Intuit is down 61% in a year while earnings rose 20%. What's going on?
Intuit is at $268, down 61% in a year and 25% in the last month. The worry is AI. Intuit makes TurboTax, which was used for 39 million US tax returns this year, and the fear is that AI will do a simple return for little or nothing. Cheaper rivals are already taking customers.
The business hasn't shrunk yet, though. In the fiscal year to July, revenue grew 14% to $21.4B, and operating income and earnings per share both grew 20%. So I went through the 10-K and the Q4 call to see how much of Intuit the worry actually covers.
|Business|FY2026 revenue|Growth|
|:-|:-|:-|
|QuickBooks Online Accounting|$5.05B|\+23%|
|Payroll, payments, lending, Mailchimp|$4.87B|\+16%|
|QuickBooks Desktop|$2.95B|\+6%|
|TurboTax|$5.30B|\+7%|
|Credit Karma|$2.64B|\+20%|
|ProTax|$0.65B|\+4%|
TurboTax is a quarter of revenue. QuickBooks, Intuit's accounting software for small businesses, is more than half.
Bear case
The bear case is real, and management made it themselves. On the Q4 call the CEO said "price is now the number one reason customers leave TurboTax." Federal units fell 2% to 39.0M. TurboTax revenue only grew because of the expert-assisted version. The rest of TurboTax, mostly the DIY software, shrank by roughly 14% on my arithmetic from their figures. That's the part AI competes with most directly, and Intuit is now cutting entry prices on purpose to win people back. This year's guide is 9-10% growth, with TurboTax at 2-3%. And Credit Karma, a credit-score app that gets paid when its members take out a loan, card or insurance policy through it, grew 20% mostly on personal loans and credit cards. That business follows the credit cycle both ways.
Bull case
The bull case is that the rest of the business is doing fine. QuickBooks Online grew 23%, and the 10-K puts that down to higher prices as well as more customers, the opposite of what is happening in TurboTax. TurboTax Live, where a human expert does or checks the return, grew 37% and is now more than half of TurboTax revenue. And the whole thing throws off a lot of cash. They spent $5.4B on buybacks last year, and the share count fell 2%.
The P/E is 16.2 against its own ten-year median of 51.6. Stockoscope's DCF (analyst growth of about 10% a year, tapering after year five, a 9.1% discount rate) puts it at $537, double the price. But only $192 of that comes from the next ten years. The rest depends on Intuit still earning well after 2036, which is exactly what the AI worry is about.
The simplest test I could find is to take TurboTax out completely. The rest (QuickBooks, Credit Karma and ProTax) made $16.2B last year, up 16%, faster than Intuit as a whole. At today's enterprise value of $72.1B you'd be paying about 4.5 times sales for that alone, and Intuit's own ten-year median is 10.3 times sales.
So where does it leave us
The price is treating TurboTax as a business in decline and QuickBooks as next in line. The numbers show the first one starting, not the second. The DIY side is shrinking and Intuit is cutting prices to stop it, so I wouldn't count on TurboTax's old margins coming back. But at about 4.5 times sales for everything else, a lot of that is already in the price.
Two numbers would change my mind: TurboTax units after next tax season, once the price cuts have had a go, and QuickBooks Online growth. If units fall again, the bear case on TurboTax is right. If QuickBooks slows too, it's right about the whole company. Until then this looks to me like a business priced for a worse outcome than it has reported so far. That isn't the same as safe, and a multiple below its normal can stay there for years.
For those who follow it: is TurboTax losing customers on price a reset, or the moat breaking?
Not investment advice. DYOR.