Paycom Software’s projection for full-year 2026 revenue disappointed market expectations, even as the company reported a fourth quarter with robust profitability metrics. The payroll and human resources technology provider set 2026 total revenue guidance at $2.185 billion, a 6.5% increase from the prior year, below the analyst consensus of $2.225 billion, which implied roughly 8.5% growth.
The vendor also provided a specific outlook for recurring revenue, forecasting 7.4% growth in 2026 compared with analysts’ forecasts of 9.4%. Under management’s guidance, the incremental recurring revenue for 2026 would represent about 79% of the incremental recurring revenues achieved in fiscal 2025, a step down from the roughly 97% that was guided last year.
Operationally, Paycom’s fourth quarter largely tracked expectations. Total revenue for the period came in at $544 million, up 10.2% year-over-year. Recurring revenue rose 11.3% to $517 million. The company also reported an improvement in its annual retention rate, which increased by one percentage point to 91%.
Profitability metrics were a brighter spot in the quarter. Adjusted EBITDA reached $236 million, translating to a margin of 43.4%, which beat consensus estimates by 0.7 percentage points. For the coming fiscal year, Paycom guided adjusted EBITDA of $960 million and a margin of 43.9% - both figures slightly ahead of Street estimates of $958 million and 43.1% margin.
Wall Street reactions highlighted the tension between solid margin performance and softer growth assumptions. Barclays analysts described the quarter as "okay (not great)" and suggested the below-consensus 2026 guidance could exert downward pressure on the shares in the near term, raising questions about the company’s growth trajectory.
By contrast, BMO Capital pointed to evidence that the company is investing in future sales capacity, stating that Paycom "appears to be going on offense with a major increase in sales capacity and training initiatives," a move that BMO said could support stronger results in the back half of 2026.
Jefferies also weighed in, saying the "disappointing 2026 growth outlook will likely overshadow the results" despite the healthy EBITDA margin outlook. Jefferies added that while the stock appears inexpensive on some measures, the results "largely validate company-specific and industry concerns."
In discussing forward drivers, Paycom’s management signaled expectations for employment levels to stabilize and identified new customer acquisition as the primary avenue for future growth.
Context and implications
- Paycom’s guidance reveals a more cautious near-term revenue trajectory than analysts anticipated, particularly within its recurring revenue base.
- Margins remain a strength, with adjusted EBITDA and projected profitability modestly above consensus, a factor analysts noted when assessing valuation and risk.
- Management’s emphasis on expanding sales capacity and training suggests the company is prioritizing customer acquisition efforts to reaccelerate growth later in the fiscal year.
While the company’s latest quarterly results showed solid margin performance and stable retention, the lighter-than-expected 2026 revenue outlook is likely to be the focal point for investors and analysts monitoring enterprise software and HR technology stocks in the near term.