Paycom's Q2 Earnings Surpass Expectations, Revenues Rise Y/Y

Paycom’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing once, the average surprise being 7.2%.

Revenues totaled $531.2 million, which rose 9.8% from the year-ago quarter and exceeded the consensus estimate by 3.7%.

Paycom’s Q2 in Detail

Paycom’s Recurring revenues (representing 95.1% of the total revenues) improved 11% to $505.2 million in the second quarter. Our estimate for the company’s Recurring revenues was pegged at $485.7 million.

Paycom’s revenues from the Interest on funds held for clients segment decreased to $26 million from $28.5 million in the year-ago quarter and contributed 4.9% to total sales. Our estimate for the segment’s revenues was pegged at $25.9 million.

Adjusted gross profits increased 10.4% from the year-ago period to $444.1 million. The adjusted gross margin expanded 40 basis points (bps) on a year-over-year basis to 83.6%.

Paycom’s adjusted EBITDA rose 18.5% year over year to $235 million. The adjusted EBITDA margin expanded 320 basis points to 44.2%.

Paycom’s Balance Sheet & Cash Flow

Paycom exited the second quarter with cash and cash equivalents of $198 million compared with $153.9 million recorded in the previous quarter. The company had long-term debt of $900 million as of June 30, 2026.

In the second quarter of 2026, PAYC generated operating cash flow of approximately $213.8 million, paid out $17.9 million in dividends and bought back $345.9 million worth of its common stock.

Paycom Raises 2026 Guidance

Following the second-quarter performance, management raised its full-year 2026 guidance ranges. For 2026, Paycom expects total revenues of $2.197-$2.212 billion, implying year-over-year growth of 7-8%, up from its prior range of $2.175-$2.195 billion. The Zacks Consensus Estimate is pegged at $2.19 billion, indicating year-over-year growth of 6.7%.

The company projects recurring revenues to grow 8-9% year over year, up from its prior range of 7-8%. PAYC forecasts revenues from Interest on funds held for clients to be $105 million, up from the prior projection of $103 million.

Paycom expects its 2026 adjusted EBITDA to be between $1.007 billion and $1.022 billion, translating to an EBITDA margin of approximately 46% at the midpoint, up from the earlier guided range of $950 million to $970 million.

Paycom’s Zacks Rank & Other Stocks to Consider

Currently, PAYC carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader Zacks Computer and Technology sector are Lumentum LITE, Applied Materials AMAT and Analog Devices ADI, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Lumentum have surged 123% year to date. The Zacks Consensus Estimate for LITE’s fiscal 2026 earnings is pegged at $8.19 per share, up by 5 cents over the past 30 days, indicating an increase of 297.6% year over year.

Shares of Applied Materials have jumped 107.9% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.14 per share, up by 3 cents over the past 30 days, indicating a rise of 28.9% year over year.

Analog Devices shares have surged 39.2% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.42 per share, up by 10 cents over the past 30 days, indicating an increase of 33.9% year over year.

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

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