Paycom Software (NYSE:PAYC) raised its full-year revenue and profitability outlook after third-quarter revenue rose 10% and adjusted earnings grew sharply, with executives pointing to automation and artificial intelligence as drivers of both product development and internal efficiency.
The payroll and human resources software company reported third-quarter revenue of $544 million, ahead of its expectations, according to Founder and CEO Chad Richison. Recurring and other revenue rose 11% from a year earlier to $519 million.
GAAP net income was $133 million, or $2.99 per diluted share. Non-GAAP net income increased 37% to $150 million, while non-GAAP diluted earnings per share rose 74% to $3.37. CFO Bob Foster attributed the per-share increase to earnings growth and the benefits of the company’s capital allocation strategy.
Adjusted EBITDA was $268 million, or 49.3% of revenue, helped by expanding gross margin and lower operating costs, Foster said. He told analysts that Paycom believes its margins are sustainable as it continues to find efficiencies through automation and use of its own products.
Full-Year Outlook Raised
Paycom now expects 2026 revenue of $2.213 billion to $2.218 billion, representing approximately 8% year-over-year growth. The forecast includes about $107 million in interest on funds held for clients. Recurring and other revenue is expected to rise nearly 9% for the year.
The company also raised its adjusted EBITDA outlook to $1.069 billion to $1.079 billion. Foster said the midpoint implies a margin of 48.5%, or 550 basis points above the 2025 adjusted EBITDA margin.
Asked about an implied slowdown in the fourth quarter, Foster said quarterly results can fluctuate and that Paycom faces a difficult comparison with the prior-year period. He noted that the company had raised its guidance twice during the year.
For modeling purposes, Paycom expects stock-based compensation of approximately 3% of revenue and capital expenditures of approximately 6% of revenue in 2026. Foster said the capital spending estimate gives the company flexibility to make investments for clients.
Automation and New Products
Richison said Paycom’s investments in data centers, AI technology and graphics processing units are helping it deliver more automation at a lower cost. Clients do not pay for tokens on Paycom’s system, he said.
President and Chief Client Officer Shane Hadlock said usage of the company’s IWant AI tool was up approximately 65% from the end of 2025. The tool is enabled across Paycom’s client base and has responded to millions of queries, he said.
Paycom is also selling Asset Management, a product designed to help clients track, recover and deploy equipment and other assets. Richison said the product, which launched in the prior quarter, had at least 300 clients. Unlike IWant, Asset Management is a billable product.
Richison said Paycom released more solutions in the past 12 months than in any previous 12-month period. With products in testing or use by select clients, he said he expects 2027 to be similarly active and described the coming year as potentially transformational for the company’s technology.
Asked about lower research and development spending, Richison said the company is focused on the results of that spending rather than its level. He added that Paycom would spend more if needed.
Cash Flow and Capital Allocation
Paycom generated $536 million in free cash flow during the first nine months of 2026 and expects stronger free cash flow in 2027. Foster declined to provide a more specific figure for next year, saying the business generates sustainable and durable cash flow.
The company ended the third quarter with $194 million in cash and cash equivalents and $750 million outstanding on its revolving credit facility, after paying down $150 million during the quarter.
Paycom repurchased $3 million of stock in the third quarter and had $1.65 billion remaining under its buyback authorization at quarter-end. It ended the period with approximately 44 million shares outstanding, down nearly 20% from approximately 55 million a year earlier. The board also approved a quarterly dividend of $0.375 per share, payable in early December.
Looking ahead, Richison said sales and marketing would remain a significant focus in 2027 and that some products in the pipeline would require a different type of sales group. Hadlock said international expansion remains a strategic priority, citing the addition of a large enterprise client in Mexico.
About Paycom Software (NYSE:PAYC)
Paycom Software, Inc is a provider of cloud-based human capital management (HCM) software designed to help businesses manage employee-related processes through a unified platform. Its solutions support payroll, human resources, talent acquisition and management, time and labor management, compliance, and employee engagement.
The company’s software is intended to allow employers and employees to enter and manage workforce information within a single system. Its offerings include payroll processing, benefits administration, expense management, scheduling, performance management, learning, and recruiting tools.
