By Mackenzie Tatananni

Paychex stock was headed for its biggest same-day drop in more than five years on Wednesday.

The company failed to beat estimates for revenue and earnings for its May quarter, and guidance continue to lag behind expectations.

While the company said Wednesday that revenue grew 10% year over year to $1.43 billion in its fiscal fourth quarter, the figure came in below the $1.44 billion analysts were expecting. Revenue declined markedly from $1.51 billion in the previous quarter. Adjusted earnings of $1.19 a share were in line with Wall Street's consensus, according to FactSet.

The company's mixed fiscal 2026 outlook appeared to be weighing most on shares. Management forecast fiscal-year revenue between $6.49 billion and $6.6 billion, below the $6.61 billion analysts anticipated.

Other parts of the outlook were more palatable, such as the forecast for adjusted earnings. Paychex sees fiscal-year earnings in the range of $5.40 and $5.50 a share, above the $5.32 a share Wall Street had expected at the midpoint.

The stock led the list of decliners in the S&P 500 on Wednesday as it slid 8.8% to $138.86. The losses put Paychex on track for its largest same-day percent decrease since March 20, 2020, when shares fell more than 10%, according to Dow Jones Market Data.

Paychex provides software tailored to payroll, benefits, human resources, and insurance services. Revenue for the company's management-solutions business, which comprises most of its top line, climbed 12% to $1 billion in the May quarter.

The company attributed most of these gains to the acquisition of Paycor, a technology company offering similar services, which closed in April. Excluding Paycor, management-solutions revenue was up just 3%.

On the earnings call, CEO John Gibson noted that parts of the company's professional employer organization $(PEO)$ business were battered by passing revenue headwinds.

"While the PEO business remains strong and participant levels in our health plans across the country continue to increase, enrollment in our Florida at-risk medical plan did decrease year over year," Gibson said. He clarified that Florida was "a unique animal" with an oversized impact on revenue.

"We also continued to see a trend among employees opting for lower-cost health plans to offset the rising healthcare cost," Gibson added.

The company's latest financials seemed to be weighing on shares of peer Paycom Software, which fell 4.6%. The S&P 500 was flat, while the tech-heavy Nasdaq Composite was up slightly.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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June 25, 2025 12:36 ET (16:36 GMT)

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