Intuit’s State of the Union FQ2 Report

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Alicia Katz Pollock: In this episode of the unofficial QuickBooks Accountants Podcast, we're going to dive into the latest financial results from Intuit, specifically their fiscal second quarter 2026, which goes from November 2025 to January 2026. Also called the Jan Q report. My name is Alicia Pollock from royal.com. All right. The too long don't read is [00:00:30] that results came in ahead of expectations driven by broad based strength in QuickBooks, online credit karma and TurboTax, though not without a drag from MailChimp, which I honestly didn't expect. So this report is going to give us a great look into the health of small and midsize businesses, the tax season landscape, and into its aggressive moves into AI. So let's start with the cornerstone QuickBooks overall QuickBooks Online Performance QBO accounting revenue growth remains strong in the mid [00:01:00] 20s, landing at 24% year over year. What's driving this price increases, of course, and the continued growth of the premium tiers, specifically QBO Advanced and Intuit Enterprise Suite, or AIS, which together saw 40% growth. The Intuit Enterprise Suite story is particularly compelling. Deal volume was up an impressive 50% compared to the prior quarter. Crucially, Intuit has seen an acceleration of new customers coming to QuickBooks through eyes [00:01:30] moving. So it's not just people moving up, it's people moving over. What that means to us in the real world is that people are leaving QuickBooks Desktop Enterprise and moving over to Intuit Enterprise Suite, a major driver.

Alicia Katz Pollock: Here is their expanded partnerships with large accounting firms. One third of all new Ise contracts in the quarter were influenced by recommendations from accounting firms, which is a significant jump of 20% over the previous quarter. Intuit says that accountants are eager to build resale [00:02:00] practices around eyes, so until it's putting money behind this momentum and investing 30% in incremental direct sales capability for Ise over the next 3 to 6 months. They're also excited about making Claude Co-work capabilities available in Ise, because there's things that Co-work already does that they don't need to build. So it's an additional benefit. So some examples of what that might look like. If you're a restaurant located in a tourist area and you want to understand the tourist trends and weather [00:02:30] impacts, you'll be able to get daily updates and forecasts into traffic or a winery in Napa. Maybe they give you free shipping when you buy a case, but then they have to decide if they want to ship by ground or by air. So in both of these cases, they're going to be able to use Claude right inside into an enterprise suite to see what's recommended. And Intuit's excited because they don't have to build their own large language model or LLM for that. They can integrate cloud co-work right into it so that the brains [00:03:00] of the platform is delivering accuracy and compliance, but coworkers providing the specifics of what the customer needs.

Alicia Katz Pollock: Looking at QuickBooks Online Services, their growth accelerated slightly, just up 18% year over year. This was fueled by strong adoption and upsells in payroll, which of course is it's the start of the calendar year. And so, uh, so this is the time when people do move over to payroll, but they also had solid performance in QuickBooks payments and bill pay. So [00:03:30] on a macro level, Intuit flagged that SMB and mid-market trends have been, quote unquote, steady to modestly improving over the last 90 days. Revenue from mid-market businesses is up in the mid-single digit percentages, and their key verticals are performing well, including IT services, manufacturing and non-discretionary sectors. For those of you like me who didn't know, a non-discretionary sector refers to industries that produce goods and services that people need, regardless of the current economic climate. So [00:04:00] their purchase is not dependent on a customer's disposable income. These sectors are often referred to as consumer staples and and typically include food and beverage, household goods, utilities, health care. And so these industries are increasingly using QuickBooks. Okay, so now let's move over to the consumer side, which is TurboTax and Credit karma. So, so far their tax season is off to a strong start. Turbotax [00:04:30] revenue was up 12% in the January quarter. This is noteworthy because industry wide return volumes were actually down early in the season, and until it's attributing that to the later availabilities of W-2s this year.

Alicia Katz Pollock: Their strength came from momentum in their assisted tax channel, which covers both consumer and business tax and successful integration benefits from credit karma. Now let's talk about that assisted tax. Intuit's investing heavily in the assisted tax channel. And [00:05:00] that's where they directly help people with file their returns. They cited 5.1 million unique visitors to their landing pages through early February, which is compared to 4.2 million for all of the last tax season, so they're definitely off to a strong start. Credit Karma also delivered robust results, with revenue up 23% year over year. All right. Now the area that's facing challenges MailChimp MailChimp is the software that you use to communicate with your [00:05:30] customer base through sending emails. It's actually integrated into QuickBooks online. I've been a long time user. I really like it. And if you're not using MailChimp to communicate with your clients, you really should be. Now, I'm not just saying that because of this earnings report, it really is something that my business is based around. So let's talk about what's happening. So there's underperformance in the MailChimp sector. Mailchimp revenue is declining slightly year over year. Intuit noted that while there's pockets momentum in the mid-market, [00:06:00] like larger customer wins, it's being offset by a lack of progress in improving SMB retention and new customer acquisition.

Alicia Katz Pollock: So the major news here is that they are revising MailChimp growth down. They had previously anticipated that MailChimp would return over 10% growth in the next 3 to 6 months, but they've revised that, saying that it will happen, quote unquote, sometime post fiscal year 2026. In other words, next year. So this underperformance was the primary offset to otherwise strong [00:06:30] QuickBooks results. All right. Now let's look at the full financial picture and the company's forward looking strategy, particularly around artificial intelligence and human intelligence. The first thing that I want to note is that while the human intelligence, part of what they're calling hi to go with the AI doesn't show up in the actual numbers, when they gave their reports, they really talked about high heavily that they are investing in the humans as well as the technology. The [00:07:00] full year outlook. Intuit maintained its full year guidance for the fiscal year 2026 total revenue, projecting 21 to 21.2 billion, which is a 12 to 13% growth year over year. Notably, the QuickBooks target was slightly raised when factoring in the negative growth revision for MailChimp, which highlights the continued strength of the core platform. Now, Alicia in the field does hear from a lot of people who are making the move over to zero. So I do know [00:07:30] that the accounting market is looking at competitive ledgers, but at the moment that hasn't affected Intuit's numbers at all.

Alicia Katz Pollock: Now let's talk about AI monetization and strategy. Their report strongly hints at how Intuit plans to monetize its AI investments. Intuit indicated that subscription prices increases for QuickBooks are, quote unquote, likely coming again based on strong customer adoption and [00:08:00] their use of the AI features, which customers are seeing value in. But, you know, I got to take that with a grain of salt because never a year has gone by when there hasn't been a price increase. So that is making me wonder if the price increase for next year is going to be more significant than it had been in the past. Now, personally, Alicia says, hey, QuickBooks, that is potentially going to shoot you in the foot long term, unless you really are just completely leaning into AIS and are abandoning [00:08:30] the small business and small bookkeeper segment, because I myself have been having to consider other tiers where I have clients who really need the features that are in plus, but they can't afford $115 a month. So we're making do with essentials. So while of course they need it for the drivers of this report, because it all comes down to shareholders, word on the ground is that price increases are not welcome. Okay, now here's something really [00:09:00] interesting. Intuit is also considering offering separate AI only SKUs or versions that would be priced based on consumption or usage.

Alicia Katz Pollock: So That's actually looking at a new revenue stream focused purely on AI driven efficiency. I don't have any details about what this means, but I find this extremely interesting. Now, even though we are seeing signs of disruption from AI competitors like Digits and Puzzle, and even this migration [00:09:30] that I see going over to zero into its remaining confident in its marketing positioning. And part of that's because they have unique proprietary financial data, which basically means they have insight over the global market and the United States business market because they have access to the financial data of the businesses, which is not to say they're using your data. That's not what I mean by that, but it does mean that they have aggregate data where they can see how how the economics are doing. They're also part [00:10:00] of their competitive positioning is that they're utilizing domain specific workflows in AI models built for finance. They also know that because they're operating in a highly regulated regulatory and compliance based environment, That's a barrier to entry for other ledgers, and they're partnering with large language models like OpenAI, which is ChatGPT and Anthropic. But they explicitly state that they're not sharing any proprietary customer data with these external models. They're viewing them as complementary [00:10:30] and not competitive for now. So to wrap up, Intuit had a robust second quarter. There was strength in the core QuickBooks platform, especially around Intuit Enterprise Suite.

Alicia Katz Pollock: They had strong TurboTax results, and all of that outweighs the challenges that they're finding in MailChimp. Their aggressive investment in EIS sales capability, coupled with the clear path to monetizing AI through subscription price increases and new usage based products, sets the stage for what [00:11:00] looks like a continued focus on profitable growth and platform expansion in the mid-market. We will be watching closely to see how the EIS investment and AI strategy and AI strategy unfold in the coming quarters. All right. So let's end with what's going on in my world. I continue on with the great QBO refresh, rerecording all of my classes. And we have been through the basic curriculum, we have been through the advanced bookkeeping curriculum, and we are now going into [00:11:30] deep dives into all the different modules. Just this week I taught my eCommerce in Qbo class, which talks about how to integrate POS systems and e-commerce into your QuickBooks online. This coming week, I'm doing Baby's Got Backups, which is the different ways that you can backup and import and export your data. And then on the 31st, I have a class on third party apps, which is all the best practices to integrate your QuickBooks with other platforms. So do check [00:12:00] it out@mailwise.com. And the links to the direct classes are in the show notes. Thank you for listening and we will see you in the next one.