Paylocity (PCTY 3.87%), a cloud-based payroll and human capital management software provider focused on small and midsize organizations, shared its fourth quarter and full-year fiscal 2025 earnings on August 5, 2025. GAAP revenue was $400.7 million in Q4 FY2025, ahead of Wall Street’s $388.4 million GAAP estimate, but delivered GAAP earnings per share (EPS) of $0.86, falling dramatically short of the $1.40 GAAP consensus. While top-line growth was healthy, the quarter saw flat GAAP net income and a pronounced miss on profitability (GAAP EPS). Looking at the quarter as a whole, revenue execution remained robust, yet management’s cautious outlook for 2026 signals slowing operational momentum.
| Metric | Q4 2025 | Q4 2025 Estimate | Q4 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $1.56 | $1.40 | $1.48 | 5.4% |
| Revenue (GAAP) | $400.7 million | $388.4 million | $357.3 million | 12.2% |
| Recurring & Other Revenue | $369.9 million | $324.7 million | 13.9% | |
| Adjusted EBITDA | $130.7 million | $120.2 million | 8.7% | |
| GAAP Net Income | $48.6 million | $48.8 million | (0.4%) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q3 2025 earnings report.
Understanding Paylocity’s Business and Recent Focus
Paylocity is a software company that delivers payroll and human resources (HR) solutions through a modern cloud platform. Its main customer base is U.S. businesses with 10 to 5,000 employees. The platform offers tools for payroll, benefits, talent management, time tracking, and compliance, with a focus on an integrated user experience and mobile access.
Recent priorities for the business include driving technological innovation—especially the integration of artificial intelligence (AI)—expanding its client base, and broadening its product portfolio beyond HR to reach the Office of the CFO. Key success factors have been ongoing investments in research and development, adding new features and modules, deepening channel partnerships, and maintaining regulatory compliance to build client trust.
Quarter Highlights: Revenue Outperformance Meets Cost Pressure
During the quarter, revenue grew by 12% to $400.7 million, Revenue exceeded analyst expectations by $12.26 million (GAAP). Recurring and other revenue, a critical metric for software subscription models, rose 14% year-over-year to $369.9 million, reflecting strong client base expansion and average revenue per client. However, GAAP net income was virtually unchanged at $48.6 million, indicating that higher costs or margin compression offset the gains on the top line.
The company’s non-GAAP earnings per share stood at $1.56. Yet, the GAAP EPS of $0.86 marked a sharp shortfall of 38.6% from the expected $1.40, signaling heavy costs such as robust stock-based compensation and increased operating expenses. Notably, GAAP sales and marketing, research and development, and general and administrative expenses were all up compared to Q4 FY2024, consistent with investments in innovation and integration initiatives like the Airbase acquisition.
Airbase, a spend management software acquired and now fully integrated, contributed meaningfully—estimated at roughly 1% of full-year revenue. However, the broader financial impact of Airbase remains early-stage.
Additional product launches this quarter included Paylocity for Finance, a new suite targeting CFOs with unified tools for both finance and HR teams. The push into this new product family signals an effort to diversify revenue beyond core HR software. In parallel, the company continued development and rollout of add-on modules like rewards and recognition, learning, and feedback tools. Management highlighted that channel and broker referrals generated more than 25% of new sales in Q3, supporting client acquisition at scale. There was no dividend declared or changed for the period.
Looking Ahead: Slower Growth and Prudent Guidance
Management’s guidance for FY2026 projects significantly slower growth, with total revenue expected to increase by approximately 8% and recurring and other revenue by approximately 9% over the prior year. The company expects recurring and other revenue between $1.597 billion and $1.612 billion, with total revenue between $1.707 billion and $1.722 billion, a midpoint increase of only 8–9%. This marks a notable slowdown from the 14–15% revenue gains seen in the prior year.
Leaders cited macroeconomic caution and the potential for longer customer sales cycles as factors behind the tempered guidance, though they did not note any immediate impact on the sales pipeline or client base. No further quantitative detail was offered on forward client counts or average revenue per user. With the integration of Airbase expected to ramp slowly and continued high stock-based compensation costs in play, investors will likely focus on core earnings and margin expansion in the upcoming quarters.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
