Intuit (NASDAQ:INTU) shares traded modestly lower on Friday despite the company developing financial software products reporting better-than-expected results for its fourth quarter.
It could be that investors were looking for a bit stronger guidance given the healthy FQ4 outperformance. On the other hand, the provided outlook reflects the pressure under which consumers and small and medium businesses (SMBs) are operating in the era of higher interest rates.
Solid Results and Outlook
Intuit said its revenue grew 12% year-over-year to $2.71 billion with the company’s largest business unit by revenue – Small Business and Self-Employed Group – reporting a YoY jump in sales of 17%.
Credit Karma saw its revenue fall 11% YoY to $424 million, which is better than what analysts were fearing. Intuit blamed the decline on macroeconomic headwinds in personal loans, auto insurance, home loans, and auto loans. On the bottom line, Intuit posted a profit per share of $2.71, outperforming the expected $1.46.
“We had a very strong fourth quarter, ending the year with momentum, as we executed on our strategy to be the global AI-driven expert platform powering prosperity for consumers and small businesses,” said Sasan Goodarzi, Intuit’s chief executive officer.
“Our overall performance demonstrates the strength of our platform and portfolio including our ability to maintain earnings power in uncertain times and expand operating margin while investing in the most important areas to drive durable long-term growth.”
As far as the company’s full-year fiscal 2023 results are concerned, it managed to grow revenues 13% to $14.4 billion. Adjusted earnings rose 22% to $14.40.
For this quarter, the company expects adjusted EPS of $1.97, up or down 3 cents, which is in line with the consensus. Revenue is expected to grow 10-11% YoY.
For FY24, Intuit guided for adjusted EPS in the range of $16.17-16.47, which came in above the expected $16.00. At the midpoint of the guidance, the expected EPS growth compared to FY23 is 13.3%.
Intuit sees revenue between $15.89 billion to $16.11 billion, with the midpoint of the range coming in just ahead of the expected $15.96 billion. The implied YoY revenue growth is 11.1%.
The Small Business and Self-Employed Group unit is again expected to act as the biggest revenue growth driver as revenue in this segment is seen rising 16-17% YoY. Credit Karma sales are seen flat YoY, up or down 3%.
Intuit finished FY23, which ended on July 31, with a total cash and investments balance of about $3.7 billion and a total debt of $6.1 billion. The company repurchased $2 billion of its stock during FY23, while the Board approved a new $2.3 billion repurchase authorization. When combined with a previous authorization, Intuit is now allowed to buy back up to $3.8 billion of its shares.
Finally, the company also said its Board approved a quarterly dividend of $0.90 per share, payable on October 17, 2023.
Despite solid results and outlook, especially in the tough macro environment, Intuit shares fell about 1.5% in early Friday trade. The options traders predicted a ±4.6% post-earnings move.
The market reaction to Intuit’s FQ4 earnings report comes amidst speculation that these traders made use of leading options brokers to place some large bullish options bets on INTU stock. The stock’s volatility could continue to be high as investors prepare for the company’s Investor Day, which is scheduled for the last week of September.
The company’s stock is up 28% year-to-date through Thursday’s close.
‘AI Platform Leader in Fintech’
As expected, a lot of chatter on the subsequent earnings call was about AI and how Intuit plans to position itself in this new era. CEO Goodarzi reminded analysts on the call that Intuit opted to pursue the AI path back in 2018.
Since then, the company “made strong progress transforming from a tax and accounting platform, where consumers and small businesses have to do the work to achieve the benefit that they are seeking, to a global financial platform where we do the hard work for them.”
At the core of the management’s optimism is Intuit’s AI-driven data platform. For instance, Intuit offers customers a 360-degree view of their businesses. Goodrazi highlighted 500,000 customer and financial attributes per small business available on the platform.
“Intuit’s rich data platform is a powerful foundation that allows us to create innovative AI-assisted experiences for all of our customers powering their prosperity,” he said.
In early June, Intuit introduced the Generative AI Operating System, which is specifically trained in solving tax, accounting, marketing, cash flow, and personal finance challenges. Goodrazi said that the goal is to become “an AI platform leader in fintech.” At the time, Intuit said it recorded 730 million AI-driven customer interactions per year.
Just a few weeks later, Intuit announced a deal with Microsoft-backed OpenAI to accelerate GenAI-driven application development on the company’s GenOS platform. Intuit is now leveraging the power of OpenAI’s GPT 4.0 technology to swiftly build secure, intelligent, personalized GenAI-powered experiences across its fintech products.
“Intuit is creating breakthrough product experiences on Intuit GenOS and we are excited to be working with OpenAI using their industry-leading large language models to accelerate our innovation,” said Marianna Tessel, Chief Technology Officer at Intuit.
Thanks to these new products and partnerships, Intuit is now in a position where it can introduce innovation “at an accelerated rate,” said Goodrazi. The management feels very bullish about Intuit’s position in the new AI-driven era, as it comes at a time when the company serves more than 100 million consumers and SMBs. This is all possible thanks to the robust investments the company has been making in AI in recent years.
Conclusion
Intuit reported stronger-than-expected FQ4 results and guidance that came in ahead of the average analyst estimate. Still, INTU stock reaction was modestly negative as investors likely wanted a tad stronger full-year outlook on the back of the FQ4 outperformance. However, the provided outlook could easily prove to be conservative, leaving enough room for Intuit stock to outperform in an environment that is more and more AI-driven.