This Payroll Software Company Bought Back 20% of Its Shares and the Stock Has Nearly Doubled Since April
While most software companies were retreating, Paycom made an aggressive and unconventional bet on itself, and the market delivered a verdict that caught even seasoned analysts off guard.
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Paycom Software (NYSE:PAYC | PAYC Price Prediction) spent the first half of 2026 doing what most software companies stopped doing: buying its own stock while everyone else was selling.
Buyback By The Numbers
Paycom retired roughly 20% of its shares in eight months. The share count fell from 56.1 million at the end of 2025 to about 45.1 million today, and the company did most of that buying while the stock was near a 52-week low of $104.15. In the first six months of 2026, Paycom repurchased nearly 11 million shares for approximately $1.4 billion. That is a company betting on itself at the low.
What It Means
Context matters here. Paycom spent $325.5 million on share repurchases in all of fiscal 2025. The 2026 pace is a different animal. In Q1 alone, the company bought back 8,375,443 shares for $1.060 billion and authorized a new $2.00 billion buyback. Q2 added another 2.6 million shares for $346 million, or about 6% of shares outstanding in a single quarter. Management called the repurchases opportunistic, citing a “valuation disconnect” in the market.
The funding is the part long-term holders need to see clearly. Paycom drew $900 million on its $2.1 billion revolving credit facility to support the year-to-date repurchases. Cash and equivalents ended Q2 at $198 million. This was a leveraged buyback funded partly with credit, and the balance sheet reflects that: stockholders’ equity fell to $571.5 million in Q2, down 68.28% year over year because of treasury stock accumulation.
Underneath the buyback, the operating business gave management cover. Q2 revenue was $531 million, up 10%, with recurring revenue of $505 million, up 11% year-over-year. Non-GAAP EPS came in at $2.78, ahead of the $2.381 consensus. Adjusted EBITDA margin expanded 320 basis points to 44.2%. Management raised full-year revenue guidance to $2.197 billion to $2.212 billion and adjusted EBITDA to $1.007 billion to $1.022 billion, implying a record 46% margin at the midpoint.
Market Reaction
Paycom stock rose 98.81% between April 1, 2026 and August 31, 2026, from $120.26 to $239.10, with a 46.07% move in August alone. At the Q1 earnings 8-K filing on May 6, 2026, shares were $126.1438. By the Q2 filing on August 5, 2026, they closed at $175.00. The stock now trades above the $211.56 average analyst target, with 6 buy and 14 hold ratings and no sells. Zoom out and the picture is more sober: the stock is still down 50.07% over the last five years, from $478.83 on September 1, 2021.
Bull Case
The buyback is a bet the market already validated. Oakmark Select portfolio manager Robert Bierig named Paycom on CNBC on September 1, 2026, saying: “Another example would be Paycom, which is a payroll software company that is buying back 20% of its shares this year. So we think they’re also very much a durable business that is going to benefit from some of the technology changes that are taking off right now.” Bierig also pushed back on the AI-loser framing: “I think people have wanted to put all of software into like an AI loser bucket. And we are big believers in the power of AI, but we think software companies can succeed at the same time.”
The operating case supports the capital allocation. Paycom cut R&D expense from $74.8M to $51.9M, largely because it moved AI workloads in-house. The company spent over $100 million last year preparing its own data centers, and management expects roughly $100 million in R&D savings this year plus $30 million or more from IWant response fees that would have gone to a third party. CEO Chad Richison said Paycom is “well positioned to exceed our initial 2026 plan on both a revenue and profitability basis.” Free cash flow is expected to exceed $650 million for the year. Retiring 20% of the float against that cash profile compounds every future dollar of earnings across a smaller share base.
Bottom Line
Paycom bought its own stock at the bottom of a software panic, funded partly with debt, and the stock nearly doubled. For long-term holders, the forward catalyst is the raised guidance: $1.007 billion to $1.022 billion in adjusted EBITDA against a share count that is roughly 20% smaller than it was on New Year’s Day. The stock now sits above the average analyst target, and the analyst desk skews to hold. The buyback is the reason the story worked. Whether it keeps working depends on how the credit line gets paid back, and how quickly the automation savings show up in the 2027 numbers.
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Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.
He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.
