TriNet Sinks 11% Despite Q3 Earnings Beat as Worksite Employees Drop 11%

Key Takeaways

• TriNet shares fell 11% today as third-quarter revenue dropped 5% and worksite employees fell 11%, despite an earnings beat.
• TriNet’s earnings recovery came from raising its health fees, and those higher prices cost it clients.
• The top of TriNet’s 2026 EPS range leaves about $0.13 for the fourth quarter, against $0.46 a year earlier.
• ADP and Paychex both grew their PEO worksite employees, so the next test is whether TriNet’s new sales turn its count back up.

TriNet Group (TNET) reported third-quarter adjusted EPS of $0.94 before today’s open, ahead of Wall Street’s estimates, and the stock fell 11% anyway.

Revenue fell 5%, worksite employees dropped 11% to about 295,000, and management reaffirmed its full-year guidance rather than raising it, though it now expects EPS at the top end. Meanwhile, PEO rivals Automatic Data Processing (ADP) and Paychex (PAYX) both grew their worksite employees in their latest quarters. Investors want growth, and TriNet isn’t growing.

The Repricing Worked, and It Cost Clients

TriNet raised its health fees through 2025 and again in January to get its insurance costs back in line. Those costs took 89% of its insurance revenue in the third quarter, down from 90% a year earlier.

But the higher prices pushed some clients out. CEO Mike Simonds said on this morning’s call: “As a result of our health plan repricing, retention in Q1 was lower than we expected.”

TriNet’s revenue slipped from $1.27 billion in the first quarter of 2025 to $1.17 billion in the second quarter of 2026, and the third quarter’s $1.18 billion was still down 5% from a year earlier:

The High End Leaves Little for the Fourth Quarter

Simonds now expects full-year retention to come in modestly above TriNet’s original plan, and new sales are growing again. CFO Mala Murthy said TriNet now expects 2026 adjusted EPS at the top of its $4.50-$5.10 range, while revenue is trending toward the bottom of its $4.75-$4.90 billion range.

That sounds better than it is. TriNet has already earned $4.97 a share in adjusted EPS through nine months, so the top of the range leaves about $0.13 for the fourth quarter, by my math, against $0.46 a year earlier. The fourth quarter is usually TriNet’s weakest, with insurance costs eating 94% of insurance revenue in last year’s fourth quarter, but that’s still a steep drop.

Analysts see earnings recovering only slowly:

The top of TriNet’s range would beat the $4.87 consensus for 2026, so I’d expect estimates to tick up. But if 2026 lands near $5.10, the $4.92 consensus for 2027 would mean lower earnings next year, and that number won’t climb much until worksite employees do.

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ADP and Paychex Are Still Adding Workers

ADP’s average PEO worksite employees grew 2% to about 771,000 in the quarter to Sept. 30. It raised its company-wide guidance yesterday, but kept its PEO outlook unchanged.

Paychex’s PEO and Insurance Solutions revenue rose 12% to $367.6 million in the quarter to Aug. 31, driven by more worksite employees and higher insurance volumes, and it raised that business’s growth outlook to 7-8% from 6-7%.

So TriNet’s shrinking is its own problem, not the industry’s, though neither rival says where TriNet’s lost clients went.

Why I’d Wait on TriNet Stock

TriNet traded at 16.4x forward earnings at yesterday’s close, right on its 16.2x five-year average:

After today’s drop, that’s about 14.6x on unchanged estimates, still well above the 8.0x low it hit in February.

The earnings fix is real, but TriNet won’t earn a higher multiple until worksite employees stop shrinking. Simonds wouldn’t say when worksite employees will grow again, though he expects new sales growth to pick up to high single digits in the fourth quarter. I’d wait for that report early next year to see whether those sales turn the count back up. If retention keeps improving, though, today’s drop could look like an overreaction by then.

So what is TriNet stock actually worth?

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