Paychex's (PAYX) fiscal Q3 beat was tempered by its fiscal Q4 revenue outlook that fell short of investor expectations, as management maintained its conservative stance, RBC Capital Markets said in a note Thursday.

Analysts said the growth of Paychex's Professional Employer Organization business is expected to moderate due to the timing of revenues, resulting in about 7% revenue growth for H2 of 2026.

Paychex is well-positioned to increase its revenue in a range of labor market environments, driven by strong demand for HR outsourcing solutions and the company's focus on sustaining client retention at 82% to 83%, according to the note.

Analysts said, however, that the company's growth may be impacted by weaker-than-expected employment trends. The company's revenue and margins could benefit from a higher interest rate environment that leads to higher interest on funds held for clients, analysts added.

RBC has a sector perform rating on the stock and a $102 price target.

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