Paychex misses quarterly revenue estimates on weak client spending

Reuters
03-26
Paychex misses quarterly revenue estimates on weak client spending

March 26 (Reuters) - Paychex PAYX.O on Wednesday slightly missed Wall Street estimates for third-quarter revenue, as businesses cut back on spending for human capital management services amid economic uncertainty.

Shares of the Rochester, New York-based company about 2% in premarket trading.

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-high interest rates and policy uncertainty, especially around import tariffs, are making companies cautious about increasing headcount and prompting businesses to cut spending.

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.

In January, the company announced it would acquire payroll processing firm Paycor HCM PYCR.O for about $4.1 billion in cash in a deal expected to close in April 2025.

The deal reflects a broader consolidation trend in the payroll and HR industry with payroll firm Automatic Data Processing ADP.O in October purchasing management services provider WorkForce Software for around $1.2 billion.

Paychex cut its forecast for revenue growth from its Professional Employer Organization and Insurance Solutions business to a range of 6.0% to 6.5%, from 7.0% to 9.0% guided previously.

The company posted total revenue of $1.51 billion for the quarter ended February 28, falling short of analysts' estimate of $1.52 billion, according to data compiled by LSEG.

On an adjusted basis, the company reported third quarter profit of $1.49 per share, compared with estimates of $1.48 per share.

(Reporting by Kritika Lamba in Bengaluru; Editing by Shailesh Kuber)

((Kritika.Lamba@thomsonreuters.com;))

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