Summary
Paycom's third quarter revenue was $493.3 million, up 9.2% from the prior-year quarter. Gross profit reached $407.9 million, up 12.2%. Gross margin improved to 82.7%, up 2.2 percentage points. Operating income was $112.6 million, up 7.3%, but operating margin declined to 22.8%, down 0.4 percentage points. GAAP net income was $110.7 million, or $1.96 per diluted share, up 51.0% and 49.6% respectively from the prior-year quarter. Non-GAAP net income was $109.6 million, or $1.94 per diluted share. Adjusted EBITDA was $194.3 million, representing 39.4% of revenue. The GAAP net income figure includes a one-time gain from the July 2025 naming rights amendment, while non-GAAP net income excludes it. That gain helped drive the large year-over-year increase in GAAP net income, and it also lifted GAAP diluted EPS.
Cash generation was strong. Operating cash flow was $177.8 million in the quarter, up 91.6%. Capital expenditures were $98.0 million, up 103.3%. Deferred revenue was $151.1 million, up 6.2% from the prior-year quarter. For the nine months ended September 30, 2025, revenue rose 8.5% to $1.51 billion, while operating income fell 15.6% to $410.1 million. Net income for the nine months was $339.6 million, down 12.6%, and diluted EPS was $6.02, down 12.6%. Operating cash flow for the nine months was $482.8 million, up 29.3%, and capital expenditures were $197.4 million, up 39.5%. Free cash flow, a non-GAAP measure, was $285.4 million for the nine months. The MD&A attributes the operating income decline for the nine-month period to a large reversal of previously recognized stock-based compensation expense related to a forfeited restricted stock award in the prior-year period. That reversal made the prior-year nine-month operating income unusually high.
Management guides for the full fiscal year ending December 31, 2025. Total revenue is expected in a range of $2.045 billion to $2.055 billion, representing roughly 9% growth at the midpoint. Adjusted EBITDA is guided to a range of $872 million to $882 million, a margin of approximately 43% at the midpoint. Recurring and other revenue growth is expected at approximately 10% year over year. On the product side, Paycom continues to push its Beti, GONE and IWant offerings, which support full-solution automation and command-driven navigation. The company says these tools are expanding its sales pipeline and improving client return on investment. Client attrition, particularly among smaller clients, remains a partial offset to new business, additional application sales, higher usage and pricing strategies. The business is seasonal, with first and fourth quarter recurring revenue typically higher than other quarters. The company also faces intense competition, pricing pressure and client retention challenges in the HCM market.
The quarter carried several risks. Macroeconomic conditions, interest rates, inflation and labor market shifts can affect client hiring and therefore revenue. The company flags security vulnerabilities, cyber-attacks, data privacy compliance, changing laws and regulations, reliance on key executives, and challenges in developing new applications. The MD&A also lists failure to maintain client relationships, failure to manage growth, risks from the background checks business, and international expansion risks. The July 2025 amendment to the naming rights agreement shortened that commitment, terminating on the earlier of September 30, 2028 or the last event at the current arena. The One Big Beautiful Bill Act, signed in July 2025, allows an immediate deduction for domestic research and development expenditures and reinstates 100% bonus depreciation. Paycom says cash tax remittances decreased in the third quarter and expects continued reductions to benefit cash flows in the fourth quarter and future periods. Capital spending remains elevated, including on AI-focused data center investments and other strategic expansion. The company also completed an assessment of useful lives for servers and network equipment, increasing them from three years to six years effective at the beginning of the third quarter of 2025.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $493.3M | $483.6M | +2.0% | $451.9M | +9.2% |
| Gross profit | $407.9M | $396.1M | +3.0% | $363.6M | +12.2% |
| Gross margin | 82.7% | 81.9% | +0.8 pp | 80.5% | +2.2 pp |
| Research & development | $74.1M | $74.8M | -0.9% | $63.0M | +17.5% |
| Sales & marketing | $295.3M | $283.8M | +4.1% | $258.7M | +14.1% |
| Total operating expenses | $380.7M | $371.3M | +2.5% | $347.1M | +9.7% |
| Operating income (loss) | $112.6M | $112.3M | +0.3% | $104.9M | +7.4% |
| Operating margin | 22.8% | 23.2% | -0.4 pp | 23.2% | -0.4 pp |
| Net income (loss) | $110.7M | $89.5M | +23.7% | $73.3M | +51.1% |
| Net margin | 22.4% | 18.5% | +3.9 pp | 16.2% | +6.2 pp |
| Diluted EPS | $1.96 | $1.58 | +$0.38 | $1.31 | +$0.65 |
Risks
Adverse economic and market conditions could lead clients to reduce headcount, eliminate unscheduled payroll runs such as bonuses, delay HCM spending, or renegotiate contracts. Tariffs, inflation, higher unemployment, reduced credit access, and geopolitical conflicts such as Ukraine and the Middle East may exacerbate these pressures.
A decreasing interest rate environment would compress interest earned on funds held for clients and corporate funds. Interest on funds held for clients decreased 11.0% for the three months ended September 30, 2025 and decreased 10.6% for the nine months ended September 30, 2025.
The risk factor warns that failure by Congress and the President to agree on federal budgetary matters, especially a prolonged government shutdown, may harm the U.S. economy and delay payments from clients that rely on government resources.
The HCM market is highly competitive, rapidly evolving, and fragmented, with new entrants, disruptive technologies, aggressive pricing, and client retention strategies that can directly affect recurring revenue growth and the ability to attract and retain clients.
The company's growth strategy depends on incorporating AI and automation across its solution and making related investments, including significantly expanded data center capabilities. Capital expenditures increased 103.3% for FY2025 Q3 vs. FY2024 Q3 and increased 39.5% for FY2025 year to date vs. FY2024 year to date, and failure to realize expected efficiencies or ROI could pressure results.
Client attrition, particularly among smaller clients, partially offset new client additions, additional application sales, increased usage, and pricing strategies in recurring and other revenues for the three and nine months ended September 30, 2025.
Recurring revenues are seasonal, with first and fourth quarter recurring revenues generally higher because payroll tax filing forms, Affordable Care Act forms, and unscheduled payroll runs such as bonuses are concentrated then, which also causes seasonal fluctuations in operating income.
SaaS KPIs
All quarters →Adjusted EBITDA margin
Adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from Paycom Software, Inc.'s SEC filings for Q3 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.