Intuit: Buy The Blip?
TurboTax softness spooks the market amid broader AI fears
Earnings Brief
Intuit shares fell meaningfully in after-hours trade after the company slightly reduced their outlook for TurboTax revenue growth in fiscal 2026, from 8% to 7%. Expectations were lifted elsewhere, resulting in an aggregate increase in guidance. Overall, for fiscal 2026, Intuit expects: 13-14% revenue growth, non-GAAP operating margin to expand by about 1-point, and non-GAAP EPS to grow 18%:
Confirming media reporting earlier in the day, Intuit announced it will be reducing its workforce by 17% to remove layers of friction from the decision-making process. Intuit expects ‘a big chunk’ of savings to drop to the bottom-line with a ‘smaller part’ reinvested, suggesting Intuit is satisfied with the level of investment against its key priorities: assisted tax, its money portfolio, and mid-market, all of which continue to grow more than 30%.
Intuit attributed the softness in TurboTax to two factors: (1) a smaller number of overall tax filings this season (down 0.3% versus an expectation for a 1% increase, creating a net gap of 2MM filings); and (2) weakness among price-sensitive lower-income (<$50k) DIY filers. Simply put, Inuit lost on price within this cohort. Historically, Intuit made one-time offers to bring this group of customers in the door but has failed to retain them at standard pricing. To address the issue moving forward, Intuit will selectively lower pricing, modify product features, and rely on other opportunities to monetize these customers. What could that look like? Incentivizing customers with a reduced or free tax filing if they deposit their refund (or better yet, their paycheck) into a Credit Karma Money checking account, attach a debit card, and spend a certain amount monthly. Or a reduced or free tax filing as a reward for opening a credit card account, purchasing insurance, or taking out a mortgage via a Credit Karma referral. I cannot stress enough that the weakness called out by Intuit is in a narrow part of the market. And while Intuit is not giving up on this group of customers, it is emphasizing, and having success among, higher-value DIY and assisted filers with more complex tax situations.
YTD, TurboTax revenue has grown 7.5%. For the full fiscal year, Intuit expects TurboTax revenue to grow approximately 7%, implying $5,286MM of revenue. Assuming 53% (or $2,801MM) for TurboTax Live leaves $2,485MM from the DIY category, just 11.6% of Intuit’s total revenue:
Excluding DIY revenue from both fiscal 2025 and 2026 implies Intuit’s remaining revenue will grow approximately 18% in fiscal 2026:
The math moving forward is relatively straightforward: If TurboTax Live revenue grows at the midpoint of Intuit’s long-term guidance of 15-20% (which would be a meaningful slowdown from 47% growth in fiscal 2025 and 36% growth in fiscal 2026), it would contribute more than 9-points to TurboTax’s overall growth. Pairing that with a 5% reduction in DIY revenue (an improvement from the 14% decline in fiscal 2025 and more in-line with fiscal 2024’s performance), yields 7% total TurboTax revenue growth in fiscal 2027. A more realistic scenario: 25% Live growth and a 10% decline in DIY yielding 8.5% total TurboTax revenue growth in fiscal 2027.
Thoughts on the Stock
Perception is greater than reality for software companies, and a weak spot anywhere is certain to be punished in this market environment. In that regard, Intuit’s decline is not surprising and, to a degree, justified. However, the results do little to refute the key points of my thesis:
Intuit is moving successfully into the much larger assisted tax category, which is unlikely to be disrupted by AI. For fiscal 2026, Intuit expects TurboTax Live revenue and customers to grow 36% and 38%, respectively. TurboTax Live will make up 53% of TurboTax’s total fiscal 2026 revenue, or $2,801MM, representing only 7.5% of the $37B total addressable market.
QuickBooks’ dominance makes Intuit the ‘ultimate SMB platform’ with a clear right to win in other service offerings, specifically payments and payroll. Through the first three quarters of fiscal 2026, Intuit’s online payments and payroll revenue increased more than 25%. It is important to note that growth dipped to 22% during fiscal Q3. However, fiscal Q2 was seasonally stronger due to the timing of some payroll-related tax filings, which accelerated growth on a year-over-year basis to 28%. In aggregate, fiscal Q2 and Q3 online payments and payroll revenue grew 25%, roughly in-line with fiscal Q1’s 26% growth rate. Over the trailing twelve months, online payments and payroll revenue were more than $3.4 billion. Finding that combination of scale and growth is rare among Intuit’s peer group.
Valuation: Compelling, but is anyone in a hurry to buy?
At the after-hours price of approximately $323, Intuit trades at <21x its expected fiscal 2026 GAAP EPS estimate of $15.82 (midpoint). However, included in this amount is an anticipated $300MM restructuring charge in fiscal Q4 and roughly $660MM of amortization of acquired intangible assets. Adjusting for these items (net of tax) results in normalized fiscal 2026 EPS of $18.44. If we assume mid-teens growth off this base during fiscal 2027 (which may prove conservative given Intuit’s plan to let most of the savings from the headcount reduction drop to the bottom-line), it results in normalized EPS of about $21.21, implying a multiple of ~15x:
In my view, this is highly compelling, especially for a company expected to grow revenue at the high-end of low double-digits and EPS by at least 15% over the medium-term. Although I plan to add to my position (because nothing has changed fundamentally, except the price), I’ll likely do it in a measured way, primarily because I do not expect the stock to recover quickly and potentially fall more as Intuit has no way to redeem itself until the conclusion of next tax season, which is a full year away.
Moving forward, I’ll be watching a couple of items closely. First, online payments and payroll revenue growth. I would very much like to see this growth rate recover (moderately) in fiscal Q4, validating that the dip in fiscal Q3 was due to a timing issue, which made fiscal Q2 seasonally stronger. A range of 23-25% for fiscal Q4 is reasonable to expect, in my opinion. Second, the exact savings from the workforce reduction, and what portion plans to be reinvested versus fall to the bottom-line. And finally, more details around its plan to win back price-sensitive lower-income DIY filers and how it will show up in the income statement (more Credit Karma revenue from increased monetization and the impact on margins). However, as mentioned previously, even if the plan is credible and management is optimistic, it ultimately won’t matter until actual results come in after next tax season.
Here is a link to my full report on Intuit: Long Intuit
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Disclosure: As of May 21, 2026, I am long Intuit. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.
My wife has some - I was trying to figure out why it was down post mkt - so thx for filling that in, ridiculous as it is to be down this much on such small innocuous deltas in one or so lines (while aggregate numbers rise). I was listening to Tien-Tsin talking to TOST yesterday and he inferred that he was a bit unsure why that stock was down so much post earnings as well. I have a hunch - all these pods are all now using the same AI tools, which is why you get an instant down 10% or so - everything is automatically fed into AI and the analysts have their list of parameters drawn up and fed into the tool and if any line item is not good they smash the stock (if is software related). And you smash it big as that's working in this tape. It'll start to stop when they pile on shorts on a down 20% stock but then it recovers strongly in the days after - but that needs to become a pattern. That'll make them less confident of being aggressive, until then, it is at least offering up some good opportunities to take the other side of that aggressiveness. The multi-strats are all doing quite well lately being long chips and anything AI, and the likes of INTU are just the opposite side of that trade. This is why we're getting big down moves as those guys control most of the short term liquidity. So you get down 20% instead of a more reasonable 2%. As I said, a hunch only.
I agree with your assessment, Bob. I haven't started a position yet, but will be watching closely.