Intuit looks to end FY24 on a high note, focused on AI and assisted segment

Intuit Inc. (NASDAQ: INTU), the maker of popular accounting software TurboTax and QuickBooks, has reported better-than-expected third-quarter results and mixed guidance. Currently, the company’s investments are focused on data and artificial intelligence, and it looks to deliver strong operating margin expansion in fiscal 2025 and beyond.

The Mountain View-headquartered financial technology firm’s stock suffered a selloff soon after the earnings announcement, mainly reflecting investors’ disappointment over the weaker-than-expected fourth-quarter earnings guidance. The stock has maintained an upward trajectory over the past one and a half years, though it suffered short-term losses, and the trend is likely to continue. The lower price can be seen as an investment opportunity.

Growth Strategy

This tax season, the company’s main focus has been on the assisted segment, for both consumers and small businesses. Within the core small-business and self-employed customer group, its three-pronged growth strategy is to grow the core, connect the ecosystem, and expand globally. Buoyed by the positive response to the integration of TurboTax and Credit Karma – software packages for tax preparation and credit management respectively — the company sees double-digit growth in TurboTax Live revenues and customer base this year.

On a per-share basis, Intuit’s earnings rose to $9.88 per share in the April quarter from $8.92 per share in the corresponding period of 2023. Earnings also exceeded expectations, as they did in each of the trailing eight quarters. Net income, including special items, was $2.39 billion or $8.42 per share in Q3, vs. $2.09 billion or $7.38 per share in the prior-year quarter.

Results Beat

The bottom line benefitted from a 12% year-over-year increase in revenues to $6.74 billion in Q3. Revenues exceeded Wall Street’s estimates, marking the fourth beat in a row. With 18% growth, the Small Business and Self-employed segment was the primary growth driver. The Consumer business, which accounts for about 55% of total revenues, registered a 9% revenue growth.

“This season, we made good progress against our multiyear strategy to transform the assisted experience for customers. TurboTax Live, our assisted offering, including our do-it-with-me and full-service tax offerings for both consumers and businesses, is the largest durable growth opportunity. We expect TurboTax Live customers to grow 12% and revenue to grow 17% in fiscal year 2024. TurboTax Live revenue is expected to be $1.4 billion, representing approximately 30% of total consumer group revenue growing at a significant scale,” Intuit’s CEO Sasan Goodarzi said during his post-earnings interaction with analysts.

Guidance

Anticipating the positive momentum to continue in the year’s final months, Intuit forecasts a 13-14% revenue growth for the fourth quarter, broadly in line with the market’s projection. Meanwhile, the $1.80-1.85/share earnings estimate for Q4 fell short of expectations. The management raised its full-year guidance, hoping to leverage its continued investments in generative AI and data. FY24 revenue is currently expected to grow about 13% from last year. Adjusted profit for the year is expected to be between $16.79 per share and $16.84 per share.

Intuit’s stock has been under pressure after it issued weak Q4 guidance. Though the company raised its full-year forecast, it failed to impress investors. INTU traded down 8% on Friday afternoon, after opening the session at $620.