HCM Software: Earnings Support Needed to Sustain Rally

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HCM Software: Earnings Support Needed to Sustain Rally

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HCM Software Equities

AmericasEarnings Support Needed to Sustain Rally

Software

Kevin McVeigh

Amid a cautious hiring environment, we expect demand to be subdued for the Analyst

foreseeable future as employers balance macro uncertainty with increasingly kevin.mcveigh@ubs.com

AI-fueled productivity focus. Hiring is at levels consistent with more subdued +1-212-882 0081

demand as temporary help underperforms likely due to companies delaying Bruna Werneck

headcount additions in search of technology-fueled efficiency gains. The Associate Analyst

ongoing adoption of AI coupled with government workforce rationalization is bruna.werneck@ubs.com

contributing to more measured hiring. Against this backdrop, we recommend +1-212-882 5955

investors buy Paycom given strong free cash as evidenced by buybacks Olivia Bradlee

capturing 18% of market cap in Q1 and sell Robert Half as we think it will be Associate Analyst

difficult for the RHI stock to maintain its 50%+ rally YTD given the current olivia.bradlee@ubs.com

sluggish hiring cycle fueling continued downward estimate revisions. We are +1-212-713 1227

cutting our above Street EPS estimates 10-15¢ on average 2026-30 with 2026 to

$1.40 from $1.50.

Key Q debates + implied 1-day move

AI differentiation + monetization—recent expert calls suggest customers

increasingly expect AI to be baked-in rather than a premium, suggesting that

monetization is more likely to come through better retention, lower service

intensity, and selective attach/mix benefits than through a distinct AI SKU. Net/net,

the winners are likely to be the vendors that can prove measurable workflow

outcomes from embedded AI.