What Happened?

Shares of payroll and HR services provider Automatic Data Processing (NASDAQ: ADP) fell 5.3% in the afternoon session after the company reported third-quarter results that beat analyst expectations, but its revenue guidance for the upcoming quarter failed to impress investors. 

ADP's revenue grew 7.1% year on year to $5.18 billion, and its adjusted earnings per share came in at $2.49, both narrowly topping Wall Street's forecasts. Despite these beats, the market reacted negatively. The disappointment stemmed from the company's revenue guidance for the fourth quarter, which was only in line with expectations, suggesting that the positive momentum might not continue as strongly. Adding to concerns, the company's free cash flow margin, a measure of cash profitability, declined to 11.5% from 15.8% in the same quarter last year. The combination of an in-line outlook and weaker cash generation appeared to overshadow the solid top- and bottom-line results.

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What Is The Market Telling Us

ADP’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

ADP is down 9.1% since the beginning of the year, and at $263.31 per share, it is trading 19.4% below its 52-week high of $326.81 from June 2025. Investors who bought $1,000 worth of ADP’s shares 5 years ago would now be looking at an investment worth $1,665.

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