ADP Stock Gains 23% in 3 Months: Here's What You Should Know

ADP ADP stock has rallied over the past three months. The company’s shares have surged 23%, outperforming the industry’s 1.4% growth and the Zacks S&P 500 Composite's 4.5% appreciation.

3-Month Share Price Performance

                                                                   Image Source: Zacks Investment Research

Let us delve into the factors that have contributed to the company’s outperformance.

Strong Margins Anchor Profitability

ADP’s top line moved up 3.6% sequentially during the second quarter of fiscal 2026, which then increased exponentially by 10.8% during the third quarter of fiscal 2026. This top-line momentum was accompanied by 7.7% and 28.6% sequential growth in adjusted EBIT in the second and third quarters of fiscal 2026, respectively.

A disproportionate growth between revenues and adjusted EBIT is a clear indication of heightened operational efficiency, as evidenced by a 50 basis points (bps) and 420 bps expansion in adjusted EBIT margins during the aforementioned quarters.

These strong margins translated into significant improvement in net earnings, resulting in impressive bottom-line growth. During the second quarter of fiscal 2026, net earnings increased 4.8% sequentially, resulting in a 5.2% upsurge in the bottom line.

Although similar, the momentum achieved during the third quarter of fiscal 2026 was aggressive, as net earnings spiked 28% sequentially, pushing the bottom line up by 29%. This performance is a testament to ADP’s ability to convert incremental revenue gains into high-margin bottom-line growth, fortifying investor morale in the scalability of its operations.

Dividends Attract Income-Seeking Investors

ADP has a consistent track record of dividend payments. The company paid $1.9 billion, $2.2 billion and $2.4 billion in dividends during fiscal 2023, 2024 and 2025, respectively. During the nine months ended as of March 31, 2026, ADP paid $1.9 billion in dividends, a substantial rise from the year-ago period’s $1.8 billion. Such moves, despite turbulent cash flow, indicate the company’s commitment to returning value to shareholders and underline its confidence in the business.

Solid Balance Sheet Bolsters Liquidity

ADP’s balance sheet reveals that it holds a cash chest of $3.2 billion as of the end of the third quarter of fiscal 2026 compared with no current debt, strengthening its liquidity. It is further justified by a current ratio of 1.04 during the third quarter of fiscal 2026 that improved marginally from the year-ago quarter. While the metric stands lower than the industry average of 1.9, being above 1 bodes well with investors, signaling efficiency in covering short-term obligations.

Zacks Rank & Stocks to Consider

ADP currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Computer and Technology sector are Amphenol Corporation APH and MKS Inc. MKSI, each flaunting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Amphenol Corporation has a long-term earnings growth expectation of 24%. Amphenol Corporation delivered a trailing four-quarter earnings surprise of 14.1%, on average.

MKS has a long-term earnings growth expectation of 29.9%. MKS delivered a trailing four-quarter earnings surprise of 7.5%, on average.

Beyond Nvidia: AI's Second Wave Is Here

The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research