Intuit's stock declined by 11% following a disappointing outlook, with the market's attention simultaneously shifting towards Nvidia's impending earnings. This movement occurred even as Intuit revealed a small consolidated beat in its recent financial report. Investors had initially hoped for a stronger tax season performance, expecting roughly 9.7% FY26 TurboTax growth, but Intuit revised its TurboTax growth forecast to 7%.
The decline was primarily attributed to weakness in Intuit's do-it-yourself (DIY) tax segment, with total TurboTax Online units decreasing by 2% and e-file share falling about one point. The number of pay-nothing customers also dropped to 7 million from 8 million. Management cited pricing and packaging issues for the DIY segment's struggles and proposed shifting lower-income customers to a value-based model. Despite these challenges, Intuit's TurboTax Live segment performed well, with revenue growing 36% and customer numbers increasing by 38%, reaching 53% of total TurboTax revenue.
Intuit's financial results also showed that its consumer revenue rose to $5.3 billion, with TurboTax contributing $4.4 billion and Credit Karma $631 million. However, the company's Mailchimp business experienced a slowdown, partly due to AI disruption and increased competition. Analysts had projected Intuit's revenue to reach $4.27 billion for the last quarter, an 11.43% increase year-over-year, bringing its annual revenue to $21.3 billion, up 13.4% YoY. Despite a forward price-to-earnings ratio of 15.4, which is significantly lower than its five-year average of 33, the market reacted negatively to the revised guidance.
The company announced a 17% workforce reduction, impacting approximately 3,000 roles, and anticipates $300 million to $340 million in restructuring charges to be recognized in the fourth quarter. Despite these charges, Intuit had raised its full-year EPS guidance. The focus for investors has now shifted to Intuit's fiscal 2027 outlook, particularly regarding the growth rate for its TurboTax business, as a single-digit growth forecast could confirm bearish market sentiments that have seen the stock fall from a 52-week high of $721.54 to $345.66. Goldman Sachs had previously cut Intuit to "Sell" with a $276 target, citing the potential for AI models to disrupt the tax preparation market.
Looking ahead, Intuit's Q4 revenue, which is projected to be around $4.247 billion to $4.280 billion, representing about 11% growth, is not expected to be the main driver of stock movement. Instead, the fiscal 2027 outlook, which will provide insights into the future performance of its recently trimmed TurboTax business amidst staff reductions and market competition, is what will largely influence the stock's trajectory. Intuit's Global Business Solutions line, which grew 15% to $3.3 billion in Q3, will also be closely watched for any signs of deceleration that could indicate broader issues beyond the tax segment.
