Intuit Inc (INTU) — Q2 2026 Earnings Call Transcript

Thank you. Good afternoon, and welcome to Intuit's Second Quarter Fiscal 2026 Conference Call. I'm here with Intuit's Chairman and CEO, Sasan Goodarzi; and our CFO, Sandeep Aujla. Before we start, I'd like to remind everyone that our remarks will include forward-looking statements. There are a number of factors that could cause Intuit's results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our Form 10-K for fiscal 2025 and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit's website at intuit.com. We assume no obligation to update any forward-looking statements. Some of the numbers in these remarks are presented on a non-GAAP basis. We've reconciled the comparable GAAP and non-GAAP numbers in today's press release. Unless otherwise noted, all growth rates refer to the current period versus the comparable prior year period, and the business metrics and associated growth rates refer to the worldwide business metrics. A copy of our prepared remarks and supplemental financial information will be available on our website after this call ends. With that, I'll turn the call over to Sasan.

Thanks, Anne-Sophie, and thanks to all of you for joining us today. We delivered an outstanding quarter with Q2 revenue growth of 17%, clear evidence our strategy is working with strong execution across our 3 Big Bets. This performance underscores how our AI and human intelligence platform innovation is fueling Intuit's growth and delivering significant customer benefits. We are a category of one because our platform is mission-critical to our customers' financial lives. In our category, accuracy, compliance, security, reliability of financial decisions and the liability that comes with it are critical to our customers. It's our advantage, and it's why we win. Intuit is fueling the success of our customers with innovation that enables businesses to operate from lead to cash and helps consumers from credit building to wealth building, all in one place with confidence that it's done right in a regulated environment. This means Intuit is delivering financial intelligence at scale. Our success rests on our powerful combination of proprietary data, domain-specific AI platform capabilities and AI-powered human intelligence, which we'll refer to as HI. And as we scale, the business model strengthens. The more customers we engage, the more insights we gain, which improve recommendations, outcomes and value for every customer. That creates a powerful network effect that reinforces our competitive advantage with our nearly 100 million customers and a system of AI agents and AI-enabled experts fueling ARPC growth and margin expansion. Our system of intelligence combines AI and HI to deliver done-for-you experiences with accuracy, compliance, security, reliability and data privacy that create a durable competitive advantage. This foundation delivers what matters most to customers, when it comes to financial insights, money management, taxes, bookkeeping and accounting, leading to complete confidence in their high-stakes financial decisions. We're setting the standard for trusted financial intelligence, and this advantage defines our leadership for years to come. Our momentum is fueled by 3 big bets that represent the company's largest growth vectors across $300 billion in TAM, where our penetration today is 6%. The first bet is delivering done-for-you experiences powered by AI and HI, creating an entirely new category. Second, accelerating money benefits by putting money at the center of everything we do for our consumers and businesses; and third, fueling mid-market success with a disruptive AI-native ERP platform. Let me start with our all-in-one business platform, where we deliver done-for-you experiences powered by AI and HI, driving growth, saving customers time and money and consolidating how they run their business in one place. We are continuing to see momentum with our virtual team of AI agents. Over 3 million customers have leveraged agents to do the work for them with all-time repeat engagement of more than 85%. In January alone, our accounting agents saved time and delivered impact for our customers by categorizing over 237 million transactions. This represents over half of all the transactions categorized that month. Our business tax agent is putting more money directly back into our customers' pockets, uncovering an average of over $1,000 in incremental tax deductions. Our AI and HI capabilities are not only automating tasks and workflows but driving consumption and adoption of services like payroll and powering QuickBooks Live customer growth of over 50% in Q2. Given this success, we are rapidly scaling the rollout of Intuit Intelligence, a revolutionary system of intelligence that fundamentally changes how customers engage with our platform to run their businesses. Leveraging Intuit's proprietary data, domain-specific AI platform capabilities, and human intelligence, it delivers done-for-you experiences with complete customer satisfaction. Customers can ask anything. For example, who are my most profitable customers? What are my top expenses and how can I reduce operating costs? How can I grow customers? Intuit Intelligence provides grounded answers in their own proprietary data and will take action on their behalf through automation and with a seamless handoff to a trusted AI-enabled human expert. This represents a profound shift because now it's done for you with confidence. And because Intuit Intelligence uses deterministic domain-specific models that are built on decades of trusted proprietary data, its recommendations are personalized, accurate, reliable and compliant. This is intelligence rooted in lived financial reality, not generic large language models. The value of Intuit Intelligence is unmistakable. Over the past year, our real-world testing has shown that when AI and HI come together in a single integrated experience, customers can achieve better outcomes, and it positions Intuit for sustained double-digit revenue growth as it unlocks our TAM. We're also making strong progress accelerating money benefits by putting money at the center of everything we do. We saw total online payments volume for our payments and bill pay customers grow 29%, reflecting continued momentum in helping our customers get paid faster and better manage their cash flow. Bill pay volume nearly doubled as we continue to see breakthrough adoption. Turning to mid-market. Our disruptive AI-native mid-market platform is fueling the success of growing businesses, and we are further scaling our investment in product innovation and go-to-market motions to accelerate customer adoption. In Q2, online ecosystem revenue for QBO Advanced and Intuit Enterprise Suite grew approximately 40%. The combination of continuous platform innovation and faster onboarding is driving significant customer value. With our Intuit Enterprise Suite product release in February, we are deepening our capabilities in the largest verticals within our nearly $90 billion mid-market TAM. We just launched a construction edition for Intuit Enterprise Suite, the first in a series of industry-specific AI-native ERP solutions designed for the mid-market. Construction firms face highly complex financial and project workflows, yet many still rely on fragmented systems and manual processes that limit visibility, slow decisions and increase risk as they scale. Built on our AI-native ERP financial platform, this construction edition brings financial and project data together in a single system, combining the rigor and control of an ERP with the flexibility, speed and intelligence modern businesses need to operate and grow with confidence. Lallier Construction, a family-owned construction leader based in Colorado, is using Intuit Enterprise Suite as a single source of truth across 5 divisions, turning fragmented financial data into decision-grade insights. By automating hundreds of intercompany invoices, they've reduced peak month-end reconciliation time by approximately 90% and reclaimed 16 to 18 hours of accounting work per week, shifting their team from manual cleanup to real analysis. Because IES offers multidimensional tracking across departments, locations, projects, and product lines, Lallier now has the accurate P&Ls for each division with the visibility to support their goal of tripling revenue over the next 3 years. Shifting to go-to-market. We're excited to expand our direct sales team by approximately 30% as we're seeing seller productivity continue to increase. New IES contracts grew nearly 50% quarter-over-quarter with a meaningful acceleration in new customers added to the franchise, underscoring the significant headroom we have for IES beyond fueling expansion within our base. We're also seeing continued momentum with our accountant partnerships. This quarter, we signed partnerships with several top 20 accounting firms eager to build reseller practices, including Citron Cooperman and Eddie Bailey. The progress we are making with our early accounting partners, supported in part by the launch of new wholesale billing capabilities drove accelerated growth with nearly 1/3 of new contracts influenced by accountants recommendations in Q2, 10 points higher than Q1. We continue to make progress with Intuit Accountant Suite, an AI native offering that transforms accounting firms' efficiency and effectiveness in managing their clients, firms, and workforce. This platform significantly deepens our partnership with accountants and encourages them to migrate clients to QBO Advanced and Intuit Enterprise Suite, fueling faster mid-market penetration. We're seeing strong initial adoption and feedback, particularly around the incremental value firms are getting by managing their operations and gaining valuable insights all in one place. Turning to our consumer platform. Our strategy is to win as an all-in-one AI-driven expert platform in service of building credit to wealth year-round. While overall IRS returns were down more than 5 points through February 6, we delivered 12% TurboTax revenue growth this quarter. 2 strategic areas of standout that contribute to our momentum, winning in the assisted segment and the outsized role Credit Karma is playing to accelerate tax growth. Starting with done-for-you experiences. This season, TurboTax's AI-driven features such as dynamic navigation to streamline tax prep, agentic experiences like the stock basis agent and personalized recommendations are accelerating tax completion and delivering a faster, more confident filing experience. Our AI-powered automated data entry has been used so far by over 80% of our customers, saving them significant time from manual data entry. Last year, we saved our customers over 6 million hours of work while putting more money in their pocket. This year, our new AI agent automates the rigorous manual work required for cost basis adjustments, a task customers often choose to bypass due to its complexity, lowering taxable income by an average of $12,000 compared to those that filed without the agent. All these improvements also fuel the productivity of our AI-enabled experts serving customers in the assisted category. In Credit Karma, domain-specific AI agents such as our refund Assistant, debt assistant and tax assistant are delivering done-for-you personal finance, tax and money experiences with better financial outcomes. These agents, along with new features like Cards Optimizer and Credit Spark promote engagement throughout the year. In addition, our new AI-powered year-round tax insights are driving stronger tax intent. Early tax demand from Credit Karma members has been exceptionally strong, highlighting the strategic advantage of an integrated consumer platform. Shifting to our go-to-market approach in tax. Our investment in proprietary data, domain-specific AI platform capabilities, and AI-enabled human intelligence is fundamentally transforming and disrupting the assisted tax category. The tax category, which is 7x bigger than the DIY category, is all about confidence. When customers choose assisted, they demand a human expert in their corner to deliver peace of mind in a high-stakes regulated environment, where they face significant liability if they get it wrong. With our unique platform advantage, Intuit delivers certainty and customer confidence with expert level accuracy, compliance, and reliability backed by our guaranteed best money outcome. That's why we're expanding our local presence with AI-powered virtual and in-person filing options, delivering a uniquely warm, modern experience with confidence, the best price, and faster access to money. We now have approximately 600 local service centers, including several retail locations and one flagship store, making local expertise more visible and accessible than ever. This expanded footprint is enabling us to serve customers where they are and establish our expertise locally, driving more engagement with a previously untapped customer base. We have seen 5.1 million total unique visitors to landing pages and in-store visits through February 6. That's compared to 4.2 million for the full season prior. The majority of these are prior year assisted prospects, and we're seeing strong early engagement with experiences that enable these visitors to connect with an expert immediately or schedule an appointment for later, building a strong pipeline for our robust assisted offerings, including business tax. Lastly, our Fast Money offerings reflect a seamless connection across our consumer platform that gives customers faster access to their largest paycheck of the year. With Credit Karma's AI assistant, consumers get always-on financial guidance that helps them make smarter decisions and build stronger financial futures year-round. We're seeing compelling early demand for faster access to refunds. We're off to a strong start in tax, growing revenue 12% in Q2 while IRS returns are down 5 points as of February 6. As anticipated, we're seeing higher consumer interest in our AI-enabled expert assistance and Fast Money capabilities. We're pleased with early momentum winning in the assisted segment and driving incremental tax demand with Credit Karma, highlighting the flywheel effect across our consumer platform. Our strategy is expanding our share of TAM, increasing ARPC and contributing to our company margin expansion, all fueled by AI and HI. Our platform has become a service that delivers peace of mind, certainty, and confidence. Zooming out, we're helping shape the future of financial intelligence by working with leading AI companies to meet consumers and businesses wherever they choose to work and get work done. These companies partner with Intuit because in a high stakes regulated environment where customers face significant liability if they get it wrong, they demand more than generic LLM recommendations. They require intelligence that is personalized, accurate, compliant, reliable, secure, and drives real action on their behalf. In our category of one, it's all about customer confidence in financial decisions; the combination of data, AI and human expertise is essential to success. That's why we have built a system of intelligence with APIs and MCP that spans a customer's financial life across their apps and data and is not confined to any one system. Our platform is designed to transcend and orchestrate across any system or app, so whether the data sits with Intuit or elsewhere, we can connect it, interpret it and help customers act with confidence. Earlier this month, we launched all 4 of our apps in OpenAI's App Directory. And this week, we announced a multiyear game-changing partnership with Anthropic to advance highly personalized experiences for consumers and businesses. Powered by Intuit's decades of deep domain expertise and proprietary data models, the Intuit platform will become the foundation, where businesses can build and customize secure, accurate, compliant AI agents for a long tail of industry-specific needs using Anthropic's Claude, Agent Builder. Intuit will also bring personalized tax, finance, accounting, and marketing capabilities to millions of Claude and Cowork users. Our AI-driven expert platform strategy is unlocking our TAM as evidenced by strong first half revenue growth of 18%. As a category of one leader, we provide the trusted foundation for high-stakes financial decisions, delivering the reliability, accuracy, security, compliance, and privacy our customers rely on to act with confidence. This is the next chapter of Intuit: service as software built on data, AI, and HI, delivering double-digit revenue growth with expanding margins. Now let me turn it over to Sandeep. Thanks, Sasan.

We had a strong second quarter of fiscal 2026 with a revenue of $4.7 billion, which is a 17% increase. Our GAAP operating income was $855 million compared to $593 million last year, and our non-GAAP operating income increased to $1.5 billion from $1.3 billion a year ago. GAAP diluted earnings per share rose to $2.48 from $1.67, while non-GAAP diluted earnings per share increased to $4.15 from $3.32, demonstrating our disciplined business management and continued efficiencies in AI. In terms of our business segments, we are making strides with our all-in-one platform and providing done-for-you experiences. The revenue from our Global Business Solutions Group rose 18% this quarter, or 21% without Mailchimp, and online ecosystem revenue increased 21% in Q2, or 25% excluding Mailchimp. This growth is driven by consistent momentum in the mid-market, with QBO Advanced and Intuit Enterprise Suite online ecosystem revenue climbing 40%. We are seeing productivity enhancements from our dedicated mid-market sales team and are expanding capacity by approximately 30%, supported by favorable LTV to CAC economics. Online ecosystem revenue for small businesses and the rest of our base grew 18%. Additionally, we experienced robust growth in both online accounting and online services during Q2. QuickBooks Online accounting revenue grew 24%, thanks to higher effective prices, customer growth, and shifts in product mix. Online services revenue increased 18% in Q2, or 28% excluding Mailchimp, driven by our Money offerings, which include payments, capital, and payroll services. Within Money, revenue growth was fueled by increases in payments revenue from customer growth and a rise in total payments volume per customer alongside higher effective prices. Total online payment volume, including bill pay, grew 29%, indicating our continued progress in payments and bill pay adoption. Online payment volume growth, excluding bill pay, was 17%, consistent with previous quarters and impacted by winter storms last month. In payroll, revenue growth reflects shifts in product mix, customer acquisition, and higher effective prices. Mailchimp's revenue was slightly down compared to last year as we strengthen the platform for sustainable growth. We are encouraged by momentum in the mid-market with larger customer wins and improved retention, along with rising adoption and usage of SMS. However, improving churn and acquisition among smaller customers is taking longer than anticipated. We remain focused on enhancing go-to-market strategies and product experiences, now expecting Mailchimp to return to double-digit growth sometime after fiscal 2026. Overall, we are confident in our strategy, and the online ecosystem momentum is strong. This solid performance highlights significant traction across growth areas, positioning Intuit for leadership and success. Transitioning to Desktop, we saw Desktop ecosystem revenue increase by 10% in Q2, with Desktop enterprise revenue growing in the high teens. We anticipate Desktop ecosystem revenue to grow at a low single-digit rate for fiscal year 2026. Regarding our consumer platform, we continue to enhance our all-in-one platform that engages consumers throughout the year, helping them make informed financial decisions through done-for-you experiences, AI-driven local tax expertise, and quicker access to funds. Q2 revenue grew by 15%, primarily driven by Credit Karma, which saw a 23% revenue increase. TurboTax revenue grew by 12%, while ProTax revenue increased by 7%. Within Credit Karma, personal loans contributed 10 points to revenue growth, credit cards provided 9 points, and auto insurance contributed 4 points. We are aware that in the latter half, we will be comparing to last year's strong growth in credit cards and personal loans. We have started the tax season strongly and are optimistic about the potential for our AI-driven expert platform to offer the best experience, faster access to funds, and competitive prices for our customers. Now, regarding our balance sheet and capital allocation. Our financial principles continue to guide our decisions, and they remain our long-term commitment. We are pursuing opportunities for margin expansion over time, maintaining a disciplined approach to capital management and leveraging ongoing AI and automation efficiency gains. We ended the quarter with around $3 billion in cash and investments, and $6.2 billion in debt. We repurchased $961 million of stock in the second quarter. Given the current stock price and our strong confidence in business momentum, we plan to significantly increase our share repurchases this year and aim to be active in the market each quarter. The Board has approved a quarterly dividend of $1.20 per share, payable on April 17, 2026, representing a 15% increase from last year. Moving to guidance, we are reaffirming our fiscal 2026 guidance, predicting total company revenue between $20.997 billion and $21.186 billion, which corresponds to a growth rate of 12% to 13%. This forecast includes a Global Business Solutions Group revenue growth of 14% to 15%, and we are confident in our ability to meet this guidance. Our overall Consumer Group revenue growth is expected to be between 8% and 9%, supported by strengthened momentum across our portfolio, including TurboTax growth of 8%, Credit Karma growth of 10% to 13%, and ProTax growth of 2% to 3%. This gives us high confidence in achieving our Consumer Group guidance for the year. We anticipate GAAP diluted earnings per share of between $15.49 and $15.69, reflecting growth of 13% to 15%, and non-GAAP diluted earnings per share of between $22.98 and $23.18, which indicates growth of 14% to 15%. We expect a GAAP tax rate of about 23% in fiscal 2026. Our guidance for the third quarter includes a total company revenue growth of 10%, with GAAP earnings per share between $10.56 and $10.62, and non-GAAP earnings per share between $12.45 and $12.51. Detailed full year 2026 and Q3 guidance can be found in our press release and fact sheet. Now, I will turn it back over to Sasan.

Great. Thank you, Sandeep. We're excited about our progress and the momentum across our growth vectors and our opportunity to increase Intuit's total share of our $300 billion TAM. With that, let's open it up to your questions.

Sasan, you delivered strong Q2 results, no doubt about it. But as you can see right now, the market is worried about AI disrupting software and, in fact, your business, less QuickBooks but more tax. Can you help us understand like what is the disconnect? Where do you think the market is wrong? And where do you see the opportunity for you and that you are not getting disrupted by AI, but rather you're going to benefit from AI? And Sandeep, a quick follow-up. I want to ask here that people are pointing to your Q3 operating margin guidance, which was Q2 was strong. Is there any safety in expense?

Thank you for your question. I’d like to address the first part. To begin with, I want to emphasize that we operate in a unique category that is heavily regulated. For our customers, compliance, security, and accuracy are paramount. Customers require human expertise because any mistakes in their high-stakes decisions can lead to significant liabilities. This context highlights our competitive advantages, which are driven by both regulatory and customer needs. Currently, our platform leverages data, AI, and human intelligence. Looking back at our results from last year and the positive momentum in the first half of this year, we are unlocking total addressable market opportunities, increasing average revenue per customer, and expanding our margins. Our achievements reinforce our focus on our customers and our commitment to delivering results. Companies such as OpenAI and Anthropic seek partnerships with us because they recognize the complexities involved in our industry. They understand that developing a platform like ours requires more than just technology; it necessitates an integration of advanced technology and human intelligence. As a result, we have established a service that operates with high confidence and certainty. Ultimately, our strong results underpin our optimism not only for the remainder of this year but also for our future trajectory.

Let me discuss the margin. Before that, I want to emphasize Sasan's point regarding our partnerships with major LLMs. These collaborations show that the LLMs are interested in working with us rather than against us. It's important to remember this and the customer benefits we provide through our platform. Our belief that AI combined with human intelligence is a true differentiator holds strong, especially when it comes to making critical financial decisions. This combination is essential for effective end-to-end solutions. We've been testing this approach within our business platform, which integrates AI and human intelligence, and I must say, the customer response has exceeded our expectations. We’re now considering how to incorporate AI and human intelligence into our offerings more comprehensively based on these positive results. Now, regarding margins, Siti, you’ve followed us for years, and we consistently aim to deliver margins throughout the year. I am very confident in our guidance for the full year and in our ability to achieve margin expansion. In the third quarter, we outperformed in the second quarter, which, as Sasan indicated, started slowly due to the tax season. As a result, some marketing and customer success expenses shifted from Q2 to Q3. Additionally, our teams identified significant opportunities to reallocate spending to maximize return on investment in Q3. This is reflected in our guidance. Considering the overperformance in Q2 and our long-standing commitment to delivering margins for the full year, I am feeling optimistic about our prospects.

It's Nick on for Brad this evening. I'd actually like to build on Siti's question a bit here. When you're talking about the power of AI and HI together, as models continue to improve, how do you see that balance between AI and HI shifting? And where do Intuit and its customers stand to benefit the most from these models as they continue to advance?

Thank you for your question. I’d like to break this down into key segments of the company. Firstly, our significant changes in the assisted tax segment, which includes both consumer and business tax, are completely driven by data, AI, and human intelligence. We are succeeding due to our scale, offering the best experiences, competitive pricing, and quick access to funds. As I mentioned earlier, the assisted tax category is over seven times larger than the do-it-yourself category because customers prefer having an expert assist them with their decisions and liabilities. Our seven years of investment in this area is now yielding results as we disrupt the assisted tax segment, which grew 45% last year and is worth over $2 billion. We are experiencing strong traction, not just since February 6, but we’ve completed two months of tax season and have around six weeks left, showing notable momentum with our assisted service. This is a significant opportunity for us, and I believe we are only beginning to tap into this disruption. Secondly, we are gaining traction in the mid-market because our entire platform is rooted in AI and human intelligence, effectively making us an AI-native ERP platform that simplifies work for customers. For example, we are seeing peak reconciliation completed 90% faster at month-end and reducing weekly accounting work by 17 hours through our platform, utilizing both AI and the human support we provide. Our platform is not just self-sustaining; it is revitalizing and driving growth in the mid-market, allowing us to accelerate our business and gain acceptance among accountants. Thirdly, I want to emphasize a crucial point made by Sandeep. Last year, we introduced a series of AI agents on our platform, including accounting, payment, and finance agents. For instance, the accounting agent saves customers about 12 hours a month, while the finance agent automates profit and loss statements and cash flow statements, saving customers 17 to 18 hours weekly. We are providing faster and more significant financial benefits to our customers through our payments AI agent and tax agent, which helps reduce their deductions. This is contributing to the growth of QuickBooks Live, which has risen 50% year-over-year. Our AI and human intelligence are bringing substantial customer benefits and are financially self-sustaining, which enhances our pricing power. What we have discovered is that when we offer a combined experience of technology and expertise, customers are willing to pay more for it. This is about empowering them for success and ensuring their confidence in their financial responsibilities. Looking to the future, we are evaluating and will be introducing AI and human intelligence into our offerings for specific tasks based on our test results. This is expected to enable us to raise subscription prices while delivering significant savings to customers. We anticipate increased use of our payment, payroll, and expert services. This demonstrates how AI and human intelligence are driving growth across our platform, which bolsters our confidence not only for the rest of this year but also over the next two to five years.

Congratulations on a strong quarter. I wanted to ask about the new deal with Anthropic that you signed during the quarter, which seems to generate a lot of excitement as reflected in the press release. However, it appears that investors might be feeling a bit cautious due to the uncertainty involved. The main concern seems to be about the potential risks of giving Anthropic access to your proprietary data and customer workflows, and whether they could replicate your business model. Can you elaborate on what makes this partnership exciting for Intuit, and what measures are in place to prevent any negative scenarios? How can we reassure investors about this?

Thank you for your question, Keith. I want to start by explaining why we are forming these partnerships. As Sandeep mentioned, both OpenAI and Anthropic are great partners. They are keen on collaborating with us because they recognize the regulatory environment and the critical financial decisions made by our customers. Accuracy, compliance, and safety are paramount, and customers expect a mix of technology and human expertise, which is hard to replicate. In fact, the market for this might be too small for them to handle alone, which is why they depend on us. This reliance underscores the importance of our role in delivering the necessary experience. When customers engage, they use our platform through APIs and MCPs, and our agreements ensure that neither customer data nor our AI capabilities leave our premises. We aim to provide the experience that customers require, whether it involves OpenAI or Anthropic. Economically, we maintain ownership of the experience and the relationship and do not share in the profits, although we are committed to continuing our use of external LLMs as part of our deal with Anthropic. It's essential to clarify that we do not share customer data or domain expertise, and our partners have no interest in doing so either because of the nature of our partnership. Ultimately, our primary goal is to be where our customers are. We are dedicated to enhancing our platform capabilities and improving user experiences. However, we still need to confirm if customers actually prefer to manage their finances through these applications. This potential is what excites us about the partnership and the opportunity for new customer growth.

And Keith, one thing I would add is when customers think or investors think about the relationship we have with these LLMs, in addition to everything Sasan mentioned, the moat that we have comes from our proprietary data. And Sasan shared that, that data is not leaving our four walls that stays here. So that's not being impacted. Our moat comes from being the core of the flow of funds, whether it's access to capital, whether it's hours worked by the employees, whether it's money flow, that's not being touched by these LLMs. Our moat comes from human intelligence being a massive differentiator, particularly in areas that we play with, which is high stakes financial decisions, high liability, regulatory decisions, that's a moat that remains with us. So that's the one where I would ask folks to step back and look at what generates the moat and how that moat remains untouched. And in fact, it's being augmented in this new era of AI.

Okay. Maybe I'll just kind of continue the line of thinking on the AI side. Just as you work and partner with these model providers and you have your own internally built agentic capabilities as well. Just how do you think about what makes sense for you all to kind of focus on? Where does it make sense to rely on some of these third parties? And maybe where does kind of the rubber meet the road in terms of what that means for the customer experience moving forward?

That's a great question, and I apologize for not mentioning it earlier. We approach this by considering the difference between context and core. Our core focus is on providing comprehensive done-for-you experiences using AI, data, and human intelligence, which assist customers from lead generation to cash management and from credit building to wealth accumulation. Over the years, we've invested in proprietary data, data models, and domain-specific AI models, including some large language models, though primarily we rely on knowledge engineering and machine learning. Additionally, we've developed our Intuit financial large language models that complement our offerings by providing confident, reliable experiences where customers often face significant liabilities, resulting in high demand for our services. In terms of context, we align with partners like Anthropic. For example, a construction company may need to evaluate its project plans, lien waivers, and subcontractor payments to understand their cash flow. Our platform leverages our AI models, data models, and human intelligence to facilitate this process, allowing customers to create tailored dashboards with the insights specific to their needs, even if they are unaware of the underlying technology, like Claude, that makes it possible. Different types of construction companies, such as roofers and architects, will each have their unique insights, which represents the context for us. We avoid the need to develop overly specific solutions while still allowing us to innovate within industry-specific verticals. For Anthropic and OpenAI, context means understanding a customer's intent when they're using their applications. That insight is essential for them. Once they recognize what the customer needs, our skills and experiences come into play within our platform. This emphasizes the distinction between context and core for us. Our partnership with large language model providers is straightforward in delivering tailored experiences for customers. I hope this clarifies our approach and execution regarding how our models work together.

I'll add my congrats. Sasan, you had mentioned twice that IRS returns are down 5% year-over-year through February 6. I assume you mean that more as a timing difference this season, perhaps because I think some of the reports are showing that IRS staffing is down 27% versus last year, maybe it takes longer up. So is it just more back-end loaded tax season? Or are you trying to signal anything about the full tax season? And then secondly, Sandeep, can you comment on some of the economic health indicators that you sometimes say like number of employees, hours worked, the cash balances, credit scores, et cetera, just whether you think there's been any change there?

Sure. Mark, let me address both of your questions and see if Sasan has anything to add afterward. Regarding your first question, we want to emphasize that the IRS was down 5 points through February 6. This is important because despite that, our TurboTax revenue increased by 12%. To provide some context, last year the IRS was down about 8 points through February 7, and our revenue grew by 4%. This comparison gives us confidence as we head into this tax season. It's primarily about timing and illustrating our performance relative to external factors during the same period. Now, could you remind me of your second question? I just quickly blanked on it.

If you could just comment on some of the economic health indicators like cash balances, and hours worked and credit score. The reason I'm asking, Sandeep, is the consumer confidence scores, there was a minor bounce last month. But outside of that, they've looked pretty awful for a while, and yet you've had a better, more positive read on it and very strong results. And I'm just wondering if that's continuing.

There are two key metrics I monitor as indicators of the business's health. The first is the number of hours worked by our customers' employees, which has increased by around 4%, showing stronger performance in January compared to October. This gives me continued optimism, as the figures have improved since then. The second metric is cash reserves, which are stable; cash in the bank is crucial. While mid-market and small businesses have seen increases, micro businesses are slightly down. Overall, the small and medium-sized business sector remains stable. Other metrics we track are secondary yet useful, like the business-to-revenue ratio, which has also remained stable over the past three months. Mid-market businesses have seen about a 6% increase, while small businesses are up slightly and micro businesses have decreased slightly. Overall, the health of the sector appears positive. IT services and nondiscretionary spending are performing well, though advertising and retail sectors are experiencing some declines. Profitability in ancillary services has increased several points over the last three months, particularly in IT services, manufacturing, and wholesale trade. Despite any negative media coverage, I remain confident in the business's quantitative metrics. Additionally, we have a well-diversified customer base across various sizes, industries, and regions, which is an important factor to consider when evaluating our business and the economic landscape.

Maybe just 2 quick ones for me. Sasan, I guess to the part about AI, the partnerships that you've talked about, obviously, some amazing growth again in GBSG. I wanted to ask how durable are some of the trends that you're seeing over the course of the next few quarters and even beyond that? And then to the Anthropic partnership specifically, I think you did a great job laying out how it is going to improve the customer experience. You've talked about how the data is not going to leave. But maybe talk about just the specific monetization plans, how it impacts potentially gross margins? And then, Sandeep, just as a follow-up on Mailchimp. I think the language moved to returning to double digits beyond fiscal '26. Maybe just give us a little bit more color there and your thoughts about kind of both the key unlock and what happens if it can't do that?

Thank you for your question, Alex. What excites us is that AI and HI are central to our platform and drive our growth. We've discussed various proof points regarding this. It’s not an ancillary project for us; we are not searching for ways to monetize AI as a fallback for our core business. It's integral to our platform. In response to your question about durability, we are quite optimistic. One growth area is our disruption of assisted tax services for both consumers and businesses. Our trajectory has significantly changed over the last few years, with this segment exceeding $2 billion last year and growing at 45%. We're seeing excellent momentum this year, and based on the current tax season, we are confident about its performance, making it very sustainable. With every passing day, our investments are boosting our momentum. Second, our mid-market segment remains strong due to our platform innovations and our evolving go-to-market strategy. The results speak for themselves, with contracts increasing by 50% quarter-over-quarter. Our accountants are now contributing more to new customer acquisitions, increasing by 10 points since last quarter. The influx of new customers is substantial, and while we still have potential in our existing customer base, we are expanding our sales team to capitalize on this opportunity. Lastly, as mentioned by Sandeep, our innovations in AI and HI for businesses are creating significant time and cost savings, which empowers our platform to be self-sustaining and provides us with considerable pricing power. We were pleasantly surprised to find that both new and existing customers want a combined offering as part of our platform, influencing our approach to not only subscription pricing but also consumption models. We believe what we are experiencing is robust and will extend beyond the next few quarters. Our focus has been on these three growth areas for some time, and we are already seeing positive outcomes from our investments. Before I hand it over to Sandeep, regarding the economics, we do not share in any of the economics with OpenAI and Anthropic. The terms for our customers are the same as if they were to engage directly with them. Our primary focus remains on enhancing the user experience. We have much to demonstrate together about customer engagement through these LLM applications. We also have a complete stake in the economics, although we do not expect margin expansion from that avenue. As Sandeep mentioned earlier, you can anticipate continued margin growth at the company level.

Alex, let me build on that, and also touch on your point around Mailchimp. When it comes to AI, keep in mind, the margins are driven by the monetization. We've got 3 levers for monetization. One is pricing for value. When Sasan shared that the accounting agent is saving people 12 to 14 hours a month, we know that people in North America value their time around $75 an hour. So that's $900 plus of value we're delivering. So we can take a cut of that, and that's great margin that goes to the bottom line. Secondly, our agents, our AI is serving up capabilities across our ecosystem at a time of need. So we're switching the conversation from being a sales pitch to helping address the customer need. As an example, our customer could have payroll due tomorrow, but the invoice is not going to get paid until next week; with a click of a button, they get access to the capital loans, payroll is done. The employees are paid, employees are happy next week when the customers pay the invoices, the agent automatically pays down the debt. Thirdly, and this is a key point for us all to keep in mind, AI drives a seamless connection to HI. And we know in HI, particularly QB Live, we see 22 points higher ecosystem attach. So in addition to HI being a higher revenue upsell when they engage, they have to pay us more for the human expert. We also know when they end up talking to human experts, they end up consuming even more of our ecosystem. So all of that stuff is top line massively accretive, which will then drive the margins. Now let me get to Mailchimp. Look, as a company, we fall in love with our customer problems, not the solution. Our focus and our attachment as a business remain to that core customer problem versus an attachment to any one particular solution. We are evaluating the path to continue to scale Mailchimp and how we can best address the customer need and also evaluate how Mailchimp fits as part of our set of offerings, and we will continue to evaluate our portfolio offerings. All options, as I've shared before, are on the table, and we'll make sure we keep you all apprised as we narrow in on the options.

Sasan, I wanted to ask you a little bit of how you see the general-purpose knowledge intelligence tools evolving. So specifically something like Claude Cowork. Where do you see the boundary at some of your leading-edge SMB customers between the types of tasks that they can do with core to cowork or a general-purpose intelligence tool versus where Intuit really excels with some of the domain-specific intelligence. How do those 2 ecosystems work together?

Yes, Gabriela, thank you for your question. Our advantage lies in delivering proprietary data and domain-specific AI models, which include knowledge engineering, machine learning, and our Intuit financial large language models, along with human expertise. In a regulatory environment focused on high-stakes financial decisions with significant liability, compliance, accuracy, privacy, and security are paramount for our customers. It's noteworthy that with our $300 billion total addressable market, experts influence over half of that spend, which remains structurally unchanged over the last decade and even in recent months. Our innovations in AI and human expertise are driving an increased demand for the integration of technology and human skills, emphasizing the need for confidence and reliability in our services. This synergy is why companies like OpenAI and Anthropic show interest in us, as we excel in this area. We also see the value in partnering with them, particularly because of their technology's alignment with our needs. For instance, we are excited about integrating Claude Cowork's capabilities into the Intuit Enterprise Suite because there are functionalities they offer that we can leverage without the need for development on our side. A practical example would be a restaurant in a tourist area that wants to understand tourist trends and weather impacts on its business. By integrating Claude Cowork with our platform, we can provide accurate daily forecasts using their POS and Intuit platform data without having to create a new large language model. The restaurant doesn't need to understand the technology behind it; they just require access to key performance indicators that reflect their business needs. Our partnership clarifies the distinction between context and core capabilities on both sides, demonstrated through real-world examples like this.

Gabriel, I would like to add my perspective on this. I believe that any financial or core business recommendation from the offices of the CFO, COO, or CEO is essential to us. When we mention our financial agents saving 17 to 18 hours a month or achieving a 69% reduction in analysis time, that is fundamental. The accounting agent, the payment agent that facilitates quicker payments, and the payroll agent that identifies issues and saves hours are all central to our operations. Let me share a recent example to illustrate this. I visited a winery in Napa that offers free shipping on case purchases. They have to determine whether to ship a bottle ground to Denver, which is lower cost and better for margins, or to use 2-day air to prevent the wine from freezing. They can utilize Claude on our platform to analyze the weather patterns, allowing the agent to decide the best shipping method. This aspect is not something we need to develop because it falls outside our core focus, being more relevant to the shipping department. That's how I differentiate between what is core and what is contextual for us.

Great. Maybe on the 600 service centers and the in-person opportunity in tax, maybe how are you judging the success of that? I think as we've been listening to the whole call, we've been hearing the combination of human plus intelligence means that, that's the optimal way to see the path forward. And so I guess as you think about the in-person opportunity in tax, what's the takeaway so far this year? And how are you thinking about it going forward?

Yes. Thanks for the question. First of all, I'll start with the stat we talked about earlier because it's just, again, facts are friendly. Through early February, we had over 5 million customers that visited either our landing pages and/or a store because of the 600 centers that you just alluded to. And that's through early February, like February 6. All of last season, it was 4.2. So that is a very important stat from the perspective of we want to be where the customers are. So one, by having these 600 locations, it allows us to actually show up locally in search. Visibly be seen. And two, it gives customers confidence that we're local, albeit the majority of the engagement is entirely virtual. So really, we're tapping into a customer base that allows us to unlock the TAM based on all the capabilities that we now have across our platform with AI and HI. But that's the importance of the centers. And again, it's all tech-driven, and it's powerful because of the traffic that it ignites for us.

Okay. Awesome. Well, thank you, everyone, for your wonderful questions. We look forward to seeing you between now and then and look forward to talking to you about our Q3 results. So until then, be safe, be good. We'll talk to you soon. Bye, everybody.