Intuit Inc. (NASDAQ:INTU) saw its shares drop by the most in over a year after reporting a loss of 1 million free TurboTax users this tax season, raising concerns about demand for the software. According to the Mountain View, California-based software developer, 10 million people used TurboTax for free this year, a decrease of about 1 million from the previous year. The company also lost market share among low-paying customers. As a result, the stock fell as much as 9.3% on Friday, hitting $600.49, marking the biggest decline since November 2022.
Intuit has been focusing on catering its TurboTax software to those with more complex tax situations, betting that these customers would benefit from online assistance from experts. The company has also promoted more artificial intelligence features in its products.
Despite the decline in free users, there are positive signs for Intuit’s strategy. The average TurboTax user spent 10% more on their filings this year compared to last year. Fiscal third-quarter revenue increased by 12% to $6.74 billion, surpassing analysts’ estimates of $6.64 billion.
The period ending April 30, which includes the crucial tax season, is the most important for the maker of TurboTax and other financial software. Profit, excluding certain items, was $9.88 per share, exceeding Wall Street’s expectations.
During an earnings call, company executives addressed questions about the user decline. Keith Weiss, an analyst at Morgan Stanley, inquired about why Intuit couldn’t appeal to both the high and low ends of the market with TurboTax.
Raimo Lenschow, an analyst at Barclays, noted that competition for lower-paying and free customers raises concerns for investors.
CEO Sasan Goodarzi downplayed the significance of the free customer base, stating that some users are “just really looking for free tax software — bouncing between platforms — and we are not interested in pursuing those customers.” Goodarzi emphasized that TurboTax has gained market share among individuals who typically hire accountants for their tax returns.
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