Paychex Inc.

Q1 fiscal ’27 results were strong; profitability expanded - Total revenue: +6% YoY to ~$1.6B - Operating income / EPS: Operating margin +280 bps to 38%; adjusted operating margin +~130 bps to ~42% - Diluted EPS: $1.21 (+14% YoY); adjusted diluted EPS: $1.34 (+10% YoY) - Expenses: up only ~1% YoY despite continued investment; offset by AI/productivity efficiencies - Cash flow from ops: $414M (timing of client & corporate tax payments) - Capital return: $424M dividends in the quarter; ~47% ROE (12-month rolling)

Guidance updated modestly—PEO is the main driver - Full-year fiscal ’27 guidance reaffirmed, but with updated segment expectations - PEO & Insurance Solutions revenue growth: now 7%–8% (up from prior guidance) due to stronger PEO momentum - Interest on funds held for clients: now $200M–$210M (includes latest +25 bps Fed funds rate impact) - Management Solutions (rest of the portfolio) color: if Q1 strength continues, PEO trends toward the high end while Management Solutions trends toward the low end (investors should expect a mix shift favoring PEO) - Macro assumption: “stable demand” and flat employment levels

Big surprise / “what’s working”: advisory-driven go-to-market + AI execution exceeded expectations - CEO emphasized AI as embedded “intelligence” (WISE) plus advisers “in the loop,” not standalone tools - WISE scale: 2,000+ agents/features deployed; 50 trillion proprietary workforce data points - Early KPI proof: Intelligent Pay Cycle pilot (50,000+ businesses) helped prevent ~90% of payroll errors - Operational efficiency: agentic payroll processing automation up ~20% (Jan–Aug) while maintaining quality/accuracy - Go-to-market execution exceeded plan: ASO → PEO upgrades were double expectations; HCM sales referrals into PEO were up ~50% YoY - New AI products launched/announced: WISE Hire (agentic recruiting for SMBs) and embedding WISE into Microsoft ecosystem