. (NASDAQ:INTU) suffered its steepest stock drop in over a year after reporting a loss of 1 million free TurboTax users this tax season, sparking concerns about demand for the software. According to the Mountain View, California-based software developer, 10 million people used TurboTax for free this year, marking a decline of about 1 million from the previous year. The company also lost market share among low-paying customers. Consequently, the stock plummeted by as much as 9.3% on Friday, reaching $600.49, its most significant decline since November 2022.
Intuit has been prioritizing the development of its TurboTax software for individuals with more complex tax situations, betting that these customers would highly value online expert assistance. The company has also been promoting enhanced artificial intelligence capabilities in its products.
Despite the decline in free users, Intuit’s strategy shows promising signs. The average TurboTax user spent 10% more on their tax filings this year compared to last year. Fiscal third-quarter revenue experienced a 12% increase to $6.74 billion, surpassing analysts’ estimates of $6.64 billion.
The period ending April 30, which encompasses the crucial tax season, holds great significance for the maker of TurboTax and other financial software. Profit, excluding certain items, reached $9.88 per share, exceeding Wall Street’s expectations.
During an earnings call, company executives addressed questions surrounding the user decline. Keith Weiss, an analyst at Morgan Stanley, inquired about Intuit’s inability to simultaneously cater to both the high and low ends of the market with TurboTax.
Raimo Lenschow, an analyst at Barclays, highlighted that competition for lower-paying and free customers raised concerns among investors.
CEO Sasan Goodarzi downplayed the importance 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.