Paychex Stock Declines Pre-Market Despite Positive Q3 Earnings — Retail’s Unimpressed

Revenue rose 5% to $1.509 billion, mostly aligning with a Street expectation of $1.508 billion.

Paychex Inc. (PAYX) shares drew retail investor attention on Wednesday morning after the company’s third-quarter earnings topped analyst expectations.

Paychex provides technology and advisory services in human resources, employee benefit solutions, insurance, and payroll.

Revenue rose 5% year over year (YoY) to $1.509 billion, mostly aligning with the Street’s expectation of $1.508 billion. Adjusted earnings per share (EPS) came in at $1.49 compared to an analyst estimate of $1.48.

Segment-wise, Management Solutions revenue rose 5% to $1.1 billion, primarily impacted by continued growth in the number of clients and better price realization. 

Revenue from Professional Employer Organizations (PEO) and Insurance Solutions increased 6% to $365.4 million, driven by growth in the number of average PEO worksite employees and a rise in PEO insurance revenues.

CEO John Gibson said the third quarter (Q3) was a transformational time at Paychex. “Our investments in automation and technology are also boosting efficiency across the organization, resulting in operating margins of 45.8% and adjusted operating margins of 46.9%, an increase of 180 basis points compared to the prior year period,” he said.

As of Feb. 28, 2025, the company had cash, restricted cash, and total corporate investments of $1.7 billion. The company said short-term and long-term borrowings, net of debt issuance costs, stood at $816.6 million.

For the fiscal year ending in May 2025, the company expects PEO and Insurance Solutions revenue to grow by 6.0% to 6.5%. Meanwhile, the adjusted operating margin is anticipated to be approximately 43%.

On Stocktwits, retail sentiment surrounding Paychex dipped further into the ‘extremely bearish’ territory (3/100) accompanied by significant retail chatter.

Despite the positive earnings report, PAYX shares declined over 1% in Wednesday’s pre-market session.

The stock gained over 4% in 2025 and is up over 20% in the past 12 months.

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