories with 67,000 associates delivering solutions for our clients' global operations. With direct integration to tens of thousands of government entities, tax authorities, and banking institutions, our global footprint provides a “final mile” ecosystem that is hard to replicate.

As AI accelerates regulatory fragmentation, our scale and compliance infrastructure become even more critical to our clients' success. We continue to build on these strengths to further improve our client experience, and to add to our global footprint to meet our clients where they choose to do business. We have strategically focused on delivering a single, unified, consistent and easy to navigate experience for our global and multinational clients, leaning into our strength in global payroll and expanding our HR and workforce management solutions. We continue to build more relationships with best-in-class providers to give clients seamless integrations and customizations that simplify their HR processes and address their unique needs, whether through embedded payroll offerings or partner solutions available through the ADP Marketplace. And we intend to continue to invest in our sales organization and best-in-class sales technology to not only optimize the purchase experience but to empower
5

our sellers to provide the deep expertise and insights our clients require to ensure they have the right HCM solutions to help them achieve their objectives and make a meaningful impact for their employees.

ADP's Commitment to Responsible AI
Clients have relied on ADP through decades of change and complexity. In the AI era, our commitment to responsible AI reinforces ADP's position as the trusted partner for HCM. ADP maintains strong governance through an active AI & Data Ethics Council, comprised of both industry leaders and ADP experts, which advises on emerging industry trends and concerns and provides guidance with respect to compliance with the principles that ADP should follow while developing products, systems and applications that involve AI, machine learning (“ML”) and data.

We additionally have an interdisciplinary working group across ADP that determines governance for use cases and the set of principles and processes that govern the use of these technologies, including operational monitoring of recommendations made by AI and ML technologies. As we continue to introduce new AI tools, we aim to incorporate compliance, transparency and security into development from the start.
Reportable Segments
Our two reportable business segments are Employer Services and Professional Employer Organization (“PEO”), and are based on the way that management reviews the performance of, and makes decisions about, our businesses. For financial data by segment and by geographic area, see Note 15 to the “Consolidated Financial Statements” contained in this Annual Report on Form 10-K.
Employer Services . Our Employer Services segment serves clients ranging from single-employee small businesses to large enterprises with tens of thousands of employees around the world, offering a comprehensive range of technology-based HCM solutions, including our strategic, cloud-based platforms, and HRO (other than PEO) solutions. These solutions address critical client needs and include: Payroll Services, Benefits Administration, Talent Management, Workforce Management Solutions, Compliance Solutions, Human Resources Management, Retirement Services and Insurance Services.
Professional Employer Organization . Our PEO business, called ADP TotalSource ® , is our full-service PEO that offers expert guidance, user-friendly technology, comprehensive employee benefits, and a risk management, safety, and workers’ compensation program as part of a co-employment arrangement in which employees who work for a client (referred to as “worksite employees”) are co-employed by the client and us.

6

PRODUCTS AND SOLUTIONS

To help clients manage the workforce infrastructure that makes business possible, whether they’re a Fortune 500 company or a small local business, we provide a unified ecosystem of HCM solutions rooted in our industry-leading data and deep domain expertise. Our strategic cloud-based platforms, scalable by company size and location, allow clients to recruit, onboard, pay, manage and retain their people in one single space with precision, compliance and confidence. Our AI is built into the very core of how our platforms orchestrate, govern and execute HR and pay processes for real-world outcomes .

HCM Solutions
Integrated HCM Solutions. Our premier suite of HCM solutions support employers of all types and sizes across the entire employment cycle, from recruitment to retirement.
These solutions are powered by our award-winning data and AI capabilities, which are designed to reduce friction, surface actionable insights and support informed human judgment across all of our platforms, including:
• RUN Powered by ADP ® , serving over 980,000 small businesses, is an all-in-one platform designed specifically for small businesses to simplify payroll, HR, and compliance. It combines easy-to-use technology with 24/7 real-person support from ADP’s team of payroll professionals. By embedding automation and AI into routine tasks, RUN helps small businesses focus on running their operations with compliance, precision and confidence. RUN also integrates with other ADP solutions, including workforce management, workers’ compensation, benefits, and retirement services.
• ADP Workforce Now ® is a flexible HCM solution used by over 90,000 mid-sized and large businesses in North America to manage their employees. More businesses use ADP Workforce Now in North America than any other HCM solution designed for both mid-sized and large businesses. Workforce Now integrates payroll, HR, time, benefits and compliance on a single platform, enabling organizations to manage complex workforce requirements with confidence.
• ADP Lyric™ HCM is a global HCM for large enterprises, unifying HR management, payroll, workforce management, talent, and data analytics into a flexible, intelligent, and human-centric solution. Businesses using Lyric also benefit from comprehensive end-to-end service support, with an emphasis on global compliance support and expertise. Lyric is built for the way people actually work together, mirroring practically any structure of work groups, such as divisions, regions, or dynamic teams. Lyric integrates generative AI technology with ADP’s unmatched dataset, helping to support decision-making, drive efficiency and personalize employee experiences based on attributes of role, geographic location, typical behaviors, and
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anticipated need, all while maintaining human oversight in high-stakes outcomes such as pay, compliance and workforce decisions.

Payroll Services . We pay approximately 26 million (approximately 1 out of every 6) workers in the United States. We offer flexible payroll services to employers of all sizes, including the preparation of employee paychecks, pay statements, supporting journals, summaries, and management reports. Our payroll solutions are designed to deliver dependable execution at scale, supported by deep expertise and AI-enabled automation that helps reduce risk without removing human judgment and accountability.
We provide employers with a wide range of payroll options, including using mobile technology, connecting their major enterprise resource planning (“ERP”) applications with ADP’s payroll services or outsourcing their entire payroll process to us. Employers can choose a variety of payroll payment options including ADP’s electronic wage payment and, in the United States, payroll card solutions and digital accounts. On behalf of our clients in the United States, we prepare and file federal, state and local payroll tax returns, and quarterly and annual Social Security, Medicare, and federal, state and local income tax withholding reports.
Benefits Administration. In the United States, we provide powerful and agile solutions for employee benefits administration. These options include health and welfare administration services, leave administration services, insurance carrier enrollment services, employee communication services, and dependent verification services. In addition, ADP benefits administration solutions offer employers a simple and flexible cloud-based eligibility and enrollment system that provides their employees with tools, communications, and other resources they need to understand their benefits options and make informed choices.
Talent Management. ADP’s Talent Management solutions simplify and improve the talent acquisition, management and activation process, from recruitment to ongoing employee engagement and development. Employers can use our applicant tracking software to help manage the candidate hiring process and can outsource their internal recruitment function to ADP. Employers can also receive employer brand activation services, management of candidate advertising, talent community building services, and recruiter training services, as well as career search support and outplacement for reductions in force. Our solutions provide performance, learning, succession and compensation management tools that help employers align goals to outcomes, and enable managers to identify and mitigate potential retention risks. ADP’s compensation management solutions expanded in 2025 with the acquisition of Pequity, which supports the complex compensation planning needs of mid-size, enterprise and multinational companies with flexible configurations, AI-enhanced insights, budgeting and scenario planning tools. Our talent activation solutions provide team leaders with data and insights to drive employee engagement and leadership development, which in turn help drive employee performance.

Workforce Management Solutions. ADP’s Workforce Management offers a range of solutions to over 160,000 employers of all sizes, including time and attendance, absence management and scheduling tools. Time and attendance solutions include time capture via online timesheets, timeclocks with badge readers, biometrics and touch-screens, telephone/interactive voice response, and mobile smartphones and tablets. These tools automate the calculation and reporting of hours worked, helping employers prepare payroll, control costs and overtime, and manage compliance with wage and hour regulations. Absence management tools include accrued time off, attendance policy and leave case management modules. Our employee scheduling tools simplify visibility, offer shift-swapping capabilities and can assist managers with optimizing schedules to boost productivity and minimize under- and over-staffing. We also offer data analytics and reporting tools that provide clients with insights, benchmarks and performance metrics so they can better manage their workforce. These solutions offer industry specific features and are optimized for clients of all sizes from small businesses operating in one location to the world’s largest and most complex global organizations. Solutions are available, and support compliance requirements, in over 100 countries.

Compliance Solutions. ADP SmartCompliance ® leverages ADP's industry-leading data, global scale and deep domain expertise to help clients manage their most critical compliance work with precision and confidence. As the complexity of payroll, tax and employment-related compliance grows in the AI era, the solution provides industry-leading expertise in payment compliance and employment-related tax matters that complement the payroll, HR and ERP systems of our clients. In our fiscal year ended June 30, 2026, in the United States, we processed and delivered more than 79 million employee year-end tax statements and moved more than $3.5 trillion in client funds to our clients’ employees, tax authorities and other payees. Our offerings within ADP SmartCompliance include employment tax services, W-2 management, business tax credits, ACA compliance, I-9 management, employment verification, offboarding, wage garnishment and payment solutions, which includes Wisely by ADP, our paycard offering.

Human Resources Management. Commonly referred to as Human Resource Information Systems, ADP’s Human Resources Management Solutions provide employers with a single system of record to support the entry, validation, maintenance, and reporting of data required for effective HR management, including employee names, addresses, job types, salary grades, employment history, and educational background.
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Retirement Services. ADP Retirement Services helps over 210,000 employers in the United States administer various types of retirement plans, such as SIMPLE and SEP IRAs, starter 401(k)s, traditional 401(k) plans (including Pooled Employer Plans - PEPs), 403(b) plans, and non-qualified retirement plans. ADP Retirement Services provides recordkeeping and administrative services, combined with an investment platform that gives our clients access to a wide range of non-proprietary investment options and online tools to easily manage their plan. In addition, ADP Retirement Services offers investment management services to retirement plans through ADP Strategic Plan Services, LLC, an SEC registered investment adviser under the Investment Advisers Act of 1940. ADP Retirement Services also offers trustee services through ADP Retirement Trust Services, LLC, a New Hampshire state-chartered affiliated trust company, as well as through a third party.
Insurance Services. ADP’s Insurance Services business, in conjunction with our licensed insurance agency, Automatic Data Processing Insurance Agency, Inc., facilitates access in the United States to workers’ compensation and group health insurance for over 280,000 small and mid-sized clients through a variety of insurance carriers. Our automated Pay-by-Pay® premium payment program calculates and collects workers’ compensation premium payments each pay period, simplifying this task for employers.
HRO Solutions
As a leader in the growing HR Outsourcing market, we partner with clients of all sizes from small local businesses to large enterprise organizations, to manage their most critical workforce functions including HR, benefits, payroll, and talent management. With premium services and seamless technology, we help organizations streamline processes, reduce the daily workload and reduce compliance risk while serving as their trusted partner to navigate HR needs with precision, compliance and confidence. Whether a client chooses our PEO or HRO/Managed Services, we offer solutions tailored to a client’s specific needs and provide day-to-day expertise, guidance and tools. ADP’s HR Outsourcing solutions serve over three million client employees.

Professional Employer Organization. ADP TotalSource is enabled by the ADP Workforce Now technology and offers small and mid-sized businesses a comprehensive HR outsourcing solution through a co-employment model. With a PEO, both ADP and the client have a co-employment relationship with the client’s employees. We assume certain employer responsibilities such as payroll processing and tax filings, and the client maintains control of its business and all management responsibilities. ADP TotalSource clients are able to offer their employees services and benefits on par with those of much larger enterprises, without the need to staff a full HR department. With our cloud-based HCM software at the core, we serve more than 19,000 clients and more than 770,000 worksite employees in all 50 U.S. states. ADP TotalSource is the largest PEO certified by the Internal Revenue Service as meeting the requirements to operate as a Certified Professional Employer Organization under the Internal Revenue Code. ADP TotalSource is also an Employer Services Assurance Corporation-accredited PEO, which demonstrates that ADP meets the industry’s high standards and has the experience and financial stability to fulfill the needs of the businesses it serves. As a full-service PEO, ADP TotalSource provides a broad range of HR administrative services, including payroll and payroll tax, employer compliance, HR guidance, employee benefits and benefit administration, talent strategies, and workers’ compensation insurance including risk and claims management.

ADP Comprehensive Services. ADP Comprehensive Services combines personalized, high-touch support with our market-leading ADP Workforce Now platform to offer a one-stop suite of managed services tailored to the specific needs of businesses of all sizes. Our committed team of professionals delivers expertise, guidance, tools and administrative support across HR, talent management, payroll, and benefits administration grounded in experience and best practices. We take the time to understand our clients’ businesses to offer the right strategic support, enabling a flexible partnership that can cover one, some, or all areas of their HR and payroll processes. Designed to be a scalable extension of our clients’ in-house resources, ADP Comprehensive Services provides outsourced execution that effectively combines expertise, processes and technology.

ADP Comprehensive Outsourcing Services (ADP COS). ADP COS is designed for large enterprises to outsource their payroll. With ADP COS, the day-to-day payroll process becomes our responsibility, freeing up clients to address critical issues like employee engagement and retention. The combination of technology, deep expertise and data-driven insights that ADP COS offers is powerful, allowing clients to focus on strategy and results.

Global Solutions
To help clients navigate the complexities of managing a global workforce, they need one partner they can trust to work where they work. Serving over 70,000 clients with premier global solutions, we have taken a strategic approach to offer a unified global HCM experience, connecting global HR, pay and workforce management with built-in localization, automation and analytics to provide a consistent experience across countries. Whether employers are managing people in multiple countries or looking for local in-country solutions, we partner with clients to help them navigate the most complex HR, workforce management and payroll scenarios using tailored and scalable technology supported by our deep compliance expertise.
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ADP Global Payroll is a solution for multinational organizations of all sizes, empowering them to harmonize HCM strategies in over 140 countries and territories globally. This improves visibility, control and operational efficiency, giving organizations the insight and confidence to adapt to changing local needs, while helping to drive overall organizational agility and engagement.
In addition to ADP Lyric HCM as a solution for global multinational organizations, we also offer comprehensive, country-specific HCM solutions that combine innovative technology with deep local expertise. By operating a flexible service model, we help clients manage various combinations of payroll services, benefits administration, talent management, workforce management solutions, and HR management, depending on the country in which the solution is provided.
We pay over 16 million workers outside the United States with our in-country and multi-country solutions, such as ADP iHCM and ADP Global Payroll. As part of our global payroll services, we supply year-end regulatory and legislative tax statements and other forms to our clients’ employees. Our global talent management solutions elevate the employee experience, from recruitment to ongoing employee engagement and development. Our comprehensive HR solutions combined with our deep expertise make our clients’ global HR management strategies a reality. Our configurable, automated time and attendance tools help global clients understand the work being performed and the resources being used, and help ensure the right people are in the right place at the right time.
Research and Development Expenditure
During the fiscal years ended June 30, 2026, 2025 and 2024, we invested approximately $1.405 billion, $1.388 billion, and $1.276 billion, respectively, in research and development. These investments include expenses for activities such as the development of new products, maintenance expenses associated with our existing technologies, investments in generative and agentic AI, purchases of new software and software licenses, and additions to software resulting from business combinations.
MARKETS AND SALES
Our HCM solutions are offered in over 140 countries and territories across North America, Latin America, Europe, Asia and Africa. The most material markets for HCM Solutions, Global Solutions and HRO Solutions (other than PEO) are the United States, Canada and Europe. In each market, we have both country-specific solutions and multi-country solutions, for employers of all sizes and complexities. The major components of our offerings throughout these geographies are payroll services, HR outsourcing and workforce management solutions. In addition, we offer wage and tax collection and/or remittance services in the United States, Canada, the United Kingdom, Australia, India, China, Hong Kong, Macau, Malaysia, and Taiwan. Our PEO business offers services exclusively for employees located in the United States.
We market our solutions through our direct sales force, digital sales, and indirect sales channels, such as marketing relationships with certified public accountants and banks, among others. None of our major business units has a single homogeneous client base or market. While concentrations of clients exist in specific industries, no one client, industry or industry group is material to our overall revenues. We are a leader in each of our major service offerings and do not believe any of our major services or business units is subject to unique market risk.
COMPETITION

The industries in which we operate are highly competitive and we are one of the largest providers of HCM solutions in the world. HCM Solutions, Global Solutions and HRO Solutions (other than PEO) compete with other business outsourcing companies, companies providing ERP services, providers of cloud-based HCM solutions and financial institutions. Our PEO business competes with other PEOs providing similar services, as well as business outsourcing companies, companies providing ERP services and providers of cloud-based HCM solutions. We also face ongoing competition from companies’ in-house functions, whereby companies install and operate their own HCM system.
Competition for business outsourcing solutions is primarily based on product and service quality, reputation, ease of use and accessibility of technology, breadth of offerings, and price. We believe that we are competitive in each of these areas and that our leading-edge technology (together with our data) and commitment to service excellence, distinguishes us from our competitors.

INDUSTRY REGULATION

Our business is subject to a wide range of complex U.S. and foreign laws and regulations. In addition, many of our solutions are designed to assist clients with their compliance with certain U.S. and foreign laws and regulations that apply to them. We have,
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and continue to enhance, compliance programs and policies to monitor and address the legal and regulatory requirements applicable to our operations and client solutions, including dedicated compliance personnel and training programs.
As a global leader in HR and payroll solutions, our systems contain a significant amount of data related to clients, employees of our clients, vendors and our employees. We are, therefore, subject to compliance obligations under federal, state and foreign privacy, data protection, AI and cybersecurity-related laws, including federal, state and foreign security breach notification laws with respect to both client employee data and our own employee data. The changing nature of these comprehensive laws in the United States, Europe and elsewhere, including the European Union’s (the “EU”) General Data Protection Regulation (the “GDPR”), the California Privacy Rights Act of 2020 (the “CPRA”), and the Department of Justice’s (the “DOJ”) Data Security Program established under Executive Order 14117, impact our processing of personal information of our employees and on behalf of our clients. The GDPR imposes strict and comprehensive requirements on us as both a data controller and a data processor. As part of our overall data protection compliance program, including with respect to data protection laws in the EU, we are one of the few companies in the world to have implemented Binding Corporate Rules (“BCRs”). Compliance with our BCRs permits us to process and transfer personal data across borders in accordance with the GDPR and other data protection laws in the EU. The CPRA requires companies to provide data disclosure, access, deletion and opt-out rights to consumers in California. The DOJ’s Data Security Program requires us to ensure that there is not access to sensitive personal data of U.S. persons by countries of concern in excess of certain thresholds. In the area of AI, some states and localities in the U.S., the EU and elsewhere have proposed or already enacted legislation that imposes obligations on how we develop and market AI-based products and solutions. Specifically, the EU Artificial Intelligence Act imposes requirements on providers of certain types of AI services. Additionally, self-regulatory frameworks like the National Institute of Standards and Technology AI Risk Management Framework are being promulgated and adherence to these may become an industry standard or client expectation. In the United States, the Health Insurance Portability and Accountability Act of 1996 applies to our insurance services businesses and ADP TotalSource.

As part of our payroll and payroll tax management services, we move client funds to our clients’ employees, independent contractors, tax authorities, garnishment recipients, and other third-party payees via electronic funds transfer (including direct deposit, wire transfer, and real-time payments), prepaid access and ADPCheck. In 2019, the Office of the Comptroller of the Currency (the “OCC”) authorized us to open ADP Trust Company, National Association (the “ADP Trust Bank”), via a national trust bank charter pursuant to the National Bank Act. The ADP Trust Bank is the sole trustee of ADP Client Trust, our grantor trust which holds U.S. client funds, and is responsible for the oversight and management of those client funds. The ADP Trust Bank, and all of its fiduciary activities including the U.S. money movement it oversees and manages via ADP Client Trust, is subject to comprehensive ongoing oversight and regulation by the OCC. In addition, our U.S. money movement managed by the ADP Trust Bank and our U.S. prepaid access offering are subject to the anti-money laundering and reporting provisions of The Bank Secrecy Act of 1970, as amended (the “BSA”). Our prepaid access offerings are subject to consumer protection laws and regulations, including the Electronic Funds Transfer Act and Regulation E issued by the Consumer Financial Protection Bureau as well as prohibitions on unfair, deceptive, or abusive acts or practices. Consumer protections for prepaid accounts under Regulation E include requirements related to pre-acquisition fee and other disclosures, error resolution and investigation, and account access. Elements of our money movement activities outside of the United States are subject to licensing and similar anti-money laundering and reporting laws and requirements in certain countries in which we provide such services. ADP Canada Co. is registered with the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”), Canada’s anti-money laundering and anti-terrorist financing supervisor, as a Money Services Business. ADP Canada Co. is also a registered Payment Service Provider with the Bank of Canada, as defined and required under the Retail Payment Activities Act.

Our employment background screening services business offers background checking services that are subject to the Fair Credit Reporting Act. ADP TotalSource is subject to various state licensing requirements and, as a Certified PEO, maintains certifications with the Internal Revenue Service. Because ADP TotalSource is a co-employer with respect to its clients’ worksite employees, we may be subject to certain obligations, responsibilities and liabilities of an employer under federal and state tax, insurance and employment laws, including worksite employee payroll obligations and with respect to claimed employee retention and other tax credits. ADP Strategic Plan Services, LLC, our registered investment adviser, provides certain investment management and advisory services to retirement plan administrators under a heightened “fiduciary” standard and is regulated by the SEC and the U.S. Department of Labor. ADP Broker-Dealer, Inc., which supports our Retirement Services business, is a registered broker-dealer regulated by the SEC and the Financial Industry Regulatory Authority. ADP Retirement Trust Services, LLC supports our Retirement Services business as a New Hampshire state-chartered trust company. ADP Retirement Trust Services, LLC is a directed-fiduciary trustee with responsibility for oversight of the retirement plan assets of our clients and regulated by the Department of Labor under the Employee Retirement Income Security Act of 1974, as amended, and is also subject to the oversight of the New Hampshire Banking Department.

Our current and future offerings in the payments and/or consumer space may also subject us to additional laws and regulations, which could also require corresponding compliance programs and policies and dedicated resources.

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In addition, many of our businesses offer solutions that assist our clients in complying with certain U.S. and foreign laws and regulations that apply to them. Although these laws and regulations apply to our clients and not to ADP, changes in such laws or regulations may affect our operations, products and services. For example, our payroll services are designed to facilitate compliance with state laws and regulations applicable to the payment of wages. In addition, our HCM solutions help clients manage their compliance with certain requirements of the Affordable Care Act in the United States. Similarly, our Tax Credit Services business, which helps clients in the United States realize tax credit opportunities in connection with the hiring of new employees and certain other activities, is based on federal, state or local tax laws and regulations allowing for tax credits, which are subject to renewal, amendment or rescission.
We believe that key components of our compliance programs provide real competitive differentiators. For instance, our BCRs have enabled ADP to apply a global standard of data protection, simplifying data transfer processes and assisting our clients in meeting the demanding standards of data protection expected in Europe – a solution that most competitors cannot provide. Similarly, the ADP Client Trust and ADP Trust Bank provide client funds with a level of protection that most competitors cannot offer.
The foregoing description does not include an exhaustive list of the laws and regulations governing or impacting our business. See the discussion contained in the “Risk Factors” section in Part I, Item 1A of this Annual Report on Form 10-K for information regarding changes in laws and regulations that could have a materially adverse effect on our reputation, results of operations or financial condition or have other adverse consequences.
CLIENTS AND CLIENT CONTRACTS

We provide services to more than 1.1 million clients. In fiscal 2026, no single client or group of affiliated clients accounted for revenues in excess of 2% of our annual consolidated revenues.
We are continuously in the process of performing implementation services for new clients. Depending on the service agreement and/or the size of the client, the installation or conversion period for new clients can vary from a short period of time for a small Employer Services client (as little as 24 hours) to a longer period for a large Employer Services client with multiple deliverables (generally six to nine months). In some cases, based on a client's timeline, the period may exceed two years for a large, multi-country ADP Global Payroll or ADP Lyric HCM client or other large, multi-phase implementation. Although we monitor sales that have not yet been installed, we do not view this metric as material to an understanding of our overall business in light of the recurring nature of our business. This metric is not a reported number, but it is used by management as a planning tool to allocate resources needed to install services, and as a means of assessing our performance against the expectations of our clients. In addition, some of our products and services are sold under longer-term contracts with initial terms typically ranging from two to seven years. However, this anticipated future revenue under contract is not a significant portion of our expected future revenue, is not a meaningful indicator of our future performance and is not material to management's estimate of our future revenue.
Our business is typically characterized by long-term client relationships that result in recurring revenue. Our services are provided under written price quotations or service agreements having varying terms and conditions. No one price quotation or service agreement is material to us. Based on our retention levels in fiscal 2026, our client retention is estimated at approximately 13 years in Employer Services, and approximately 6 years in PEO.
LICENSES
We are the licensee under a number of agreements for computer programs and databases. Our business is not dependent upon a single license or group of licenses. Third-party licenses, patents, trademarks, and franchises are not material to our business as a whole.
OUR PEOPLE AND CULTURE

Our HCM strategy is simple: our people have differentiated us for 77 years and we remain committed to valuing, developing and engaging them.

Our Chief Human Resources Officer (“CHRO ” ), together with our Executive Leadership Team, manages our HCM strategy and related programs and initiatives, as well as our talent strategy. Our CHRO, along with our CEO, as appropriate, regularly updates and supports our Compensation and Management Development Committee of the Board (“CMDC”) as well as the
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Board of Directors on HCM matters. The CMDC is responsible for these matters, as well as our executive compensation program, company-wide equity-based plans, and our management succession planning and development program.

Our Associates

As of June 30, 2026 , our global team of associates consisted of approximately 67,000 persons.
Our Culture and Values

Seventy-seven years ago, our founders established values that still guide us today. We seek to create a values-based culture where every associate feels supported and empowered at work.

Our long-term business success is closely linked to our commitment to creating an environment in which our associates can achieve their full potential, and to do so we listen to and engage our associates. We conduct an annual culture survey, myVoice, where our associates can share their perspectives on important topics, including client service, culture, social responsibility, ethics and compliance, innovation and leadership. In addition, we leverage our innovative StandOut ® powered by ADP platform, to help managers drive talent engagement throughout the year. We issue quarterly global StandOut® Engagement Pulse® surveys to ensure that all associates can share with their leaders how they feel about their work and their colleagues, and for us to get a snapshot of engagement across the globe.

Through our myMoment Recognition Program, we give our associates the opportunity to recognize and celebrate each other when they demonstrate our values, drive our goals and go above and beyond in contributing to our collective success. Our global ADP Cares program, which is funded by our generous associates with additional support from the ADP Foundation, helps members of our team get through difficult, unforeseen events such as natural disasters and major illnesses. We also proudly support our associates that give back to our communities through paid volunteer time off and our donation matching program.

We value different perspectives and believe that our associates and their best ideas thrive when everyone feels a sense of belonging.

We have a number of initiatives to strengthen and further cultivate our values-based culture. As an example, our voluntary business resource groups, which cover a broad array of associates and are open to all, make us stronger by promoting inclusion and cultural awareness, accelerating associate engagement, retention and career development, helping build relationships in our communities, and promoting the conservation and restoration of natural resources.

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At ADP, we are committed to upholding fair and equitable pay. Pay equity is critical to creating a culture that enables all associates to reach their full potential. We make pay decisions based on skills, job-related experience, the market value of the job and performance. We have incorporated regular pay equity reviews into our compensation decisions. And, we do not ask candidates to provide their salary history in most of the countries where we operate.

Our commitment to supporting and empowering our associates at work has led to recognition across the globe, including Fortune’s World’s Most Admired Companies (20 consecutive years); Forbes’ World's Best Employers; Fortune’s America’s Most Innovative Companies; Fast Company’s Most Innovative Companies; TIME’s World’s Best Companies; Wall Street Journal' s Best Companies for the Future; and Newsweek’s Most Trustworthy Companies in America.

Our Talent Strategy
Our talent strategy is simple – we aim to attract, develop and retain ambitious, passionate and overall top talent by offering a place where our associates can grow their careers, challenge themselves, share generously, take risks, and create positive change. This has allowed us to be recognized by esteemed organizations as an employer of choice year after year.
We invest in our team members so that they have the skills necessary to succeed and grow their careers. The ADP talent journey begins with an innovative, engaging and comprehensive onboarding process followed by extensive training and mentorship. Thereafter, our associates can access a wide range of professional and functional skills training to further continue and enhance performance and career development. Our sales professionals are provided with award-winning training programs and tools throughout their careers, and we also provide our technologists with access to training and experiences in the latest technologies on the market. We know our people leaders have tremendous impact on the experiences of our associates and clients, and on the growth of our business. As such, we invest in a leadership development strategy that uses innovative approaches to support new and experienced leaders with formal learning, tools to understand and engage their team, and in the moment support during moments that matter. Additionally, our succession planning process deploys leaders to new career experiences that help ensure we are developing leaders that will deliver results now and in the future.
Our Benefits and Health and Wellness Programs
The wide range of benefits and health and wellness programs we offer contribute to an environment where all our associates add to our success. Our associates receive a competitive benefits package, intended to help them enjoy physical, emotional and financial well-being and be productive members of their teams. While exact benefits vary by associate and region, they typically include health care coverage, a 401(k) plan with company matching contributions for U.S. associates, life insurance, paid time off and tuition reimbursement. We particularly emphasize benefits that support individual and family needs (parental leave, adoption/fertility benefits and caregiver support), and constantly update our programs according to our associates’ needs.
We offer physical and mental wellness programs that help our team pursue a healthy lifestyle and reduce absenteeism and lost time due to injuries. Our efforts include a company-wide health and safety manual and website, safety education and training, and a wellness program that rewards associates for completing wellness activities. Physical and mental health initiatives vary across regions, but can include personal health checks, nutrition and fitness expert visits offering free consultation and programs, employee mental wellness assistance programs, free counseling and mental health therapy assistance for associates, wellness programming through our business resource groups, and mindfulness classes.
Available Information

Our corporate website, www.adp.com , provides materials for investors and information about our solutions and services. ADP’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, and the Proxy Statements for our Annual Meetings of Stockholders are made available, free of charge, on our corporate website as soon as reasonably practicable after such reports have been filed with or furnished to the Securities and Exchange Commission (“SEC”), and are also available on the SEC’s website at www.sec.gov . The content on any website referenced in this filing is not incorporated by reference into this filing unless expressly noted otherwise.
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Item 1A. Risk Factors
Our businesses routinely encounter and address risks, some of which may cause our future results to be different than we currently anticipate. The risk factors described below represent our current view of some of the most important risks facing our businesses and are important to understanding our business. The following information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations, Quantitative and Qualitative Disclosures About Market Risk and the consolidated financial statements and related notes included in this Annual Report on Form 10-K. This discussion includes a number of forward-looking statements. You should refer to the description of the qualifications and limitations on forward-looking statements in the first paragraph under Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report on Form 10-K. See "Item 1. Business—Competition" of this Form 10-K for a discussion of the competitive environment in the markets in which we operate. Many risks affect more than one category, and the risks are not in order of significance or probability of occurrence because they have been grouped by categories. The risks described below are not the only risks we face and the occurrence of any of the following risks or other risks not presently known to us or that we currently believe to be immaterial could have a materially adverse effect on our business, results of operations, financial condition or reputation.

LEGAL AND COMPLIANCE RISKS
Failure to comply with, compliance with or changes in, laws and regulations applicable to our businesses could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences

Our business is subject to a wide range of complex U.S. and foreign laws and regulations, including, but not limited to, the laws and regulations described in the “Industry Regulation” section in Part I, Item 1 of this Annual Report on Form 10-K. Failure to comply with laws and regulations applicable to our operations or client solutions and services could cause us to incur substantial costs or could result in the suspension or revocation of licenses or registrations, the limitation, suspension or termination of services, the imposition of consent orders or civil and criminal penalties, including fines, and lawsuits, including class actions, that could damage our reputation and have a materially adverse effect on our results of operations or financial condition.
In addition, changes in laws or regulations, or changes in the interpretation of laws or regulations by a regulatory authority, may decrease our revenues and earnings and may require us to change the manner in which we conduct some aspects of our business. For example, a change in regulations either decreasing the amount of taxes to be withheld or allowing less time to remit taxes to government authorities would adversely impact average client balances and, thereby, adversely impact interest income from investing client funds before such funds are remitted to the applicable tax authorities. Changes in U.S. or foreign tax laws, regulations or rulings or the interpretation thereof could adversely affect our effective tax rate and our net income. In addition, changes in federal, state or local tax laws and regulations allowing for tax credits (including the non-renewal of such laws) could adversely impact our Tax Credit Services business, which helps clients in the United States realize tax credit opportunities in connection with the hiring of new employees and certain other activities. Changes in laws or regulations have caused, and could in the future cause, us to modify our client funds investment strategy, which may reduce the interest income earned on such funds. Changes in laws, or interpretations thereof, that govern the co-employment arrangement between a professional employer organization and its worksite employees may require us to change the manner in which we conduct some aspects of our PEO business. In addition, changes in the manner in which health and welfare plans sponsored by PEOs or the TotalSource Health and Welfare Plan, in particular, are regulated could adversely impact the demand for our PEO offering.

Because our PEO is a co-employer with our PEO clients and a Certified PEO by the Internal Revenue Service, we may be subject to certain obligations, responsibilities and liabilities of an employer with respect to Worksite Employees ( “ WSE”), including with respect to their wages and the payment thereof, tax credits for employers, the payment of certain taxes with respect to WSE wages and employee benefits provided to the WSEs. Even though PEO clients are contractually responsible for the timely remittance of such costs, it is possible that our clients will not remit such payments despite their contractual obligations. The risk of failing to receive such payments from PEO clients is magnified during significant financial or other disruptions or catastrophic events, such as the failure of a bank with whom a significant number of PEO clients may bank at the time, or more widespread stress or failure within the U.S. banking system. Any such event could prevent or materially delay the recovery of any payments not timely remitted and could have an adverse impact on our financial results and liquidity.

For our PEO to sponsor many of its employee benefit plan offerings, it must qualify as the employer of the WSEs under certain provisions of the Internal Revenue Code and ERISA. Additionally, our PEO’s status as an employer for purposes of ERISA is important because ERISA preempts certain state laws that could limit our PEO’s ability to offer certain benefit plan offerings as we do today. The definition of employer under the Internal Revenue Code and ERISA is not uniform and there is no definitive judicial or legislative interpretation of employer in the context of PEOs. Because many of our PEO employee benefit plan offerings are subject to ERISA, our PEO must administer and operate these plans in accordance with ERISA requirements. We believe that our PEO benefit plans satisfy all applicable ERISA requirements, but if it were determined that the PEO benefit
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plans fail to satisfy any such requirements, our PEO would likely be required to modify its current business model, and the PEO could be subject to material fines or penalties. Any such event could have an adverse impact on our financial results and liquidity.

In addition, our payroll and tax processing services involve the collection and disbursement of a significant amount of funds to a large number of federal, state and local tax authorities. Our failure to properly or timely remit taxes on behalf of our clients could result in fines, penalties and interest for which we could be responsible, and could materially adversely affect our reputation, results of operations or financial condition.

Our Wisely® offerings and potentially other future offerings in the payments and/or consumer space may subject us to additional laws and regulations, some of which may not be uniform and may require us to modify or restrict our offerings and decrease our potential revenue and earnings.

Failure to comply with anti-corruption laws and regulations, antitrust and competition laws and regulations, economic and trade sanctions, anti-money laundering laws and regulations, and similar laws could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences

Regulators worldwide continue to exercise a high level of scrutiny with respect to anti-corruption, antitrust and competition, economic and trade sanctions, and anti-money laundering laws and regulations. Such scrutiny has resulted in aggressive investigations and enforcement of such laws and regulations, any of which could materially adversely impact our business. We operate our business around the world and continue to expand globally, including in numerous developing economies where companies and government officials are more likely to engage in business practices that are prohibited by domestic and foreign laws and regulations, including the United States Foreign Corrupt Practices Act and the U.K. Bribery Act 2010. Such laws generally prohibit improper payments or offers of payments to foreign government officials and leaders of political parties and, in some cases, to other persons, for the purpose of obtaining or retaining business. We are also subject to economic and trade sanctions programs, including those administered by the U.S. Treasury Department’s Office of Foreign Assets Control, which prohibit or restrict transactions or dealings with specified countries, their governments and, in certain circumstances, their nationals, and with individuals and entities that are specially designated, including narcotics traffickers and terrorists or terrorist organizations, among others. In addition, some of our businesses and entities in the U.S. and a number of other countries in which we operate are subject to anti-money laundering laws and regulations, including, for example, The Bank Secrecy Act of 1970, as amended (the “BSA”). Among other things, anti-money laundering laws and regulations require certain financial institutions, including banks and money services businesses (such as national trust banks and providers of prepaid access like us), to develop and implement risk-based anti-money laundering programs, report large cash transactions and suspicious activity, and maintain transaction records. We have registered our prepaid card business as a provider of prepaid access, and registered ADP Trust Bank and ADP Retirement Trust Services with the Treasury Department’s Financial Crimes Enforcement Network. ADP Canada Co. is registered as a Money Services Business with FINTRAC and a Payment Service Provider with the Bank of Canada.

We have implemented policies and procedures to monitor and address compliance with applicable anti-corruption, antitrust and competition, economic and trade sanctions and anti-money laundering laws and regulations, and we regularly review, upgrade and enhance our policies and procedures. However, there can be no assurance that our employees, consultants or agents will not take actions in violation of our policies for which we may be ultimately responsible, or that our policies and procedures will be adequate or will be determined to be adequate by regulators. Any violations of applicable anti-corruption, antitrust and competition, economic and trade sanctions or anti-money laundering laws or regulations could limit certain of our business activities until they are satisfactorily remediated and could result in civil and criminal penalties, including fines, which could damage our reputation and have a materially adverse effect on our results of operations or financial condition. Further, bank regulators continue to impose additional and stricter requirements on banks to ensure they are meeting their anti-money laundering obligations, and banks are increasingly viewing money services businesses and third-party senders to be higher risk customers for money laundering. As a result, our banking partners that assist us in processing our money movement transactions may limit the scope of services they provide to us or may impose additional material requirements on us. These regulatory restrictions on banks and changes to banks’ internal risk-based policies and procedures may result in a decrease in the number of banks that may do business with us, may require us to materially change the manner in which we conduct some aspects of our business, may decrease our revenues and earnings and could have a materially adverse effect on our results of operations or financial condition.
Failure to comply with privacy, data protection, artificial intelligence and cyber security laws and regulations could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences

The collection, storage, hosting, transfer, processing, disclosure, use, security and retention and destruction of personal information required to provide our services is subject to federal, state and foreign privacy, data protection and cyber security laws. These laws, which are not uniform, generally do one or more of the following: regulate the collection, storage, hosting,
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transfer (including in some cases, the transfer outside the country of collection), processing, disclosure, use, security and retention and destruction of personal information; require notice to individuals of privacy practices; give individuals certain access and correction rights with respect to their personal information; and regulate the use or disclosure of personal information for secondary purposes such as marketing. Under certain circumstances, some of these laws require us to provide notification to affected individuals, clients, data protection authorities and/or other regulators in the event of a data breach. In many cases, these laws apply not only to third-party transactions, but also to transfers of information among the Company and its subsidiaries. The European Union (the “EU”) General Data Protection Regulation (the “GDPR”), and state consumer privacy laws like the California Privacy Rights Act of 2020 (the “CPRA”), are among the most comprehensive of these laws, and more and more jurisdictions are adopting similarly comprehensive laws that impose new data privacy protection requirements and restrictions. As part of our overall data protection compliance program in connection with the GDPR, we implemented Binding Corporate Rules (“BCRs”) as both a data processor and data controller, which permits us to process and transfer personal data across borders in compliance with EU data protection laws. In addition, the Department of Justice implemented a Data Security Program under Executive Order 14117 restricting certain transfers of U.S. persons’ sensitive data to “countries of concern” and we have taken appropriate steps to comply.

In addition, laws and regulations covering marketing, advertising, and email, telephone and text messaging communications, including the Telephone Consumer Protection Act, are applicable to our business. Claims that we have violated such laws or regulations could expose us to costly litigation, and if successful, significant statutory damages or other liabilities that could adversely affect our reputation, business, financial condition or results of operations.

We believe that providing insights and content from data, including via AI and ML, will become increasingly important to the value that our solutions and services deliver to our clients. We are increasingly leveraging AI and ML in our solutions and service delivery and are continuing to integrate AI technologies, including generative and agentic AI, to develop and deploy capabilities that are beneficial to our clients and their employees. However, legislation that governs the development and/or use of AI has been adopted or is under consideration in the U.S. at the state and local level, as well as abroad, most notably the European Union’s Artificial Intelligence Act. In addition , self-regulatory frameworks like the National Institute of Standards and Technology AI Risk Management Framework are being promulgated and adherence to these may become an industry standard or a client expectation. As a result, the ability to provide data-driven insights and otherwise leverage AI and ML may be constrained by current or future laws (including product liability regimes), regulatory or self-regulatory requirements or ethical considerations, including our own published, guiding ethical principles regarding AI and ML, that could restrict or impose burdensome and costly requirements on our ability to leverage data and/or these technologies in innovative ways. Our use of AI, including generative and agentic AI, in our products and operations also introduces additional risks, including risks related to accuracy, bias, discrimination, transparency, security, and privacy, that could expose us to regulatory investigations, enforcement actions, litigation and reputational damage. For example, if the data used to train a model or the model’s output is inaccurate or biased, or alleged to be inaccurate or biased, we could be subject to reputational damage or litigation.

Complying with privacy, data protection, AI and cyber security laws and requirements, including the enhanced obligations imposed by the GDPR, our BCRs, U.S. state privacy laws, including the CPRA, and the EU Artificial Intelligence Act, may result in significant costs to our business and require us to amend certain of our business practices. Further, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase. The future enactment of more restrictive laws, rules or regulations and/or future enforcement actions or investigations could have a materially adverse impact on us through increased costs or restrictions on our businesses and noncompliance could result in significant regulatory penalties and legal liability and damage our reputation. In addition, data security events, concerns about privacy abuses by other companies and increased awareness of the potential (positive and negative) of AI are changing client, consumer and social expectations for enhanced protections (including with respect to bias and potential discrimination). As a result, noncompliance, the failure to meet such expectations or the perception of noncompliance or such failure, whether or not valid, may damage our reputation.
If we fail to protect our intellectual property rights, it could materially adversely affect our business and our brand

Our ability to compete and our success depend, in part, upon our intellectual property. We rely on patent, copyright, trade secret and trademark laws, and confidentiality or license agreements with our employees, clients, vendors, partners and others to protect our intellectual property rights. We may need to devote significant resources, including cybersecurity resources, to monitoring our intellectual property rights. In addition, the steps we take to protect our intellectual property rights may be inadequate or ineffective, or may not provide us with a significant competitive advantage. Our intellectual property (including source code) could be wrongfully acquired as a result of a cyber-attack or other wrongful conduct by third parties or our personnel, or as a result of increased use of AI tools, including generative and agentic AI, by us or our vendors. Litigation brought to protect and enforce our intellectual property rights could be costly and time-consuming. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights, which may be successful. In addition, use of AI tools may result in the release
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of confidential or proprietary information which could limit our ability to protect, or prevent us from protecting, our intellectual property rights.
We may be sued by third parties for infringement of their proprietary rights, which could have a materially adverse effect on our business, financial condition or results of operations

There is considerable intellectual property development activity in our industry. Third parties, including our competitors, may own or claim to own intellectual property relating to our products or services and may claim that we are infringing their intellectual property rights. Additionally, as we expand our use of AI, there is uncertainty regarding intellectual property ownership and license rights of AI algorithms and content generated by AI and we may become subject to similar claims of infringement. We may be found to be infringing upon third party intellectual property rights, even if we are unaware of their intellectual property rights. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us or if we decide to settle, could require that we pay substantial damages or ongoing royalty payments, obtain licenses, modify applications, prevent us from offering our services, or require that we comply with other unfavorable terms. We may also be obligated to indemnify our clients, vendors or partners in connection with any such claim or litigation. Even if we were to prevail in such a dispute, any litigation could be costly and time-consuming.
SECURITY AND TECHNOLOGY RISKS

Our businesses collect, host, store, transfer, process, disclose, use, secure, retain and dispose of personal and business information, and collect, hold and transmit client funds, and a security or privacy breach may damage or disrupt our businesses or operations, result in the disclosure of confidential information, damage our reputation, increase our costs, cause losses and materially adversely affect our results of operations

In connection with our business, we collect, host, store, transfer, process, disclose, use, secure, retain and dispose of large amounts of personal and business information about our clients, employees of our clients, our vendors, our partners, and our employees, contractors and temporary staff, including payroll information, health care information, personal and business financial data, social security numbers and their foreign equivalents, bank account numbers, tax information and other personal and business information. We also collect significant amounts of funds from the accounts of our clients and transmit them to their employees, tax authorities and other payees.
We are focused on safeguarding and protecting personal and business information and client funds, and we devote significant resources to maintain and regularly update our systems and processes. Nonetheless, the global environment continues to grow increasingly hostile as attacks on information technology systems continue to grow in frequency, speed, complexity, sophistication and effectiveness (including due to the use of AI), and we are regularly targeted by unauthorized parties using malicious tactics, code and viruses. Certain of these unauthorized parties may be state-sponsored and/or supported by significant financial and technological resources. Although this is a global problem, it may affect our businesses more than other businesses because unauthorized parties (which could include our personnel) may focus on the amount and type of personal and business information that our businesses collect, host, store, transfer, process, disclose, use, secure, retain and dispose of, and the client funds that we collect and transmit.
We have programs and processes in place designed to prevent, detect and respond to data or cybersecurity incidents. However, as a result of the complexity of our operating environment, the period over which hardware and software has been acquired or other reasons, our programs and processes may not be sufficient or adequate or may fail to prevent, detect or respond to a cybersecurity incident or identify and/or remediate a security vulnerability in our operating environment. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and are increasingly more complex, sophisticated and effective (including due to the use of AI). As AI technologies, including generative and agentic AI, continue to evolve, threat actors are increasingly leveraging these technologies to enhance the sophistication, scale, speed and effectiveness of cyberattacks making them more difficult to detect and defend against. The adoption and deployment of AI technologies within our and our authorized third parties’ solutions, services, and systems may also introduce novel security, data governance and operational risks. In addition, new computing technologies, including quantum computing, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms we or our authorized third parties use or have used to encrypt and protect data. We may fail to anticipate or detect these techniques and/or incidents for long periods of time and, even when we do so, we may be unable or fail to implement adequate or timely preventive or responsive measures. Our ability to address data or cybersecurity incidents may also depend on the timing and nature of assistance that may be provided from relevant governmental or law enforcement agencies. Hardware, software, applications or services that we develop or procure from authorized third parties, or are required by governmental or law enforcement agencies to install on our systems, may contain defects in design or manufacture or other problems that could (or in respect of third party software, may be designed to) compromise the confidentiality, integrity or availability of data or our
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systems. Unauthorized parties have also attempted to gain (and in certain cases have gained), and will continue to attempt to gain, access to our systems and facilities, and those of our authorized third parties, through fraud, trickery, and other methods of deceit, including using stolen identities to obtain employment with us or our authorized third parties as well as phishing and other social engineering techniques whereby attackers use end-user behaviors to distribute computer viruses and malware into our systems, our authorized third parties’ systems or otherwise compromise the confidentiality, integrity or availability of data or our systems. As these threats continue to evolve and increase (including due to the use of AI), we continue to invest significant resources, and may be required to invest significant additional resources, to modify and enhance our cybersecurity controls and to investigate and remediate any security vulnerabilities. In addition, as we become increasingly interconnected with our authorized third parties, the security risk of our networks and the larger ecosystem in which we operate is heightened. While our operating environments are designed to safeguard and protect confidential personal and business information, we do not have the ability to monitor the systems, personnel or physical facilities of, or the implementation or effectiveness of any safeguards by, our clients or our authorized third parties and, in any event, unauthorized parties have circumvented in the past, and may in the future be able to circumvent, those security measures. Information or system access obtained by unauthorized parties (which could include our personnel) resulting from successful attacks against our clients or our authorized third parties may, in turn, be used to attack and compromise our information technology systems, or result in production downtimes and operational disruptions that could have a material adverse effect on our business, results of operations or financial condition. Further, while we perform due diligence prior to acquisitions and take actions to safeguard the businesses that we acquire, these businesses may not have invested as significantly as we do in security and technology and may be more susceptible to cybersecurity incidents, which may make us more vulnerable to cybersecurity incidents as well.

We have been, and expect we will continue to be, the subject of cybersecurity attacks, including unauthorized intrusion, malicious software infiltration, network disruption, denial of service, corruption of data, ransomware attack, insider threats, and theft of sensitive information (including our intellectual property). Although none of the cybersecurity incidents that we have identified to date have materially affected us, including our business strategy, operations, results of operations, or financial condition, we continue to face significant known and unknown cybersecurity threats. In the future, a cybersecurity attack, unauthorized intrusion, malicious software infiltration, network disruption, denial of service, corruption of data, ransomware attack, theft of non-public or other sensitive information, exploitation of previously unknown "zero-day" vulnerabilities, or similar act by an unauthorized party (which could include our personnel) with respect to our businesses or our authorized third parties’ businesses, or inadvertent acts or inactions by our authorized third parties or personnel, could result in the loss, disclosure or misuse of confidential personal or business information or our intellectual property or the theft of client or ADP funds, which could have a materially adverse effect on our business or results of operations or that of our clients, result in liability, litigation, regulatory investigations and sanctions or a loss of confidence in our ability to serve clients, or cause current or potential clients to choose another service provider. As the global environment continues to grow increasingly hostile, the security of our operating environment is ever more important to our clients and potential clients. As a result, the breach or perceived breach of our security systems or the security systems of our authorized third parties could result in a loss of confidence by our clients or potential clients and cause them to choose another service provider, which could have a materially adverse effect on our business, financial condition or results of operations.

While ADP maintains insurance coverage that, subject to policy terms and conditions and a significant self-insured retention, is designed to address losses or claims that may arise in connection with certain aspects of data and cyber risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise in the continually evolving area of data and cyber risk.
Our systems, applications, solutions and services may be subject to disruptions that could have a materially adverse effect on our business, operations, financial condition, results of operations or reputation

Many of our businesses are highly dependent on our ability to process, on a daily basis, a large number of complicated transactions. We rely heavily on our payroll, financial, accounting, and other data processing systems. We need to properly manage our systems, applications and solutions, and any upgrades, enhancements and expansions we may undertake from time to time, in order to ensure they properly support our businesses. From time to time in the past, these systems, applications or solutions have failed to operate properly or become disabled, and they may do so in the future. Any such failure or disablement, even for a brief period of time, whether due to malevolent acts, errors, defects or any other factor(s), could result in financial loss, a disruption of our businesses or operations, liability to clients, loss of clients, regulatory intervention or damage to our reputation, any of which could have a materially adverse effect on our business, results of operations or financial condition. We have a global business resiliency program that includes disaster recovery, business continuity, and crisis management plans and procedures designed to protect our businesses against a multitude of events, including natural disasters, military or terrorist actions, power or communication failures, or similar events. Despite our preparations, our plans and procedures may not be successful in preventing or mitigating the loss of client data or funds, service interruptions, disruptions to our operations, or damage to our important facilities. In addition, the severity of the failure or disablement may require us to replace or rebuild the affected system(s), application(s) or solution(s) and we may be unable to do so before it materially adversely affects our business or operations.
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A disruption of the data centers or cloud-computing or other technology services or systems that we utilize could have a materially adverse effect on our business, operations, financial condition or results of operations

We host our applications and serve our clients with data centers that we operate, and with data centers that are operated, and cloud-computing and other technology services and systems that are provided, by third-party vendors. These data centers or cloud-computing and other technology services and systems have failed, become disabled or been disrupted, and may do so in the future. As our reliance on these third-party services and systems increases, particularly on third-party cloud computing platforms, our exposure to service interruptions and performance or quality issues could be impacted. Any failure, disablement or disruption, even for a limited period of time, could disrupt our businesses or operations and we could suffer financial loss, liability to clients, loss of clients, regulatory intervention or damage to our reputation, any of which could have a material adverse effect on our business, results of operations or financial condition. In addition, our third-party vendors may cease providing data center facilities or cloud-computing or other technology services or systems (including those on which our products or services are based), elect to not renew their agreements or licenses with us on commercially reasonable terms or at all, breach their agreements or licenses with us or fail to satisfy our expectations, which could disrupt our operations and require us to incur costs which could materially adversely affect our results of operations or financial condition.

BUSINESS AND INDUSTRY RISKS

Our industry is subject to rapid technological change, including as a result of AI, and if we fail to upgrade, enhance and expand our technology and services to meet client needs and preferences, the demand for our solutions and services may materially diminish

Our businesses operate in industries that are subject to rapid technological advances (such as generative and agentic AI) and changing client needs and preferences. In order to remain competitive and responsive to client demands, we continually upgrade, enhance, and expand our technology, solutions and services, including by leveraging AI in our solutions. If we fail to respond successfully to technology challenges and client needs and preferences or our competitors or other third parties respond to such challenges more quickly or successfully than us, the demand for our solutions and services may diminish. As new technologies (such as generative and agentic AI) continue to emerge, they may be disruptive to the HCM industry. These technologies could result in new and innovative HCM products and solutions that could increase competition, place us at a competitive disadvantage or even render obsolete our technology, products and solutions. In addition, investment in product development and new technologies often involves a long return on investment cycle. We have made and expect to continue to make significant investments in product development and new technologies. We must continue to dedicate a significant amount of resources to our development efforts before knowing to what extent our investments will result in products the market will accept. In addition, our business could be adversely affected in periods surrounding our new product introductions if clients delay purchasing decisions to evaluate the new product offerings. Furthermore, we may not execute successfully on our product development strategy, including because of challenges with regard to product planning and timing and technical hurdles that we fail to overcome in a timely fashion. We may fail to realize all the economic benefit of our investment in the development of a product which could cause an impairment of goodwill or intangibles and result in a significant charge to earnings.
A major natural disaster or catastrophic event could have a materially adverse effect on our business, operations, financial condition and results of operations, or have other adverse consequences

Our business, operations, financial condition, results of operations, access to capital markets and borrowing costs may be adversely affected by a major natural disaster or catastrophic event, including civil unrest, geopolitical instability, war, terrorist attack, pandemics or other (actual or threatened) public health emergencies, extreme weather, such as droughts, hurricanes, flooding and wildfires (including as a result of climate change), or other events beyond our control, and measures taken in response thereto.

Such events may create significant volatility and uncertainty and economic and financial market disruption. The extent of any such impact depends on developments which are highly uncertain and cannot be predicted, including the duration and scope of the event; the governmental and business actions taken in response thereto; actions taken by the Company in response thereto and the related costs; the impact on economic activity and employment levels; the effect on our clients, prospects, suppliers and partners; our ability to sell and provide our solutions and services, including due to travel restrictions, business and facility closures, and employee remote working arrangements; the ability of our clients or prospects to pay for our services and solutions; and how quickly and to what extent normal economic and operating conditions resume. In addition, clients or prospects may delay decision making, demand pricing and other concessions, reduce the value or duration of their orders, delay planned work or seek to terminate existing agreements. Our business is also impacted by employment levels across our clients, as we have varied contracts throughout our business that blend base fees and per-employee fees.
Political, economic and social factors may materially adversely affect our business and financial results
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Trade, including the imposition of tariffs or other trade restrictions, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and volatility. A slowdown in the economy or other negative changes, including in employment levels (as a result of AI or otherwise), the level of interest rates or the level of inflation, may have a negative impact on our businesses. In addition, as our operating costs increase due to inflationary pressure or otherwise, we may not be able to offset these increases by corresponding price increases for our products and solutions. Clients may react to worsening conditions by reducing their spending on HCM services or renegotiating their contracts with us, which may adversely affect our business and financial results.

We invest our funds held for clients in liquid, investment-grade marketable securities, money market securities, and other cash equivalents. Nevertheless, such investments are subject to general market, interest rate, credit and liquidity risks. These risks may be exacerbated, individually or together, during periods of unusual financial market volatility.

In addition, as part of our client funds investment strategy, we extend the maturities of our investment portfolio for client funds and utilize short-term financing arrangements to satisfy our short-term funding requirements related to client funds obligations. In order to satisfy these short-term funding requirements, we maintain access to various sources of liquidity, including borrowings under our commercial paper program and our committed credit facilities, our ability to execute regular reverse repurchase transactions, our committed reverse repurchase agreements, and corporate cash balances. A reduction in the availability of any such financing during periods of disruption in the financial markets or otherwise may increase our borrowing costs and/or require us to sell available-for-sale securities in our funds held for clients to satisfy our short-term funding requirements. When there is a reduction in employment levels due to a slowdown in the economy, the Company may experience a decline in client fund obligations and may also sell available-for-sale securities in our funds held for clients in order to reduce the size of the funds held for clients to correspond to client fund obligations. A sale of such available-for-sale securities may result in the recognition of losses and reduce the interest income earned on funds held for clients, either or both of which may adversely impact our results of operations, financial condition and cash flow.

In connection with our client funds assets investment strategy, we attempt to minimize the risk of not having funds collected from a client available at the time such client’s obligation becomes due by generally impounding the client’s funds at or before the time of payment of such client’s obligation. When we don’t impound client funds by the time we pay such client obligations (including for PEO clients with respect to which we are legally obligated for payroll and tax obligations in respect of WSEs as a Certified PEO), we are at risk of not recovering such funds or a material delay in such recovery. Such risk could be magnified during significant financial or other disruptions or catastrophic events, such as the failure of a bank with whom a significant number of clients may bank at the time or more widespread stress or failure within the U.S. banking system. Any such event could prevent or materially delay the recovery of any funds from clients and could have an adverse impact on our financial results and liquidity.

We are dependent upon various financial institutions to execute electronic funds transfer and paper check payments as part of our client payroll, tax and other money movement services. While we have contingency plans in place for isolated bank failures and outages, a systemic shutdown of the banking industry would impede our ability to process payments on behalf of our payroll, tax and other money movement services clients and could have an adverse impact on our financial results and liquidity.

Our payroll and tax processing services involve the collection, custody and transmission of a significant volume of funds in short-time frames. Our operations and the systems on which we rely have been, and may in the future be, subject to processing, technological, fraud-related or human errors, as well as failures, delays or disruptions, despite our efforts to design and implement effective processing systems, controls and procedures. The inability to properly perform our money movement services, operational errors in the performance of these services (including as a result of human or system errors, timing mismatches, settlement failures, unauthorized transactions or failures or delays attributable to financial institutions or other third parties), or our failure to recover any funds from clients could result in significant financial losses, regulatory intervention, fines and penalties, litigation and reputational harm, which could have a material adverse effect on our business, financial condition and results of operations.

We derive a significant portion of our revenues and operating income outside of the United States and, as a result, we are exposed to market risk from changes in foreign currency exchange rates that could impact our results of operations, financial position and cash flows.

The investment community, clients, regulators, and other stakeholders may have evolving and varied expectations regarding our business, culture, and values. Negative publicity, regardless of whether claims are accurate, about our brand, our solutions, our data, our culture and values, or our partners, vendors, or employees, could adversely affect our reputation, our business, and our financial results. We publicly share certain information about our corporate social responsibility initiatives and we may face
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increased scrutiny related to these initiatives. Further, regulations, standards and reporting requirements in this respect continue to evolve, and may be inconsistent across jurisdictions, which may result in legal and regulatory uncertainty as well as increased compliance costs for our business. Our failure to achieve progress in these areas on a timely basis, or at all, our failure to fully comply with these requirements, or our failure to do so in a timely manner, or a negative perception of our initiatives could adversely impact our reputation, business, including employee recruitment and retention, financial results, and growth.

Change in our credit ratings could adversely impact our operations and lower our profitability

The major credit rating agencies periodically evaluate our creditworthiness and have given us strong, investment-grade long-term debt ratings and high commercial paper ratings. Failure to maintain high credit ratings on long-term and short-term debt could increase our cost of borrowing, reduce our ability to obtain short-term borrowing required by our business, and adversely impact our results of operations.
Our business could be negatively impacted as a result of actions by activist stockholders or others

We have been in the past, and may be in the future, subject to actions or proposals from activist stockholders or others that may not align with our business strategies or the interests of our other stockholders. Responding to such actions could be costly and time-consuming, disrupt our business and operations, and divert the attention of our Board of Directors and senior management from the pursuit of our business strategies. Activist stockholders may create perceived uncertainties as to the future direction of our business or strategy which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel, potential clients and business partners and may affect our relationships with current clients, vendors, investors and other third parties. In addition, actions of activist stockholders may cause periods of fluctuation in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
We may be unable to attract and retain qualified personnel

Our ability to grow and provide our clients with competitive services is, to an important degree, dependent on our ability to attract and retain highly skilled and motivated people reflecting the diversity of our communities and clients. Competition for skilled employees in the outsourcing and other markets in which we operate is increasingly intense, making it more difficult and expensive to attract and retain highly skilled, motivated and diverse personnel. If we are unable to attract and retain highly skilled, motivated and diverse personnel, results of our operations and culture may suffer.

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Item 1B. Unresolved Staff Comments
None.

Item 1C. Cybersecurity

Risk management and strategy

At ADP, security is integral to our products, our business processes and infrastructure. We have an enterprise-wide approach to security with the objectives of protecting client data and funds, and preventing security incidents that could adversely affect the confidentiality, integrity, or availability of our information systems and data that resides in those systems, while also improving our system resilience with the aim of minimizing the impact to our business when incidents do occur.

In connection with our business, we collect, host, store, transfer, process, disclose, use, secure, retain and dispose of large amounts of personal and business information about our clients, employees of our clients, our vendors, our partners, and our employees, contractors and temporary staff. We also collect significant amounts of funds from the accounts of our clients and transmit them to their employees, tax authorities and other payees. As the global environment continues to grow increasingly hostile and attacks on information technology systems continue to grow in frequency, speed, complexity, sophistication, and effectiveness, we are regularly targeted by unauthorized parties using malicious tactics, code and viruses. Although this is a global problem, it may affect our businesses more than other businesses because unauthorized parties may focus on the amount and type of personal and business information that our businesses collect, host, store, transfer, process, disclose, use, secure, retain and dispose of, and the client funds that we collect and transmit.

ADP has implemented a cybersecurity program designed to assess, identify, and manage risks from cybersecurity threats. Our cybersecurity policies, processes, and standards are informed by industry practices and by industry frameworks and standards such as the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework and the International Organization for Standardization information security standards, including those standards for which we do not have a certification, but we do exercise judgment in selecting applicable controls from such framework or standards. Our cybersecurity program includes:

• Technical Safeguards. We have implemented a layered approach to defend against cybersecurity threats. We periodically evaluate technical controls through application security assessments, vulnerability management, penetration testing, and security audits.

• Incident Management and Response. A global team monitors our key applications and systems 24/7/365 to detect, investigate and respond to anomalies and incidents. This team addresses reported or detected issues by following a defined incident lifecycle and uses an incident management system to record facts, impact and remedial actions taken. We have established a cybersecurity incident response plan and escalation process, outlining processes for responding to incidents from identification to mitigation and notifying members of senior leadership, the board of directors and external advisors, as appropriate. We test our plans and processes through simulation exercises, scenario planning and tabletop exercises, using findings to improve processes.

• External and Internal Assessments. We periodically engage assessors, consultants, auditors, and other third parties to evaluate our technology, security, and related controls and benchmark against industry practices. We engage in both internal and external assurance and audit activities across the company multiple times a year including an annual third-party review of our overall cybersecurity program.

• Threat Intelligence. We maintain affiliations with cybercrime task forces and other third-party monitoring organizations. In addition, we collaborate with professional security organizations, law enforcement and technology companies to proactively identify malicious activity.

• Business Resiliency Program. We have established a global, integrated business resiliency program designed to manage the impacts of technological, environmental, process and health risks on service delivery. This program uses an integrated framework that lays out our mitigation, preparedness, response and recovery process.

• Third-Party Risk Management. We maintain a third-party risk management process , designed to identify and manage risks associated with our vendors, our partners and other third parties, that includes conducting security assessments prior to engagement and periodically during the engagement. We also seek to include security and privacy terms, where appropriate, in our contracts with third-party service providers that require third parties to maintain security controls to protect our data and notify us in the event of a cybersecurity incident.

• Security Awareness and Training Program . Our security training and awareness program is a continuous, dynamic initiative, designed to develop and maintain a security-focused culture and empower our associates to make responsible, secure decisions. As part of this awareness program, we communicate to our associates on a regular basis regarding key security topics and current events, best practices for addressing such cybersecurity threats, and
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gamification to reinforce effective behaviors. All associates are also required to take an annual, interactive security training program that includes an overview of key security topics, policies and responsibilities.

We have also integrated cybersecurity related risks into our enterprise risk management program, which is designed to identify, prioritize, assess, monitor and mitigate the various risks confronting ADP, including cybersecurity risks. Our enterprise risk management team conducts a range of activities, including an annual enterprise risk management assessment.

We have been, and continue to be, the subject of cybersecurity attacks, including unauthorized intrusion, malicious software infiltration, network disruption, and denial of service. Although we believe that we maintain a robust program of information security and controls and none of the cybersecurity incidents that we have identified to date have materially affected us, including our business strategy, results of operations, or financial condition, we cannot provide assurances that a cybersecurity incident will not materially affect us, or our business strategy, results of operations or financial condition in the future. For additional information on cybersecurity related risks, see “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

Governance

A cross-functional, enterprise-wide management program operates to evaluate our global cybersecurity program’s effectiveness. Our chief information security officer (“CISO”) leads our global cybersecurity program and oversees the global cybersecurity services team, which is responsible for monitoring, identifying, assessing and managing cybersecurity threats across ADP. Our CISO reports to our chief security officer (“CSO”) , who leads our global security organization and is responsible for cybersecurity, fraud prevention, operational risk management, client security management, and workforce protection. Our CSO has over 25 years of experience in a range of security roles, including serving as a chief security officer at another public company, and participates in various cyber security organizations. The current CISO has served in various roles in cybersecurity and information technology for over 25 years and has attained the professional certification of Certified Information Security Manager.

Our board of directors is actively engaged in the oversight of our global cybersecurity program. The board receives regular, quarterly reports on these matters from our CSO and leadership from our global product and technology organization, including on the status of projects to strengthen the Company’s cybersecurity systems, improve cyber readiness, on existing and emerging threat landscapes, and on our global product security and resiliency program. Concurrent and in addition to these reports, our chief administrative officer (“CAO”) (who oversees legal, security and compliance matters) provides a legal, regulatory and ethics update at each meeting of the audit committee of our board of directors, which includes matters of cybersecurity, as appropriate. In addition, important actual or emerging cybersecurity events are communicated to the board of directors by our CAO and Chief Legal Officer, even if immaterial to us.

Our global cybersecurity program is subject to an annual third-party assessment overseen by our board of directors and this assessment reviews all aspects of our cyber program. Findings are reported to our board of directors and, in response, ADP develops initiatives to improve our maturity across each of the pillars of the NIST Cybersecurity Framework. The status of these initiatives is then reviewed with our board of directors during its quarterly meetings. This governance process encourages an environment of continuous improvement.

Item 2. Properties
ADP ow ns 6 of its processing/print centers, and 10 other operational offices, sales offices, and its corporate headquarters in Roseland, New Jersey, which aggregate approximately 2,561,945 square feet. None of ADP’s owned facilities is subject to any material encumbrances. ADP leases space for some of its processing centers, other operational offices, and sales offices. All of these leases, which aggregate approximately 5,935,575 square feet worldwide, expire at various times up to the year 2038. ADP believes its facilities are currently adequate for their intended purposes and are adequately maintained.

Item 3. Legal Proceedings
In the normal course of business, ADP is subject to various claims and litigation. While the outcome of any litigation is inherently unpredictable, ADP believes that it has valid defenses with respect to the legal matters pending against it and that the ultimate resolution of these matters will not have a materially adverse impact on its financial condition, results of operations, or cash flows.

Item 4. Mine Safety Disclosures
Not applicable.

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Part II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Registrant's Common Equity
The principal market for the Company’s common stock is the NASDAQ Global Select Market under the symbol ADP. As of June 30, 2026, there were 28,950 holders of record of the Company’s common stock. As of such date, 2,004,432 additional holders held their common stock in “street name.”

Issuer Purchases of Equity Securities
Period Total Number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of the Publicly Announced Common Stock Repurchase Plan (1) Maximum Approximate Dollar Value
of Shares that
may yet be
Purchased under
the Common Stock
Repurchase Plan (1) (2)
April 1, 2026 to
     April 30, 2026
1,048,451 $202.29 1,048,451 $5,278,101,357
May 1, 2026 to
     May 31, 2026
928,416 $217.56 928,416 $5,076,113,551
June 1, 2026 to
    June 30, 2026
932,828 $227.36 932,828 $4,864,027,161
Total 2,909,695 2,909,695

(1) The Company received the Board of Directors' approval in January 2026 to repurchase $6 billion of its common stock.

(2) Inclusive of the impact of the one-percent excise tax under the Inflation Reduction Act of 2022.

There is no expiration date for the common stock repurchase authorization.

For equity compensation plan information, please refer to Item 12 in Part III of this Annual Report on Form 10-K.

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Performance Graph
The following graph compares the cumulative return on ADP's common stock for the most recent five years with the cumulative return on the S&P 500 Index and the Peer Group Index, (a) assuming an initial investment of $100 on June 30, 2021, with all dividends reinvested. The stock price performance shown on this graph may not be indicative of future performance.

(a)    We use the Nasdaq Dividend Achievers Select Index as our Peer Group Index. The Nasdaq Dividend Achievers Select Index is a select group of companies, that includes ADP, with at least ten consecutive years of increasing annual regular dividend payments.
    

Item 6. Selected Financial Data
Not applicable.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Tabular dollars are presented in millions, except per share amounts

The following section discusses our year ended June 30, 2026 (“fiscal 2026”), as compared to year ended June 30, 2025 (“fiscal 2025”). A detailed review of our fiscal 2025 performance compared to our fiscal 2024 performance is set forth in Part II, Item 7 of our Form 10-K for the year ended June 30, 2025.

FORWARD-LOOKING STATEMENTS

This document and other written or oral statements made from time to time by Automatic Data Processing, Inc., its subsidiaries and variable interest entity (“ADP” or the “Company”) may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like “outlook,” “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could,” “is designed to” and other words of similar meaning, are forward-looking statements. These statements are based on management’s expectations and assumptions and depend upon or refer to future events or conditions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Forward-looking statements are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements or that could contribute to such difference include: ADP's success in obtaining and retaining clients, and selling additional services to clients; the pricing of products and services; the success of our new solutions; our ability to respond successfully to changes in technology, including artificial intelligence; compliance with existing or new legislation or
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regulations; changes in, or interpretations of, existing legislation or regulations; overall market, political and economic conditions, including interest rate and foreign currency trends and inflation; competitive conditions; our ability to maintain our current credit ratings and the impact on our funding costs and profitability; security or cyber breaches, including as a result of artificial intelligence, fraudulent acts, and system interruptions and failures; employment and wage levels; availability of skilled associates; the impact of new acquisitions and divestitures; the impact of any uncertainties related to major natural disasters or catastrophic events; and supply-chain disruptions. The factors identified above are not exhaustive. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. These risks and uncertainties, along with the risk factors discussed under “Item 1A. Risk Factors”, and in other written or oral statements made from time to time by ADP, should be considered in evaluating any forward-looking statements contained herein.

NON-GAAP FINANCIAL MEASURES

In addition to our U.S. GAAP results, we use adjusted results and other non-GAAP metrics to evaluate our operating performance in the absence of certain items and for planning and forecasting of future periods. Adjusted EBIT, adjusted EBIT margin, adjusted net earnings, adjusted diluted earnings per share, adjusted effective tax rate and organic constant currency are all non-GAAP financial measures. Please refer to the accompanying financial tables in the “Non-GAAP Financial Measures” section for a discussion of why ADP believes these measures are important and for a reconciliation of non-GAAP financial measures to their nearest comparable GAAP financial measures.

EXECUTIVE OVERVIEW

As a global leader in HR and payroll solutions, ADP continuously aims to solve complex business challenges for our clients and their workers. Our Human Capital Management ("HCM") solutions, which include both software and outsourcing services, are designed to help our clients manage their workforce through a dynamic business and regulatory landscape and the changing world of work. We see tremendous opportunity ahead as we focus on our three key Strategic Priorities: Leading with Best-in-Class HCM technology, Providing Unmatched Expertise and Outsourcing Solutions, and Leveraging our Global Scale for the Benefit of our Clients.

During fiscal 2026, we made meaningful progress on our Strategic Priorities. We continued to leverage our data advantages, domain expertise, and trusted brand to lead the HCM industry's AI transformation. ADP Assist became increasingly embedded in our clients' workflows, delivering meaningful time savings and improved accuracy. Since launching ADP Assist agents in January, we steadily expanded their availability across our payroll, benefits, HR, and compliance solutions, making AI-powered HCM agents accessible to nearly all of our more than 1.1 million clients. We also launched a dedicated space within ADP Marketplace for our partners' AI agents, further expanding our AI ecosystem. Additionally, we continued deploying AI tools across our sales, service, and research and development functions to improve the client experience and drive internal productivity gains. During the year, we experienced strong enterprise sales momentum for ADP Lyric HCM and the ADP WorkForce Suite, as our unified global payroll, global HR, and global time solutions continued to resonate with clients. Finally, we remained focused on delivering value through our global scale by providing compliant HCM solutions, local expertise, and trusted relationships wherever our clients operate.

Highlights from the year ended June 30, 2026 include:

• Revenue growth of 7% to $21,947.4 million; 6% growth on an organic constant currency
• Earnings before income taxes margin expansion of 30 bps, and adjusted EBIT margin expansion of 80 bps
• Diluted and adjusted diluted earnings per share ("EPS") growth of 10% and 11%, respectively, to $10.94 and $11.12, respectively
• Cash returned via shareholder friendly actions of $4.7B, including $2.6B of dividends and $2.1B of share repurchases

For fiscal 2026, we delivered strong revenue growth of 7%, 6% growth on an organic constant currency basis. Our United States pays per control metric, which represents the approximate growth in the number of employees on ADP clients' processed payrolls in the United States when measured on a same-store-sales basis for a subset of Employer Services clients ranging from small to large businesses, grew 1% for the year ended June 30, 2026 as compared to the year ended June 30, 2025. PEO average worksite employees increased 2% for the year ended June 30, 2026, as compared to the year ended June 30, 2025. Additionally, our ES new business bookings grew 6% in fiscal 2026, and our ES client revenue retention was 92.1%. These results are a testament to the meaningful investments we have made in our solutions and the efforts of our associates to deliver exceptional levels of client service.

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We have a strong business model, generating significant cash flows with low capital intensity, and offer a suite of products that provide critical support to our clients’ HCM functions. We generate sufficient free cash flow to satisfy our cash dividend and our modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our long-term strategy and commitments to shareholder friendly actions. We are committed to building upon our past successes by investing in research and development to enhance our products and services and by driving continuous improvement in the way we operate. Our financial condition remains solid at June 30, 2026 and we remain well positioned to support our associates and our clients.

RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS

Total Revenues

For the year ended June 30:

Years Ended
June 30,
2026 2025

Total Revenues $ 21,947.4  $ 20,560.9 
  YoY Growth 7  % 7  %
  YoY Growth, Organic Constant Currency 6  % 7  %

Total revenues increased in fiscal 2026 due to new business started from new business bookings, strong client revenue retention, an increase in zero-margin benefits pass-throughs of $318.3 million, an increase in pricing, a 1% year-over-year growth impact of foreign currency, and an increase in interest on funds held for clients of $165.7 million.

Total revenues for fiscal 2026 include interest on funds held for clients of $1,354.8 million, as compared to $1,189.1 million in fiscal 2025. The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 7.4% to $40.4 billion in fiscal 2026 as compared to fiscal 2025, coupled with an increase in our average interest rate earned to 3.4% in fiscal 2026, as compared to 3.2% in fiscal 2025.

Total Expenses
Years Ended
June 30,
2026 2025 %
Change

Costs of revenues:
Operating expenses $ 10,240.6  $ 9,622.7  6  %
Research and development 1,028.8  988.6  4  %
Depreciation and amortization 490.8  486.0  1  %
Total costs of revenues 11,760.2  11,097.3  6  %
Selling, general, and administrative expenses 4,408.2  4,051.7  9  %
Interest expense 459.3  455.9  1  %
Total expenses $ 16,627.7  $ 15,604.9  7  %

For the year ended June 30:

Operating expenses increased in fiscal 2026 due to an increase of $318.3 million in PEO Services zero-margin benefits pass-through costs to $4,607.3 million in fiscal 2026 from $4,289.0 million in fiscal 2025. Additionally, operating expenses increased by $188.9 million due to higher service and implementation costs in support of our growing revenue, $74.4 million million primarily due to higher hosting, cloud-based service, and software license costs in support of our products and solutions, and by $37.1 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.

Research and development expenses increased in fiscal 2026 due to increased costs to develop, support, and maintain our new and existing products, including the integration costs associated with the WorkForce Software acquisition.
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Depreciation and amortization increased in fiscal 2026 due to the amortization of investments in internally developed software primarily for our products and solutions, intangible assets acquired in the WorkForce Software acquisition, and purchased software, partially offset by lower amortization of customer contracts and lists.

Selling, general, and administrative expenses increased in fiscal 2026 primarily due to increases in selling and marketing expenses of $241.4 million as a result of investments in our sales organization, an increase in costs related to non-recurring, broad-based, company-wide initiatives of $67.2 million and a non-recurring net legal settlement of $18.0 million.

Interest expense increased in fiscal 2026 primarily due to net increases in interest expense of $25.3 million related to the senior notes issued in fiscal 2026 and 2025, offset by the redemption of a senior note in fiscal 2025. These increases were partially offset by a decrease of $22.8 million related to commercial paper and reverse repurchase borrowings as a result of decreases in average interest rates on commercial paper issuances and reverse repurchases of 80 and 70 basis points, respectively, offset by an increase in average daily commercial paper borrowings and average reverse repurchase outstanding balances of $0.1 billion and $0.6 billion, respectively, as compared to fiscal 2025.

Other (Income)/Expense, net

Years ended June 30, 2026 2025 $ Change
Interest income on corporate funds $ (371.0) $ (319.5) $ (51.5)

Realized (gains)/losses on available-for-sale securities, net (2.9) 1.7  (4.6)

Gain on sale of assets —  (5.0) 5.0 

Non-service components of pension income, net (28.3) (31.3) 3.0 
Net (gain)/loss on ADP Ventures' investments (8.4) —  (8.4)
Other income, net $ (410.6) $ (354.1) $ (56.5)

Interest income on corporate funds increased in fiscal 2026 due to higher average investment balances of $10.4 billion as compared to $9.2 billion in fiscal 2025, coupled with an increase in average interest rates of 10 basis points, as compared to fiscal 2025.

In fiscal 2026, the Company recognized a net gain of $8.4 million related to investments made through its Corporate Venture Capital arm, ADP Ventures.

See Note 11 of our Consolidated Financial Statements for further details on non-service components of pension income, net.

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Earnings Before Income Taxes ("EBIT") and Adjusted EBIT

For the year ended June 30:

Years Ended
June 30,
2026 2025 YoY Growth
EBIT $ 5,730.3  $ 5,310.1  8  %
  EBIT Margin 26.1  % 25.8  % 30 bps

Adjusted EBIT $ 5,874.6  $ 5,347.1  10  %
  Adjusted EBIT Margin 26.8  % 26.0  % 80 bps

Earnings before income taxes increased in fiscal 2026 due to the increase in total revenues, partially offset by the increase in total expenses discussed above.

EBIT Margin increased in fiscal 2026 due to contributions from client funds interest revenues, increased interest income on corporate funds, lower amortization of client contracts and lists, and lower interest expense related to commercial paper and reverse repurchase borrowings, partially offset by increased selling and marketing expenses and costs related to non-recurring, broad-based, company-wide initiatives.

Adjusted EBIT and Adjusted EBIT margin exclude interest income and interest expense that are not related to our client funds
extended investment strategy, and net charges, including certain legal matters, non-recurring, broad-based, company-wide initiatives, gain on sale of assets, and (gains)/losses on ADP Ventures' investments, in the applicable periods.

Provision for Income Taxes

The effective tax rate in fiscal 2026 and 2025 was 23.0% and 23.2%, respectively. The decrease in the effective tax rate is primarily due to a decrease in uncertain tax positions and an increase in tax credits, partially offset by a lower benefit for adjustments to prior year tax liabilities and a lower excess tax benefit on stock-based compensation for fiscal 2026 as compared to fiscal 2025. Refer to Note 12, Income Taxes, within the Notes to the Consolidated Financial Statements for further discussion.

Adjusted Provision for Income Taxes

The adjusted effective tax rate in fiscal 2026 and 2025 was 23.0% and 23.2%, respectively. The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.

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Net Earnings and Diluted EPS, Unadjusted and Adjusted

For the year ended June 30, respectively:

Years Ended
June 30,
2026 2025 YoY Growth

Net earnings $ 4,413.5  $ 4,079.7  8  %
Diluted EPS $ 10.94  $ 9.98  10  %
Adjusted net earnings $ 4,485.4  $ 4,092.0  10  %
Adjusted diluted EPS $ 11.12  $ 10.01  11  %

In addition to the increase in net earnings, diluted EPS increased in fiscal 2026 as a result of the impact of fewer shares outstanding resulting from share repurchases under our authorized share repurchase program, partially offset by the issuances of shares under our employee benefit plans. The Company repurchased 8.6 million and 4.4 million shares in fiscal 2026 and 2025, respectively.

For fiscal 2026, adjusted net earnings and adjusted diluted EPS reflect the changes in the components described above.

ANALYSIS OF REPORTABLE SEGMENTS
Revenues
Years Ended
June 30, % Change
2026 2025 As Reported Organic Constant Currency
Employer Services $ 14,831.4  $ 13,883.1  7  % 5  %
PEO Services 7,128.1  6,690.4  7  % 7  %
Intercompany eliminations (12.1) (12.6) n/m n/m

$ 21,947.4  $ 20,560.9  7  % 6  %

Earnings before Income Taxes
Years Ended
June 30, % Change
2026 2025 As Reported
Employer Services $ 5,436.8  $ 5,008.5  9  %
PEO Services 936.1  950.5  (2) %
Other (a) (642.6) (648.9) n/m

$ 5,730.3  $ 5,310.1  8  %

Margin
Years Ended
June 30,

2026 2025 YoY Growth
Employer Services 36.7  % 36.1  % 60 bps

PEO Services 13.1  % 14.2  % (110) bps

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(a) Other represents certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, legal settlements, company-wide severance initiatives, non-recurring gains and losses, the elimination of intercompany transactions, and interest income and expense.
n/m - not meaningful

Employer Services

Revenues

Employer Services' revenues increased in fiscal 2026 due to new business started from new business bookings, strong client revenue retention, an increase in pricing, a 1% year-over-year growth impact of foreign currency, an increase in interest earned on funds held for clients of $164.1 million, and an increase in our pays per control when measured on a same-store-sales basis of 1%.

Earnings before Income Taxes

Employer Services' earnings before income taxes increased in fiscal 2026 due to the increase in revenues, including contributions from client funds interest, discussed above, partially offset by increases in expenses, including $188.6 million in selling and marketing expenses and $159.7 million in costs of servicing and implementing our clients on growing revenue.

Margin

Employer Services' margin increased in fiscal 2026 due to contributions from client funds interest revenues, operating efficiencies for costs of servicing and implementing our clients on growing revenue, and lower amortization of client contracts and lists, partially offset by increased selling and marketing expenses and the impact from the WorkForce Software acquisition in October 2024.

PEO Services

Revenues
PEO Revenues
Years Ended Change
June 30,
2026 2025 $ %
PEO Services' revenues $ 7,128.1  $ 6,690.4  $ 437.7  7  %
Less: PEO zero-margin benefits pass-throughs 4,607.3  4,289.0  318.3  7  %
PEO Services' revenues excluding zero-margin benefits pass-throughs $ 2,520.8  $ 2,401.4  $ 119.4  5  %

PEO Services' revenues increased in fiscal 2026 due to an increase in zero-margin benefits pass-throughs of $318.3 million, and growth in average worksite employees of 2% coupled with increases in average wages and state unemployment taxes per worksite employee, as compared to fiscal 2025.

Earnings before Income Taxes

PEO Services’ earnings before income taxes decreased in fiscal 2026 due to increases in expenses, including $318.3 million in zero-margin benefits pass-through costs, $52.8 million in selling and marketing expenses, and $37.1 million in operating costs related to worker's compensation coverage and state unemployment insurance, partially offset by the increase in revenues discussed above.

Margin

PEO Services' margin decreased in fiscal 2026 due to increased selling and marketing expenses, zero-margin benefit pass through costs, an increase in the pre-tax loss from ADP Indemnity, and operating costs related to state unemployment insurance, partially offset by increased revenues discussed above.

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ADP Indemnity provides workers’ compensation deductible reimbursement insurance protection for PEO Services’ worksite employees up to $1 million per occurrence. PEO Services has secured a workers’ compensation insurance policy that caps the exposure for each claim at $1 million per occurrence and has also secured aggregate stop loss insurance that caps aggregate losses at a certain level in the year ended June 30, 2012 and prior from an admitted and licensed insurance company of AIG. We utilize historical loss experience and actuarial judgment to determine the estimated claim liability, and changes in estimated ultimate incurred losses are included in the PEO segment. 

Additionally, starting in the year ended June 30, 2013, ADP Indemnity paid premiums to enter into reinsurance arrangements with ACE American Insurance Company, a wholly-owned subsidiary of Chubb Limited (“Chubb”), to cover substantially all losses incurred by the Company up to $1 million per occurrence related to the workers ’ compensation deductible reimbursement insurance protection for PEO Services' worksite employees. Each of these reinsurance arrangements limits our overall exposure incurred up to a certain limit. The Company believes the likelihood of ultimate losses exceeding this limit is remote. ADP Indemnity recorded a pre-tax actuarial gain of $2.8 million in fiscal 2026, as compared to a pre-tax actuarial gain of $8.8 million in fiscal 2025, due to less favorable loss development in workers’ compensation reserves. ADP Indemnity paid a premium of $327.8 million in July 2026, to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for fiscal 2027 policy year on terms substantially similar to the fiscal 2026 reinsurance policy.

Non-GAAP Financial Measures

In addition to our GAAP results, we use the adjusted results and other non-GAAP metrics set forth in the table below to evaluate our operating performance in the absence of certain items and for planning and forecasting of future periods:
Adjusted Financial Measures U.S. GAAP Measures
Adjusted EBIT Net earnings
Adjusted provision for income taxes Provision for income taxes
Adjusted net earnings Net earnings

Adjusted diluted earnings per share Diluted earnings per share
Adjusted effective tax rate Effective tax rate

Organic constant currency Revenues

We believe that the exclusion of the identified items helps us reflect the fundamentals of our underlying business model and analyze results against our expectations and against prior periods, and to plan for future periods by focusing on our underlying operations. We believe that the adjusted results provide relevant and useful information for investors because it allows investors to view performance in a manner similar to the method used by management and improves their ability to understand and assess our operating performance.  The nature of these exclusions is for specific items that are not fundamental to our underlying business operations.  Since these adjusted financial measures and other non-GAAP metrics are not measures of performance calculated in accordance with U.S. GAAP, they should not be considered in isolation from, as a substitute for, or superior to their corresponding U.S. GAAP measures, and they may not be comparable to similarly titled measures at other companies.

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Years Ended
June 30, % Change
2026 2025 As Reported
Net earnings $ 4,413.5  $ 4,079.7  8  %
Adjustments:
Provision for income taxes 1,316.8  1,230.4 
All other interest expense (a) 141.0  114.8 
All other interest income (a) (92.9) (94.2)
Optimization initiatives (b) (4.5) 19.4 

Business alignment program (c) 91.1  — 
Gain on sale of assets —  (2.6)
Net (gain)/loss on ADP Ventures' investments (d) (8.4) — 
Legal settlements (e) 18.0  (0.4)
Adjusted EBIT $ 5,874.6  $ 5,347.1  10  %
Adjusted EBIT Margin 26.8  % 26.0  %

Provision for income taxes $ 1,316.8  $ 1,230.4  7  %
Adjustments:
Optimization initiatives (f) (1.2) 4.8 
Business alignment program (f) 23.2  — 
Gain on sale of assets (f) —  (0.6)
Net (gain)/loss on ADP Ventures' investments (f) (2.1) — 

Legal settlements (f) 4.4  (0.1)

Adjusted provision for income taxes $ 1,341.1  $ 1,234.5  9  %
Adjusted effective tax rate (g) 23.0  % 23.2  %

Net earnings $ 4,413.5  $ 4,079.7  8  %
Adjustments:
Optimization initiatives (b) (4.5) 19.4 
Income tax provision for/(benefit from) optimization initiatives (f) 1.2  (4.8)
Gain on sale of assets —  (2.6)
Income tax provision for gain on sale of assets (f) —  0.6 
Business alignment program (c) 91.1  — 
Income tax benefit from business alignment program (f) (23.2) — 

Net (gain)/loss on ADP Ventures' investments (d) (8.4) — 
Income tax provision for net (gain)/loss on ADP Ventures' investments (f) 2.1  — 

Legal settlements (e) 18.0  (0.4)
Income tax (benefit from)/provision for legal settlements (f) (4.4) 0.1 

Adjusted net earnings $ 4,485.4  $ 4,092.0  10  %

Diluted EPS $ 10.94  $ 9.98  10  %
Adjustments:

Optimization initiatives (b) (f) (0.01) 0.03 

Business alignment program (c) (f) 0.17  — 
Net (gain)/loss on ADP Ventures' investments (d) (f) (0.02) — 
Legal settlements (e) (f) 0.04  — 

Adjusted diluted EPS $ 11.12  $ 10.01  11  %

(a) In adjusted EBIT, we include the interest income earned on investments associated with our client funds extended investment strategy and interest expense on borrowings related to our client funds extended investment strategy as we believe these amounts to be fundamental to the underlying operations of our business model. The adjustments in the table above represent the interest income and interest expense that are not related to our client funds extended investment strategy and are labeled as “All other interest expense” and “All other interest income.”

(b) Represents partial reversals of workforce optimization initiatives from fiscal 2025 and 2024. Severance charges/(reversals) have been taken in the past and not included as an adjustment to get to adjusted results. Unlike severance charges/(reversals) in prior periods, these specific reversals relate to broad-based, company-wide initiatives.
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(c) In Q4 2026, we incurred a charge of $91.1 million as part of a corporate-led business alignment program, which is designed to better align our organization and resources with our Strategic Priorities and to streamline the organizational structure. Costs associated with this program included severance costs of $89.1 million and strategic project costs of $2.0 million. Strategic project costs consist primarily of external advisory costs. This charge is excluded from adjusted net earnings to provide a clearer view of ongoing operations and enhance period-over-period comparability. Severance charges have been taken in the past and not included as an adjustment to get to adjusted results. Unlike charges in prior periods, these specific charges relate to a broad-based, company-wide initiative. 

(d) Represents (gains)/losses on investments made through our Corporate Venture Capital arm, ADP Ventures. (Gains)/losses on these investments may result from observable price changes, changes in ownership interest, accrued interest income, and impairment charges. These adjustments may be highly variable, are predominantly non-cash, are outside our control, and are not fundamental to the underlying operations of our business model.

(e) In fiscal 2026, this represents a net charge (establishment of a legal reserve and insurance recovery) from a legal matter settled during the year ended June 30, 2026. Refer to Note 13, Commitments and Contingencies, within the Notes to the Consolidated Financial Statements for further discussion. In fiscal 2025, this represents a reversal of a legal reserve recorded during the year ended June 30, 2023.

(f) The income tax provision was calculated based on the marginal rate in effect during the period of the adjustment.

(g) The adjusted effective tax rate is calculated as our adjusted provision for income taxes divided by the sum of our adjusted net earnings plus our adjusted provision for income taxes.

The following table reconciles our reported growth rates to the non-GAAP measure of organic constant currency, which excludes the impact of acquisitions, the impact of dispositions, and the impact of foreign currency. The impact of acquisitions and dispositions is calculated by excluding the current year revenues of acquisitions until the one-year anniversary of the transaction and by excluding the prior year revenues of divestitures for the one-year period preceding the transaction. The impact of foreign currency is determined by calculating the current year results using foreign exchange rates consistent with the prior year. The PEO segment is not impacted by acquisitions, dispositions or foreign currency.
Year Ended
June 30,
2026
Consolidated revenue growth as reported 7  %
Adjustments:
Impact of acquisitions —  %

Impact of foreign currency (1) %
Consolidated revenue growth, organic constant currency 6   %

Employer Services revenue growth as reported 7  %
Adjustments:
Impact of acquisitions —  %

Impact of foreign currency (1) %
Employer Services revenue growth, organic constant currency 5   %

Note: Numbers may not foot due to rounding.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2026, cash and cash equivalent s were $4.2 billion, which were primarily invested in time deposits and money market funds.

For corporate liquidity, we expect existing cash, cash equivalents, marketable securities, cash flow from operations together with our $11.7 billion of committed credit facilities and our ability to access both long-term and short-term debt financing from the capital markets will be adequate to meet our operating, investing, and financing activities, such as regular quarterly dividends, share repurchases, and capital expenditures for the foreseeable future. Our financial condition remains solid at June 30, 2026 and we have sufficient liquidity.

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For client funds liquidity, we have the ability to borrow through our financing arrangements under our U.S. short-term commercial paper program and our U.S., Canadian and United Kingdom short-term reverse repurchase agreements ($7.5 billion of which is available on a committed basis in the U.S. as of June 30, 2026) , together with our $11.7 billion of comm itted credit facilities and our ability to use corporate liquidity when necessary to meet short-term funding requirements related to client funds obligations. Please see “Quantitative and Qualitative Disclosures about Market Risk” for a further discussion of the risks related to our client funds extended investment strategy. See Note 9 of our Consolidated Financial Statements for a description of our short-term financing including commercial paper.

Operating, Investing and Financing Cash Flows

Our cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows are summarized as follows:
Years ended June 30,
2026 2025 $ Change
Cash provided by (used in):
Operating activities $ 5,441.2  $ 4,939.7  $ 501.5 
Investing activities (4,713.8) (3,035.0) (1,678.8)
Financing activities 4,881.0  (6,973.4) 11,854.4 
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents (37.8) 37.3  (75.1)
Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents $ 5,570.6  $ (5,031.4) $ 10,602.0 

Net cash flows provided by operating activities increased due to growth in our business and a net favorable change in the components of operating assets and liabilities primarily due to timing of collections and payments, as compared to fiscal 2025.

Net cash flows used in investing activities changed primarily due to timing of net proceeds and purchases of corporate and client funds marketable securities of $2,696.2 million, offset by a net decrease in acquisitions of businesses, which totaled $1,165.1 million in fiscal 2025, primarily related to the Workforce Software acquisition.

Net cash flows provided by/(used in) financing activities changed primarily due to a net increase in the cash flow from client funds obligations of $21,516.6 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, a net decrease in cash distributed to our clients that was received from the Internal Revenue Service of $576.2 million, partially offset by the repayment of $4,769.5 million related to borrowings outstanding as of June 30, 2025 under the commercial paper program and an increase of $802.8 million in repurchases of common stock.

We purchased approximately 8.6 million shares of our common stock at an average price per share of $242.92 during fiscal 2026, as compared to purchases of 4.4 million shares at an average price per share of $289.11 during fiscal 2025. From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase program. The Company considers several factors in determining when to execute share repurchases, including, among other things, actual and potential acquisition activity, cash balances and cash flows, issuances due to employee benefit plan activity, and market conditions.

Capital Resources and Client Fund Obligations

We have $5.0 billion of senior unsecured n o tes with maturity dates in 2028, 2030, 2032, 2034, and 2036. We may from time to time revisit the long-term debt market to refinance existing debt, finance investments including acquisitions for our growth, and maintain the appropriate capital structure. However, there can be no assurance that volatility in the global capital and credit markets would not impair our ability to access these markets on terms acceptable to us, or at all. See Note 10 of our Consolidated Financial Statements for a description of our senior unsecured notes.

Our U.S. short-term funding requirements related to client funds are sometimes obtained on an unsecured basis through the issuance of commercial paper, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities. This commercial paper program provides for the issuance of up to $11.7 billion in aggregate maturity value. Our commercial paper program is rated A-1+ by Standard and Poor’s, Prime-1 (“P-1”) by Moody’s and F1+ by Fitch. These ratings denote the highest quality commercial paper securities. Maturities of commercial paper can range from overnight to up to 364 days . As of June 30, 2026, the Company had no commercial paper outstanding. A s of June 30, 2025, the
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Company had $4.8 billion of co mmercial paper outstanding, which was repaid in early July 2025. Details of the borrowings under the commercial paper program are as follows:

Years ended June 30, 2026 2025
Average daily borrowings (in billions) $ 4.2  $ 4.1 
Weighted average interest rates 4.0  % 4.8  %
Weighted average maturity (approximately in days) 3 days 2 days