Summary
Paycom Software closed fiscal 2025 with a fourth quarter that showed steady top-line growth and a split between revenue and profitability. Revenue rose 10.2% year over year to $544.3 million in the quarter. Full-year revenue rose 8.9% year over year to $2,051.7 million. Gross profit rose 11.3% year over year to $456.5 million in the quarter, and full-year gross profit rose 10.2% year over year to $1,706.3 million. Gross margin was 83.9% in the quarter, up 0.8 percentage points from the prior-year quarter, and 83.2% for the full year, up 0.9 percentage points. Operating income rose 5.8% year over year to $157.1 million in the quarter, while operating margin fell 1.2 percentage points to 28.9%. For the full year, operating income fell 10.6% year over year to $567.2 million, and operating margin declined 6.0 percentage points to 27.6%. Net income was flat at $113.8 million in the quarter. Full-year net income fell 9.7% year over year to $453.4 million. Full-year diluted EPS fell 9.4% year over year to $8.08.
The company pointed to automation and client retention as the operational centerpieces of the year. The annual revenue retention rate improved to 91% in 2025 from 90% in 2024. Client count on a parent company grouping basis increased to approximately 20,300 as of December 31, 2025, up 5% year over year. Total client count on a taxpayer identification number or client code basis grew to approximately 39,200, up 4%. Employee records stored in the system increased to 7.4 million, up 5%. Paycom launched IWant, its command-driven AI solution. The CEO framed the opportunity as a long runway, noting the company holds less than 5% of its total addressable market. Management said full solution automation and tools like IWant, Beti, and Gone continue to differentiate Paycom. The sales organization ended 2025 with 58 sales teams, unchanged from 2024.
Cash generation remained a strong point. Operating cash flow rose 22.3% year over year to $196.1 million in the quarter. Full-year operating cash flow rose 27.2% year over year to $678.9 million. Capital expenditures rose 43.0% year over year to $73.5 million in the quarter and rose 40.4% year over year to $270.9 million for the full year. Deferred revenue rose 3.9% year over year to $150.2 million. On a non-GAAP basis, fourth-quarter adjusted EBITDA was $236.3 million compared with $214.9 million a year earlier. Full-year adjusted EBITDA was $882.3 million compared with $775.4 million. Non-GAAP net income was $134.7 million, or $2.45 per diluted share, in the quarter, compared with $130.1 million, or $2.32 per diluted share. Full-year non-GAAP net income was $518.6 million, or $9.24 per diluted share, compared with $462.0 million, or $8.21 per diluted share. Free cash flow for the full year was $403.5 million, compared with $336.6 million.
Guidance for the full fiscal year ending December 31, 2026 calls for total revenue growth between 6% and 7% year over year. Recurring and other revenue growth is expected between 7% and 8% year over year. Adjusted EBITDA is guided to a range of $950 million to $970 million, a margin of approximately 44% at the midpoint. Management plans to continue to invest in its marketing program and may adjust spending levels as it sees opportunities for favorable returns. Competition in the HCM market is intense, and aggressive pricing and client retention strategies persist. Macroeconomic pressures such as inflation and interest rates shape client hiring, and because some fees are charged per employee, changes in client employee counts move results. Interest income on funds held for clients is sensitive to rate changes. Client attrition, particularly among smaller clients, partially offset revenue growth in 2025. Paycom said cash tax remittances decreased in the second half of 2025, and it expects continued reductions to positively impact future cash flows.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2025 | Q3 FY2025 | QoQ | Q4 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $544.3M | $493.3M | +10.3% | $493.9M | +10.2% |
| Gross profit | $456.5M | $407.9M | +11.9% | $410.1M | +11.3% |
| Gross margin | 83.9% | 82.7% | +1.2 pp | 83.0% | +0.8 pp |
| Research & development | $72.2M | $74.1M | -2.6% | $66.7M | +8.3% |
| Sales & marketing | $299.4M | $295.3M | +1.4% | $261.7M | +14.4% |
| Total operating expenses | $387.2M | $380.7M | +1.7% | $345.4M | +12.1% |
| Operating income (loss) | $157.1M | $112.6M | +39.5% | $148.5M | +5.8% |
| Operating margin | 28.9% | 22.8% | +6.0 pp | 30.1% | -1.2 pp |
| Net income (loss) | $113.8M | $110.7M | +2.8% | $113.6M | +0.2% |
| Net margin | 20.9% | 22.4% | -1.5 pp | 23.0% | -2.1 pp |
| Diluted EPS | $2.03 | $1.96 | +$0.07 | $2.02 | +$0.01 |
Risks
Failure to develop enhancements incorporating AI, natural language processing and machine learning could make Paycom's solution less competitive if new technologies deliver HCM solutions at lower prices or more efficiently. Paycom has made significant investments in AI-powered tools and expects continuing resource-intensive development to increase costs.
Paycom has been targeted in cyber-attacks, and a third-party cyber-attack resulted in unauthorized access to data of certain clients and their employees as well as Company data and employee records. Threat actors increasingly use AI, and a breach could cause client loss, regulatory investigations, fines and significant liabilities.
All clients are served from fully redundant data centers in Oklahoma, Texas and Arizona, and damage, failure or disruption could interrupt payroll and tax payments. Such interruptions could cause permanent data loss, client claims, refunds and reduced revenues.
Revenue depends on clients continuing to use applications, purchasing additional applications and adding new clients, and clients can generally cancel with 30 days' notice. Per-employee billing makes results sensitive to client headcount, while automation and AI could reduce clients' need for employees; annual revenue retention rate was 91% in 2025.
The HCM market is highly competitive and fragmented, with competitors such as ADP, Dayforce, Oracle, Workday and others, and the emergence of white label and embedded payroll offerings. Pricing pressures and aggressive client retention strategies could reduce sales, margins or market acceptance.
Paycom is subject to rapidly evolving privacy, data protection and AI laws, including the EU AI Act whose majority of substantive requirements take effect August 2, 2026, and numerous U.S. state privacy laws. Noncompliance could result in fines, consent orders, injunctions, litigation and required changes to Paycom's solution.
For FY2025 YTD, total revenues were up 8.9%, but operating income was down 10.6%, operating margin was down 6.0 percentage points, net income was down 9.7% and diluted EPS was down 9.4%. MD&A attributes part of the expense increase to the absence of the prior-year $117.5 million stock-based compensation reversal.
As Paycom National Trust Bank now manages U.S. client money movement, these transmissions are federally exempt from state money transmitter regulation and Paycom has surrendered its state licenses. If regulators determine Paycom operated as an unlicensed money services business, money transmitter or payment services provider, it could face civil and criminal fines, penalties and reputational damage.
Lower interest rates compressed interest on funds held for clients, which decreased 9.6% for FY2025 from FY2024, partially offset by higher average balances. A decreasing interest rate environment would compress future interest earnings and could adversely affect operating results.
Success depends on Chad Richison, founder, CEO and Chairman, and other key executives, with no key man life insurance. Paycom also faces intense competition for software developers, product managers and IT personnel, and its office-centric model may be less attractive than flexible work arrangements offered by competitors.
Pursuing larger clients may require customized features and integration, result in longer sales cycles and consume significant support resources with no guarantee of adoption. If Paycom does not meet these demands, its market opportunity could be limited.
Paycom relies on third parties for financial processing, couriers, time clocks, background checks and a licensed third-party large language model that processes sensitive employee and customer data. A breach, inaccurate output, bias or obsolescence of this LLM could lead to legal, financial and reputational harm.
Paycom's strategy focuses on automation and AI, with significant investments that may not result in marketable products or client acceptance. Clients may hesitate to adopt AI-powered automation, and future regulation could increase compliance costs and limit the strategy.
SaaS KPIs
All quarters →Adjusted EBITDA margin
Adjusted EBITDA
Non-GAAP Net Income
Non-GAAP Net Income per Diluted Share
Annual Revenue Retention Rate
Clients (based on parent company grouping)
Recurring and other revenues
Recurring and other revenues as % of total revenues
Summary, forecast, risks and KPIs are extracted from Paycom Software, Inc.'s SEC filings for Q4 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.