Paycom Software, Inc. PAYC used its second-quarter 2026 call to frame automation as a driver of client value and internal efficiency. Management raised its full-year revenue and adjusted EBITDA outlook after results exceeded expectations.
Non-GAAP earnings of $2.78 per share topped the Zacks Consensus Estimate of $2.28, while revenues of $531.2 million exceeded the $512.3 million consensus. Executives emphasized that the strength was broad-based rather than tied to a one-time factor.
PAYC Raises Full-Year Outlook
Chief financial officer Bob Foster raised 2026 revenue guidance to $2.197 billion to $2.212 billion, representing 7% to 8% growth. Recurring and other revenues are expected to increase 8% to 9%.
Foster projected adjusted EBITDA of $1.007 billion to $1.022 billion, with a record margin of about 46% at the midpoint. The outlook includes approximately $105 million of interest on funds held for clients.
During the Q&A, Foster said guidance assumes no rate changes for the rest of 2026, while any change would have a minimal current-year effect. He also expects free cash flow to exceed $650 million.
Paycom Calls the Beat Broad-Based
Founder and CEO Chad Richison said the upside came from the same revenue sources that have historically supported the business. He said no special item or isolated event drove the quarter.
Revenues increased 9.8% year over year, while recurring and other revenue rose 11.0%. Adjusted EBITDA reached $235.0 million, and its margin expanded 320 basis points to 44.2%.
Asked about slower growth embedded in the annual outlook, Richison said pipelines remain very strong. He also described client employment growth as stable and consistent with the assumptions used in guidance.
PAYC Converts AI Spending Into Savings
Richison said Paycom spent more than $100 million in 2025 to prepare data centers to host its own artificial intelligence models. The infrastructure also provided capacity that improved system performance.
Richison expects that investment to produce about $100 million of research and development savings in 2026, plus more than $30 million of avoided third-party response fees for IWant.
CFO Bob Foster said improved conversion from adjusted EBITDA to free cash flow reflects broad-based process and labor efficiencies. Richison added that changes to development structure and product-release processes have raised R&D productivity.
Paycom Widens Its Product Footprint
Richison highlighted adoption of Career and Succession Planning and the July launch of Asset Management. He called Asset Management an entry into a new multibillion-dollar addressable market and Paycom's 45th internally developed product.
President and chief client officer Shane Hadlock described Project Arc as the largest systemwide release in company history. The update added customization and scalability, with one client reporting a fourfold performance improvement.
Richison said the newest products made little contribution to second-quarter revenues but should contribute more over time. He also stressed that IWant adoption continues to expand, with accuracy remaining the priority for new AI functions.
PAYC Builds Sales Capacity and Returns Capital
Richison said the sales force is adapting to a more detailed process built around demonstrating full-solution return on investment. Paycom expanded teams from eight to 10 representatives, adding more than 100 sales positions.
Richison said bookings met management's expectations, while new representatives are reaching productivity faster than prior classes. Existing-representative productivity is also improving as pipelines expand across territories.
Foster said Paycom repurchased about 2.6 million shares for $346 million during the quarter. First-half repurchases totaled nearly 11 million shares for approximately $1.4 billion, reducing shares outstanding by 20%.
Paycom's Priorities After the Call
Management's message centered on pairing product expansion and sales capacity with continued automation across development, service and internal processes. The raised outlook reflects first-half results and greater visibility into the rest of 2026.
The call showed that Paycom is pursuing growth alongside margin expansion and capital returns. Executives remained confident in demand, pipeline development and the longer-term contribution from recently introduced products.
Zacks Rank and Style Score Signals
PAYC carries a Zacks Rank #2 (Buy), along with Value, Growth and VGM Scores of B. Under the Zacks framework, a top-two Rank combined with A or B Style Scores represents a favorable alignment of estimate-revision and style characteristics. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Its Momentum Score is C. The Zacks Rank can change as analysts revise earnings estimates following the just-reported results, so the current signal is not fixed.
(We are reissuing this article to correct a mistake. The original article, issued on August 06, 2026, should no longer be relied upon.)
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Paycom Software, Inc. (PAYC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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