Paylocity Lifts Fiscal 2027 Outlook on 11% Revenue Growth

By Grace Kim

Paylocity generated $451.7 million in revenue for the quarter ended September 30, 2026, up nearly 11% year over year and $7.2 million above the top end of its guidance.

Recurring and other revenue rose 12% to $424.5 million. Chief Financial Officer Ryan Glenn said most of the revenue outperformance came from that category.

Paylocity (NASDAQ: PCTY) raised its fiscal 2027 revenue and adjusted EBITDA forecasts after the beat, citing client retention, demand for new products and higher expected interest income on client funds.

Steve Beauchamp, Paylocity’s executive chairman, said artificial intelligence (AI) is influencing sales momentum: “Our AI strategy is definitely a factor.” He added that prospective clients increasingly ask about current and planned AI capabilities during evaluations.

How is Paylocity monetizing AI?

Beauchamp highlighted Recruiting Optimizer, a premium product that uses AI agents to assist with candidate outreach, screening and interview scheduling. He said early results showed a 35% improvement in recruiting productivity, roles filled 25% faster and a 15% reduction in candidate drop-off.

Paylocity uses two routes to monetize AI:

• Embedded: Some AI capabilities sit inside existing products, including payroll.
• Separate: Paylocity sells some offerings, including Recruiting Optimizer, separately.
• Coming in January: Paylocity plans to launch an Absence Management module.

AI is already part of sales evaluations, and Paylocity is using both bundled and separate offers to monetize it.

What changed in the fiscal 2027 outlook?

The company lifted its total revenue forecast by $30 million at the midpoint, including a $15 million increase for recurring and other revenue.

• Total revenue: Paylocity forecasts $1.910 billion to $1.925 billion, or approximately 8% growth from fiscal 2026.
• Recurring and other revenue: The forecast reaches $1.792 billion to $1.807 billion, or approximately 9% growth.
• Adjusted EBITDA: The forecast stands at $711.5 million to $721.5 million; excluding interest income on client funds, it reaches $593.5 million to $603.5 million. Adjusted EBITDA means earnings before interest, taxes, depreciation and amortization.

Glenn said strong results across human capital management (HCM), finance and information technology (IT) products shaped the revision. He also cited client retention, a stable demand environment and higher interest rates. He said the $15 million increase in expected interest income passes through to the bottom line.

For fiscal 2027, Paylocity expects approximately $118 million in interest income on client funds, based on an average daily balance of $3.5 billion and an average annual yield of approximately 3.4%. The forecast includes September’s 25-basis-point rate increase (0.25 percentage point) but assumes no further rate changes during the fiscal year.

For the second quarter, the company forecasts total revenue of $452.5 million to $457.5 million and adjusted EBITDA of $152.5 million to $156.5 million.

The practical change is a higher revenue and profit floor, with client-fund interest adding about $118 million of expected income.

What is driving demand for the platform?

President and CEO Toby Williams said new and existing clients have shown strong interest in the recently launched Elevate Solutions and Paylocity for Retirement offerings. He described demand as stable and said first-quarter growth was fairly balanced between increased average revenue per user and new customer units.

Paylocity has invested in service teams to support Elevate Solutions, its managed-services offering. Williams expects that offering’s margin profile to resemble the broader software business over the end of fiscal 2027 and into the following year.

Elevate Solutions is drawing demand, and management expects a margin profile similar to the broader software business.

What did profits and buybacks show?

First-quarter net income was $57.6 million, and adjusted EBITDA was $159.5 million, a 35.3% margin. Excluding interest income on client funds, adjusted EBITDA margin improved by 30 basis points from a year earlier, Glenn said.

He attributed the year-over-year decline in gross margin primarily to the timing of staffing and investment, including preparations for new offerings. Glenn expects margins to rise as fiscal 2027 progresses and identified no significant concern related to AI costs.

Paylocity repurchased 1.1 million shares for $152.5 million during the quarter. Approximately $1.1 billion remained under its repurchase program, and Glenn said the company expects to continue buying back shares.

Paylocity can keep buying back stock, and management sees no significant AI-cost concern.

What does Paylocity sell?

Paylocity Holding Corporation provides cloud-based HCM and payroll software for organizations.

• Core platform: Payroll, human resources, employee benefits, talent acquisition, onboarding, performance, learning and workforce administration in one integrated system.
• Additional tools: Time and labor management, scheduling, employee communications, engagement, surveys, expense management and other workplace activities.

Paylocity carries a higher revenue and profit forecast into the rest of fiscal 2027, supported by recurring revenue, retention and a $118 million client-fund interest-income assumption.