Paycom’s third quarter results were met with a significant negative market reaction, as investors digested both the company’s in-line revenue performance and a slight miss on non-GAAP earnings per share. Management attributed the quarter’s outcomes to expanded automation through its new AI-driven IWant product and ongoing adoption of Beti, which together reduced service costs and improved operational efficiency. CEO Chad Richison emphasized the impact of these innovations on client engagement, particularly among C-suite users, noting, “IWant has already successfully responded to millions of queries…extending the power of our full solution automation.” The company also saw lower internal support volumes, reflecting efficiency gains from automation.
Is now the time to buy PAYC? Find out in our full research report (it’s free for active Edge members).
Paycom (PAYC) Q3 CY2025 Highlights:
- Revenue: $493.3 million vs analyst estimates of $492.8 million (9.2% year-on-year growth, in line)
- Adjusted EPS: $1.94 vs analyst expectations of $1.96 (1.1% miss)
- Adjusted Operating Income: $143.7 million vs analyst estimates of $145.9 million (29.1% margin, 1.5% miss)
- The company reconfirmed its revenue guidance for the full year of $2.05 billion at the midpoint
- EBITDA guidance for the full year is $877 million at the midpoint, in line with analyst expectations
- Operating Margin: 22.8%, in line with the same quarter last year
- Billings: $494.7 million at quarter end, up 9.5% year on year
- Market Capitalization: $9.35 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Paycom’s Q3 Earnings Call
- Raimo Lenschow (Barclays) asked about the shift in Paycom's guidance approach and the absence of historical “beat” levels. CEO Chad Richison explained that guidance ranges are now broader and raised throughout the year based on evolving visibility, emphasizing a focus on foundational growth rather than targeting beat amounts.
- Mark Marcon (Baird) pressed for details on IWant’s usage among executives and its effect on sales momentum. Richison described new user behavior patterns, with IWant becoming the primary interface for recent hires and increasing C-suite engagement, which management sees as a positive for future adoption.
- Zane Meehan (KeyBanc Capital Markets) inquired about the sequential decline in recurring revenue growth and the impact of workforce levels on the platform. CFO Robert Foster reported stable employment numbers and indicated no unusual factors affected the quarter’s performance, attributing growth patterns to timing of client starts.
- Jared Levine (TD Cowen) sought clarification on cost savings from the recent workforce reduction and how much would be reinvested. Richison said that most cost benefits would be reflected in future guidance and stressed the company’s ongoing focus on automation-driven efficiency.
- Jacob Cody Smith (Guggenheim Securities) questioned the consistency of IWant usage and the optimization of GPU investments for AI workloads. Richison described daily analysis of product utilization and noted the recent data center investments were made to ensure adequate capacity for full client adoption.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the ongoing adoption and usage patterns of IWant and Beti across both new and existing clients, (2) the impact of automation on service costs and client satisfaction metrics, and (3) the effectiveness of new sales strategies in driving client acquisition and market share gains. Trends in free cash flow following the major data center investment will also be a key indicator.
Paycom currently trades at $168.64, down from $183.73 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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