In the third quarter of 2026, Paycom Software, Inc. (NYSE:PAYC) delivered financial results that exceeded market expectations. The company, which specializes in online payroll and human resource technology, reported non-GAAP earnings of $3.37 per share. This figure represents a 73.7% increase from the previous year and surpassed the Zacks Consensus Estimate by 22.1%.
Paycom’s revenue for the quarter rose by 10.2% year-over-year to reach $543.8 million, surpassing the consensus estimate by 1.6%. This growth was driven by an increase in recurring revenues, greater adoption of automation, and enhanced operating efficiencies. The company’s strategic focus on expanding its client base and improving service delivery has been a key factor in achieving these results.
Detailed Revenue Performance
Recurring and other revenues, which make up 95.5% of Paycom’s total revenues, increased by 11.3% year-over-year to $519.3 million, up from $466.5 million in the same quarter last year. This was above the company’s projected estimate of $508.1 million. This segment’s growth highlights the strong demand for Paycom’s services and the company’s ability to retain and attract new clients.
Conversely, revenues from interest on funds held for clients decreased by 8.6% to $24.5 million from $26.8 million in the prior-year quarter, contributing 4.5% to the total revenues. The company’s estimate for this segment was $25.2 million. Despite the decline, this revenue stream remains a minor component of Paycom’s overall financial performance.
Paycom’s adjusted gross profit saw an 11.5% increase year-over-year, totaling $458.7 million. The adjusted gross margin improved by 100 basis points to 84.4%. Additionally, adjusted EBITDA experienced a significant rise of 38% year-over-year, reaching $268.1 million, with the adjusted EBITDA margin expanding by 990 basis points to 49.3%. This improvement in margins reflects the company’s operational efficiencies and cost management strategies.
Financial Position and Cash Flow
At the end of the third quarter, Paycom held cash and cash equivalents amounting to $193.9 million, a slight decline from $198 million at the end of the previous quarter. The company also reported outstanding long-term debt of $750 million as of September 30, 2026, following a $150 million repayment during the quarter. This debt management approach is part of Paycom’s broader financial strategy to maintain a healthy balance sheet.
Throughout the first nine months of 2026, Paycom generated $613.9 million in operating cash flow, compared to $482.8 million during the same period last year. The company repurchased approximately $3 million worth of shares and distributed $16.7 million in cash dividends during the quarter. As of the end of the quarter, Paycom had $1.65 billion remaining under its share repurchase authorization, indicating a strong commitment to returning value to shareholders.
Updated 2026 Revenue Outlook
In light of its strong third-quarter performance, Paycom has revised its 2026 revenue and adjusted EBITDA guidance. The company now anticipates total revenues between $2.213 billion and $2.218 billion, reflecting approximately 8% year-over-year growth. This updated forecast compares to the prior guidance range of $2.197 billion to $2.212 billion, showcasing Paycom’s confidence in its growth trajectory.
Recurring and other revenues are expected to grow by approximately 9% year-over-year. The revenue from interest on funds held for clients is projected to be around $107 million, up from the earlier projection of $105 million. These projections underscore Paycom’s ability to adapt to changing market conditions and capitalize on new opportunities.
Paycom has also increased its adjusted EBITDA guidance to a range of $1.069 billion to $1.079 billion, up from the previous range of $1.007 billion to $1.022 billion. This revised outlook suggests an adjusted EBITDA margin of 48.5% at the midpoint, indicating an expansion of 550 basis points from 2025. The company’s focus on improving operational efficiencies and expanding its service offerings is expected to drive this growth.
Currently, Paycom holds a Zacks Rank #4 (Sell). In contrast, other companies in the broader Zacks Computer and Technology sector, such as Advanced Energy Industries (NASDAQ:AEIS), AMETEK (NYSE:AME), and ASE Technology (NYSE:ASX), hold a Zacks Rank #1 (Strong Buy). Advanced Energy Industries has seen a 1.5% increase in shares year-to-date, with a projected 75% year-over-year earnings increase for 2026. AMETEK shares have risen by 15.5% year-to-date, with a projected 13.2% year-over-year earnings increase for 2026. ASE Technology’s shares have surged by 132.8% year-to-date, with a projected 129.8% year-over-year earnings increase for 2026.
Footnotes:
- Paycom’s Q3 earnings per share increased by 73.7% year-over-year. Source.
- Paycom’s total revenue for Q3 2026 was $543.8 million, exceeding estimates by 1.6%. Source.
- Recurring revenues accounted for 95.5% of Paycom’s total revenues in Q3 2026. Source.
- Paycom’s adjusted EBITDA margin expanded by 990 basis points to 49.3% in Q3 2026. Source.
Featured Image: DepositPhotos @ EdZbarzhyvetsky
