Paychex shares climb as profit growth overshadows choppy demand

Published: 2025-03-26 11:47:23 ET PAYX

March 26 (Reuters) - Paychex on Wednesday topped Wall Street estimates for quarterly profit, helped by a tight rein on costs, even as demand for human capital management services remain choppy amid economic uncertainties.

Shares of the Rochester, New York-based company, which is in the process of acquiring payroll processing firm Paycor HCM for about $4 billion, were up nearly 5%.

While the U.S. labor market has remained stable, the outlook is darkening for economic growth amid rising trade tensions and deep cuts in government spending, impacting demand for companies like Paychex.

Still, tighter cost control helped Paychex grow its net income by 4% to $519.3 million in the third quarter ended February 28. Its total expenses, excluding acquisition-related costs, rose just 1% to $800.5 million.

The company's investments in automation and technology also helped shave costs, helping drive a 180-basis point increase in adjusted operating margins to 46.9%.

On an adjusted basis, Paychex reported a profit of $1.49 per share, above estimates of $1.48 per share.

Paychex, which has more than 745,000 clients in the U.S. and Europe, offers HR outsourcing, human capital management technology, payroll processing, and retirement and insurance solutions.

The company posted a 5% rise in total revenue to $1.51 billion for the reported quarter, but still fell short of analysts' estimate of $1.52 billion, according to data compiled by LSEG.

Paychex's deal for Paycor, which is expected to close in April, reflects a broader consolidation trend in the payroll and HR industry. Payroll firm Automatic Data Processing in October acquired management services provider WorkForce Software for around $1.2 billion. (Reporting by Kritika Lamba in Bengaluru; Editing by Shailesh Kuber)