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SEC filingDiluted EPS increased 10.5% to $3.38, outpacing net income growth of 8.8% due to share count reduction. Revenue grew 7% to $5.9 billion, supported by PEO Services expansion and client funds interest income.
Gross profit grew 8.2% to $2.9 billion, resulting in a gross margin of 48.3%. The expansion in gross margin reflects the contribution of interest income derived from the client funds extended investment strategy. Net income rose 8.8% to $1.4 billion. The effective tax rate for the period increased compared to the prior year, primarily due to a lower excess tax benefit on stock-based compensation and an increase in uncertain tax positions for the three months ended March 31, 2026.
Diluted earnings per share increased 10.5% to $3.38, outpacing net income growth due to a reduction in the share count from active repurchases. Net cash provided by operating activities increased to $4.0 billion from $3.5 billion in the prior year period. These assets are available for regular quarterly dividends, share repurchases, capital expenditures, acquisitions, and other corporate operating purposes. Through its client funds investment strategy and client impounding processes, the company has consistently maintained the required level of liquidity to satisfy all obligations.
The company continues to invest in its technology capabilities, specifically expanding its AI ecosystem. During the period, ADP launched a dedicated space within ADP Marketplace for partner companies' AI agents. This initiative aligns with the company's broader strategy to enhance its HCM technology offerings. All collateral on asset-backed securities is performing as expected through March 31, 2026.