Story Stocks^®

Intuit (INTU +9%) is sharply higher today after reporting a huge EPS beat with its Q3 (Apr) earnings report last night. It also guided above expectations for Q4 (Jul). Q3 is always a critical quarter for Intuit. It's the largest revenue quarter of the year for them because tax season triggers a lot of sales of Turbo Tax. INTU focuses on small businesses and consumers (QuickBooks, TurboTax, Credit Karma, Mailchimp).

• Consumer Group segment (TurboTax, both DIY and assisted) revenue grew a healthy 11% yr/yr to $4.0 bln. Intuit says it made significant progress in terms of disrupting the assisted tax category and winning in the DIY category. Intuit saw strong monetization across simple and complex tax filers, driving an expected 13% increase in average revenue per return (ARPR), as more customers choose its assisted offerings and faster access to refunds.
• Intuit expects pay-nothing customers to decline to 8 mln from 10 mln, as Intuit shifts its focus towards disrupting assisted tax, which resulted in yielding share with lower quality ARPR customers. Intuit expects Consumer Group revenue to grow 10% this year, driven by 24% growth in TurboTax Live customers, resulting in 47% growth in TurboTax Live revenue, well above its long-term expectation of 15-20%. ProTax (used by tax pros, accountants) revenue grew 9% in Q3.
• Outside of tax season, its largest segment is usually its Global Business Solutions Group (mostly QuickBooks and Mailchimp). GBSG revenue jumped 19% yr/yr to $2.8 bln. Its robust growth was largely consistent with prior quarters and broad-based across online accounting and online services. QuickBooks Online Accounting revenue grew 21% in Q3, driven by higher prices, customer growth, and mix shift. Intuit continues to prioritize disrupting the mid-market. Mailchimp has been a bit of a drag on GBSG segment revs. Mailchimp's revenue was flat in Q3 and Intuit continues to expect it will take several quarters to deliver improved outcomes at scale.
• Its Credit Karma segment was a laggard in FY23, but recovered nicely in FY24 and that has continued in FY25. Credit Karma revenue in Q3 grew 31% to $579 mln, driven by strength in credit cards, personal loans, and auto insurance. What makes the growth more impressive is that Intuit is lapping strong growth in auto insurance that began in Q3 last year.

Overall, this was a great quarter. Tax season is always critical for Intuit. What stood out to us is that the company made surprisingly strong inroads in terms of scaling up its higher margin assisted tax service. Also, more generally, its overall business sounds stable despite the macro/inflation pressures, which was evident with its upside Q4 guidance. What helps Intuit is that most of its customers are on the service side and not the product side, so there is some insulation from tariffs. Credit Karma was a another bright spot and its integration with Turbo Tax added to growth for its Consumer segment.