Automatic Data Processing

“A slowdown in the economy or other negative changes, including in employment levels (as a result of AI or otherwise), the level of interest rates or the level of inflation, may have a negative impact on our businesses.”

Annual report 2026A · The company itself

“As new technologies (such as generative and agentic AI) continue to emerge, they may be disruptive to the HCM industry. These technologies could result in new and innovative HCM products and solutions that could increase competition, place us at a competitive disadvantage or even render obsolete our technology, products and solutions.”

Annual report 2026A · The company itself

“BUSINESS AND INDUSTRY RISKS Our industry is subject to rapid technological change, including as a result of AI, and if we fail to upgrade, enhance and expand our technology and services to meet client needs and preferences, the demand for our solutions and services may materially diminish Our businesses operate in industries that are subject to rapid technological advances (such as generative and agentic AI) and changing client needs and preferences. In order to remain competitive and responsive to client demands, we continually upgrade, enhance, and expand our technology, solutions and services, including by leveraging AI in our solutions.”

Annual report 2026A · The company itself

“We have made and expect to continue to make significant investments in product development and new technologies. We must continue to dedicate a significant amount of resources to our development efforts before knowing to what extent our investments will result in products the market will accept.”

Annual report 2026A · The company itself

“We believe that providing insights and content from data, including via AI and ML, will become increasingly important to the value that our solutions and services deliver to our clients. We are increasingly leveraging AI and ML in our solutions and service delivery and are continuing to integrate AI technologies, including generative and agentic AI, to develop and deploy capabilities that are beneficial to our clients and their employees.”

Annual report 2026A · The company itself

“We continued to leverage our data advantages, domain expertise, and trusted brand to lead the HCM industry's AI transformation. ADP Assist became increasingly embedded in our clients' workflows, delivering meaningful time savings and improved accuracy.”

Annual report 2026A · The company itself

“We generate sufficient free cash flow to satisfy our cash dividend and our modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our long-term strategy and commitments to shareholder friendly actions. We are committed to building upon our past successes by investing in research and development to enhance our products and services and by driving continuous improvement in the way we operate.”

Annual report 2026A · The company itself

“Research and development expenses increased in fiscal 2026 due to increased costs to develop, support, and maintain our new and existing products, including the integration costs associated with the WorkForce Software acquisition.”

Annual report 2026A · The company itself

“Additionally, we continued deploying AI tools across our sales, service, and research and development functions to improve the client experience and drive internal productivity gains.”

Annual report 2026A · The company itself

“EXECUTIVE OVERVIEW As a global leader in HR and payroll solutions, ADP continuously aims to solve complex business challenges for our clients and their workers. Our Human Capital Management ("HCM") solutions, which include both software and outsourcing services, are designed to help our clients manage their workforce through a dynamic business and regulatory landscape and the changing world of work. We see tremendous opportunity ahead as we focus on our three key Strategic Priorities: Leading with Best-in-Class HCM technology, Providing Unmatched Expertise and Outsourcing Solutions, and Leveraging our Global Scale for the Benefit of our Clients.”

Annual report 2026A · The company itself

“During the year, we experienced strong enterprise sales momentum for ADP Lyric HCM and the ADP WorkForce Suite, as our unified global payroll, global HR, and global time solutions continued to resonate with clients.”

Annual report 2026A · The company itself

“EXECUTIVE OVERVIEW As a global leader in HR and payroll solutions, ADP continuously aims to solve complex business challenges for our clients and their workers. Our Human Capital Management ("HCM") solutions, which include both software and outsourcing services, are designed to help our clients manage their workforce through a dynamic business and regulatory landscape and the changing world of work. We see tremendous opportunity ahead as we focus on our three key Strategic Priorities: Leading with Best-in-Class HCM technology, Providing Unmatched Expertise and Outsourcing Solutions, and Leveraging our Global Scale for the Benefit of our Clients.”

Annual report 2026A · The company itself

“Since launching ADP Assist agents in January, we steadily expanded their availability across our payroll, benefits, HR, and compliance solutions, making AI-powered HCM agents accessible to nearly all of our more than 1.1 million clients.”

Annual report 2026A · The company itself

“Our Wisely® offerings and potentially other future offerings in the payments and/or consumer space may subject us to additional laws and regulations, some of which may not be uniform and may require us to modify or restrict our offerings and decrease our potential revenue and earnings.”

Annual report 2026A · The company itself

“The investment community, clients, regulators, and other stakeholders may have evolving and varied expectations regarding our business, culture, and values. Negative publicity, regardless of whether claims are accurate, about our brand, our solutions, our data, our culture and values, or our partners, vendors, or employees, could adversely affect our reputation, our business, and our financial results.”

Annual report 2026A · The company itself

“Political, economic and social factors may materially adversely affect our business and financial results 20 Trade, including the imposition of tariffs or other trade restrictions, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and volatility. A slowdown in the economy or other negative changes, including in employment levels (as a result of AI or otherwise), the level of interest rates or the level of inflation, may have a negative impact on our businesses.”

Annual report 2026A · The company itself

“Our business is also impacted by employment levels across our clients, as we have varied contracts throughout our business that blend base fees and per-employee fees.”

Annual report 2026A · The company itself

“Our United States pays per control metric, which represents the approximate growth in the number of employees on ADP clients' processed payrolls in the United States when measured on a same-store-sales basis for a subset of Employer Services clients ranging from small to large businesses, grew 1% for the year ended June 30, 2026 as compared to the year ended June 30, 2025. PEO average worksite employees increased 2% for the year ended June 30, 2026, as compared to the year ended June 30, 2025.”

Annual report 2026A · The company itself

“Our systems, applications, solutions and services may be subject to disruptions that could have a materially adverse effect on our business, operations, financial condition, results of operations or reputation Many of our businesses are highly dependent on our ability to process, on a daily basis, a large number of complicated transactions. We rely heavily on our payroll, financial, accounting, and other data processing systems.”

Annual report 2026A · The company itself

“A disruption of the data centers or cloud-computing or other technology services or systems that we utilize could have a materially adverse effect on our business, operations, financial condition or results of operations We host our applications and serve our clients with data centers that we operate, and with data centers that are operated, and cloud-computing and other technology services and systems that are provided, by third-party vendors.”

Annual report 2026A · The company itself

“Additionally, operating expenses increased by $188.9 million due to higher service and implementation costs in support of our growing revenue, $74.4 million million primarily due to higher hosting, cloud-based service, and software license costs in support of our products and solutions, and by $37.1 million due to an increase in costs related to workers' compensation coverage and state unemployment taxes for worksite employees.”

Annual report 2026A · The company itself

“Political, economic and social factors may materially adversely affect our business and financial results 20 Trade, including the imposition of tariffs or other trade restrictions, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and volatility. A slowdown in the economy or other negative changes, including in employment levels (as a result of AI or otherwise), the level of interest rates or the level of inflation, may have a negative impact on our businesses.”

Annual report 2026A · The company itself

“In addition, as our operating costs increase due to inflationary pressure or otherwise, we may not be able to offset these increases by corresponding price increases for our products and solutions.”

Annual report 2026A · The company itself

“ADP Indemnity provides workers’ compensation deductible reimbursement insurance protection for PEO Services’ worksite employees up to $1 million per occurrence. PEO Services has secured a workers’ compensation insurance policy that caps the exposure for each claim at $1 million per occurrence and has also secured aggregate stop loss insurance that caps aggregate losses at a certain level in the year ended June 30, 2012 and prior from an admitted and licensed insurance company of AIG.”

Annual report 2026A · The company itself

“Additionally, starting in the year ended June 30, 2013, ADP Indemnity paid premiums to enter into reinsurance arrangements with ACE American Insurance Company, a wholly-owned subsidiary of Chubb Limited (“Chubb”), to cover substantially all losses incurred by the Company up to $1 million per occurrence related to the workers’ compensation deductible reimbursement insurance protection for PEO Services' worksite employees.”

Annual report 2026A · The company itself

“However, legislation that governs the development and/or use of AI has been adopted or is under consideration in the U.S. at the state and local level, as well as abroad, most notably the European Union’s Artificial Intelligence Act. In addition, self-regulatory frameworks like the National Institute of Standards and Technology AI Risk Management Framework are being promulgated and adherence to these may become an industry standard or a client expectation.”

Annual report 2026A · The company itself

“Political, economic and social factors may materially adversely affect our business and financial results 20 Trade, including the imposition of tariffs or other trade restrictions, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and volatility. A slowdown in the economy or other negative changes, including in employment levels (as a result of AI or otherwise), the level of interest rates or the level of inflation, may have a negative impact on our businesses.”

Annual report 2026A · The company itself

“A major natural disaster or catastrophic event could have a materially adverse effect on our business, operations, financial condition and results of operations, or have other adverse consequences Our business, operations, financial condition, results of operations, access to capital markets and borrowing costs may be adversely affected by a major natural disaster or catastrophic event, including civil unrest, geopolitical instability, war, terrorist attack, pandemics or other (actual or threatened) public health emergencies, extreme weather, such as droughts, hurricanes, flooding and wildfires (including as a result of climate change), or other events beyond our control, and measures taken in response thereto.”

Annual report 2026A · The company itself

“We have been, and expect we will continue to be, the subject of cybersecurity attacks, including unauthorized intrusion, malicious software infiltration, network disruption, denial of service, corruption of data, ransomware attack, insider threats, and theft of sensitive information (including our intellectual property). Although none of the cybersecurity incidents that we have identified to date have materially affected us, including our business strategy, operations, results of operations, or financial condition, we continue to face significant known and unknown cybersecurity threats.”

Annual report 2026A · The company itself

“A disruption of the data centers or cloud-computing or other technology services or systems that we utilize could have a materially adverse effect on our business, operations, financial condition or results of operations We host our applications and serve our clients with data centers that we operate, and with data centers that are operated, and cloud-computing and other technology services and systems that are provided, by third-party vendors. These data centers or cloud-computing and other technology services and systems have failed, become disabled or been disrupted, and may do so in the future.”

Annual report 2026A · The company itself

“A major natural disaster or catastrophic event could have a materially adverse effect on our business, operations, financial condition and results of operations, or have other adverse consequences Our business, operations, financial condition, results of operations, access to capital markets and borrowing costs may be adversely affected by a major natural disaster or catastrophic event, including civil unrest, geopolitical instability, war, terrorist attack, pandemics or other (actual or threatened) public health emergencies, extreme weather, such as droughts, hurricanes, flooding and wildfires (including as a result of climate change), or other events beyond our control, and measures taken in response thereto.”

Annual report 2026A · The company itself

“We may be unable to attract and retain qualified personnel Our ability to grow and provide our clients with competitive services is, to an important degree, dependent on our ability to attract and retain highly skilled and motivated people reflecting the diversity of our communities and clients. Competition for skilled employees in the outsourcing and other markets in which we operate is increasingly intense, making it more difficult and expensive to attract and retain highly skilled, motivated and diverse personnel.”

Annual report 2026A · The company itself

“A major natural disaster or catastrophic event could have a materially adverse effect on our business, operations, financial condition and results of operations, or have other adverse consequences Our business, operations, financial condition, results of operations, access to capital markets and borrowing costs may be adversely affected by a major natural disaster or catastrophic event, including civil unrest, geopolitical instability, war, terrorist attack, pandemics or other (actual or threatened) public health emergencies, extreme weather, such as droughts, hurricanes, flooding and wildfires (including as a result of climate change), or other events beyond our control, and measures taken in response thereto.”

Annual report 2026A · The company itself

“In addition, changes in federal, state or local tax laws and regulations allowing for tax credits (including the non-renewal of such laws) could adversely impact our Tax Credit Services business, which helps clients in the United States realize tax credit opportunities in connection with the hiring of new employees and certain other activities.”

Annual report 2026A · The company itself

“Changes in laws, or interpretations thereof, that govern the co-employment arrangement between a professional employer organization and its worksite employees may require us to change the manner in which we conduct some aspects of our PEO business. In addition, changes in the manner in which health and welfare plans sponsored by PEOs or the TotalSource Health and Welfare Plan, in particular, are regulated could adversely impact the demand for our PEO offering.”

Annual report 2026A · The company itself

“Because our PEO is a co-employer with our PEO clients and a Certified PEO by the Internal Revenue Service, we may be subject to certain obligations, responsibilities and liabilities of an employer with respect to Worksite Employees (“WSE”), including with respect to their wages and the payment thereof, tax credits for employers, the payment of certain taxes with respect to WSE wages and employee benefits provided to the WSEs.”

Annual report 2026A · The company itself

“Failure to comply with anti-corruption laws and regulations, antitrust and competition laws and regulations, economic and trade sanctions, anti-money laundering laws and regulations, and similar laws could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences Regulators worldwide continue to exercise a high level of scrutiny with respect to anti-corruption, antitrust and competition, economic and trade sanctions, and anti-money laundering laws and regulations.”

Annual report 2026A · The company itself

“Change in our credit ratings could adversely impact our operations and lower our profitability The major credit rating agencies periodically evaluate our creditworthiness and have given us strong, investment-grade long-term debt ratings and high commercial paper ratings. Failure to maintain high credit ratings on long-term and short-term debt could increase our cost of borrowing, reduce our ability to obtain short-term borrowing required by our business, and adversely impact our results of operations.”

Annual report 2026A · The company itself

“For example, a change in regulations either decreasing the amount of taxes to be withheld or allowing less time to remit taxes to government authorities would adversely impact average client balances and, thereby, adversely impact interest income from investing client funds before such funds are remitted to the applicable tax authorities.”

Annual report 2026A · The company itself

“A hypothetical change in both short-term interest rates (e.g., overnight interest rates or the federal funds rate) and intermediate-term interest rates of 25 basis points applied to the estimated average investment balances and any related short-term borrowings would result in approximately an $21.0 million impact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2027.”

Annual report 2026A · The company itself

“We derive a significant portion of our revenues and operating income outside of the United States and, as a result, we are exposed to market risk from changes in foreign currency exchange rates that could impact our results of operations, financial position and cash flows.”

Annual report 2026A · The company itself

“The reduced availability of financing during periods of economic turmoil, even to borrowers with the highest credit ratings, may limit our ability to access short-term debt markets to meet the liquidity needs of our business.”

Annual report 2026A · The company itself