Q2 2026 Earnings Call Transcript

Good afternoon, everyone. My name is Bo, and I will be your conference operator today. At this time, I would like to welcome everyone to Intuit's Second Quarter Fiscal Year 2026 Conference Call. [Operator Instructions] With that, I will now turn the call over to Ms. Anne-Sophie Seigneurbieux, Intuit's Senior Vice President of Investor Relations, Corporate and Strategic Finance.

Please go ahead, ma'am.

Anne-Sophie Seigneurbieux: 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 enable businesses to operate from lead to cash and help 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 a 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 that 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 customers. 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, firm 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 standouts 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 1 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 and financial decisions and 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 delivered a strong second quarter of fiscal 2026 across the company. Our second quarter results include revenue of $4.7 billion, up 17%; GAAP operating income of $855 million versus $593 million last year; non-GAAP operating income of $1.5 billion versus $1.3 billion last year, GAAP diluted earnings per share of $2.48 versus $1.67 a year ago and non-GAAP diluted earnings per share of $4.15 versus $3.32 last year, reflecting our overall disciplined approach to managing the business, including continued AI efficiencies. Turning to our business segments. We continue to make progress serving businesses with our all-in-one platform and delivering done-for-you experiences with expertise.

Global Business Solutions Group revenue grew 18% during the quarter or 21% excluding Mailchimp, while online ecosystem revenue grew 21% in Q2 or 25%, excluding Mailchimp. This growth is underpinned by sustained momentum in mid-market with online ecosystem revenue for QBO Advanced and Intuit Enterprise Suite increasing 40%. As Sasan noted, we are seeing continued productivity gains from a dedicated mid-market sales team and are expanding capacity by nearly 30%, supported by attractive LTV to CAC economics. Online ecosystem revenue for small businesses and the rest of the base grew a strong 18%.

In Q2, we delivered robust growth in both online accounting and online services. QuickBooks Online accounting revenue grew 24% from higher effective prices, customer growth and mix shift. Online services revenue grew 18% in Q2 or 28%, excluding Mailchimp. This growth was driven by Money, which includes payments, capital and bill pay as well as payroll.

Within Money, revenue growth in the quarter reflects payments revenue growth, which was driven by customer growth and increase in total payments volume per customer and higher effective prices. Total online payment volume, including bill pay, grew 29% in Q2, reflecting our continued momentum in payments and adoption of our bill pay offering. Online payment volume growth, excluding bill pay, was 17%, largely consistent with the last several quarters, including a 1-point impact from the winter storms last month. Within payroll, revenue growth in the quarter reflects mix shift, customer growth and higher effective prices.

Within Mailchimp, revenue was down slightly versus a year ago as we continue to strengthen the platform for durable growth. We are seeing encouraging momentum in the mid-market with continued larger customer wins, improved retention and growing adoption and usage of SMS. At the same time, progress in improving churn and acquisition among smaller customers is taking longer than expected. We continue to focus on improving go-to-market and product experience and now expect Mailchimp to return to double-digit growth sometime beyond fiscal 2026. Overall, we have high confidence in our strategy and the online ecosystem momentum is very strong.

This performance underscores powerful traction across the growth vectors and positions Intuit to lead and win. Turning to Desktop. Desktop ecosystem revenue grew 10% in Q2 and Desktop enterprise revenue grew in the high teens in Q2. We continue to expect desktop ecosystem revenue to grow low single digits in fiscal year 2026. Turning to our consumer platform. We continue to make progress serving consumers with our all-in-one platform that engages them year-round to make smarter financial decisions by delivering done-for-you experiences, AI-powered local tax expertise and faster access to money.

Q2 revenue grew 15%, driven by Credit Karma revenue, which grew 23%. TurboTax revenue grew 12% and ProTax revenue grew 7% -- within Credit Karma, revenue growth reflects continued momentum with our members and partners. On a product basis, personal loans accounted for 10 points of growth, credit cards accounted for 9 points and auto insurance accounted for 4 points. As a reminder, in the second half, we are lapping the strong growth we saw in credit cards and personal loans a year ago.

As Sasan shared, we are off to a strong start in taxes season and are excited about the opportunity ahead for our AI-driven expert platform to deliver the best experience, speed to money and best price for our customers. Now shifting to our balance sheet and capital allocation. Our financial principles guide our decisions. They remain our long-term commitment and are unchanged.

As we have shared before, we are executing on opportunities to drive margin expansion over time given our disciplined approach to capital management and ongoing efficiency gains from leveraging AI and automation. We finished the quarter with approximately $3 billion in cash and investments and $6.2 billion in debt on our balance sheet. We repurchased $961 million of stock during the second quarter. Given the current stock price and our strong confidence in the momentum of our business, we are continuing to meaningfully increase our share repurchases this year.

We maintain our aim to be in the market each quarter. The Board approved a quarterly dividend of $1.20 per share payable on April 17, 2026. This represents a 15% increase versus last year. Moving to guidance. We are reaffirming our fiscal 2026 guidance.

This includes total company revenue of $20.997 billion to $21.186 billion, growth of 12% to 13%. Our guidance includes Global Business Solutions Group revenue growth of 14% to 15%. We have high confidence and a lot of momentum in achieving Global Business Solutions Group revenue guidance for the year. Our guidance also includes overall Consumer Group revenue growth of 8% to 9%.

This outlook is supported by continued strength and momentum across the portfolio, including TurboTax growth of 8%, Credit Karma growth of 10% to 13% and ProTax growth of 2% to 3%, giving us high confidence in achieving our Consumer Group guidance for the year. GAAP diluted earnings per share of $15.49 to $15.69, growth of 13% to 15% and non-GAAP diluted earnings per share of $22.98 to $23.18, growth of 14% to 15%. We expect a GAAP tax rate of approximately 23% in fiscal 2026. Our guidance for the third quarter of fiscal 2026 includes total company revenue growth of 10%, GAAP earnings per share of $10.56 to $10.62 and non-GAAP earnings per share of $12.45 to $12.51. You can find our full year 2026 and Q3 guidance details in our press release and on our fact sheet.

With that, I'll 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.

[Operator Instructions] We'll go first today to Siti Panigrahi with Mizuho.

Sasan, you delivered a 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 market is wrong?

And where do you see the opportunity for you and that you are not getting disrupted by AI, 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?

Yes. Siti, thanks for your question. Let me take the first part of it. First of all, I would just start by restating that we are a category of one in that the category that we operate in is a regulated environment.

And in that compliance and security and accuracy is everything for customers. In fact, customers demand human expertise because what they are very focused on is in their high-stakes decisions, whether it's a consumer, business of any kind or an accountant, getting it wrong means huge, huge liabilities for the customer. And that's really the context behind the category, which really informs our advantage. We have a regulatory-driven advantage.

We have customer-driven advantage. And when you look at where we are today, our entire platform is fueled by data, AI and HI. And in fact, when you look at the results that we're delivering, where we ended last year, the momentum we've had in the first half of the year, it is actually unlocking TAM. It's unlocking ARPC and it's unlocking margin expansion.

So I think our results speak for themselves in terms of how it's fueling our success. And our perspective is it is all about focusing on customers, all about putting points on the board. And it's also -- the thing I would point out is it's why companies like OpenAI, companies like Anthropic look to the partnership with us because at the end of the day, they see and understand that this is a business that comes with a lot of liability and LLMs can't just create the platform that we've created overnight. But most importantly, what we've really created is the combination of technology and human intelligence all in one.

So we have truly become a service that delivers high confidence and high certainty. And I would just end with where I started. That's why our results are so strong, and that's why we are so bullish about not just the rest of the year, but frankly, our trajectory going into the future.

Let me touch on the margin. But before I touch on margin, one thing I would reinforce is Sasan's point around the partnerships we're doing with these big LLMs. As you can see, the partnerships we are doing, other software companies are doing, these LLMs are looking to work with us and not against us. So I think that's a key component to keep in mind and the customer benefits that we are delivering through our platform and are really resonating.

In fact, one of the things I would highlight is we always had the thesis that AI and HI is a true differentiator because AI is the middle to middle and to be end-to-end, particularly when you're making high stakes, high liability financial decisions, you need that HI plus AI working together. And we've been testing this actually in our business platform in the marketplace, a lineup that includes AI and HI. And I would tell you, this was my biggest surprise. I was pretty confident that they are there with our thesis.

But the customer reaction has been tremendous, way out doing even our own expectation. And right now, we're thinking through how we incorporate this AI and HI into our lineup just by seeing how well the tests are resonating. So I just wanted to add that point to your question around AI and our differentiator. Now let me touch on the margins as well.

Siti, you followed us for years, and we operate to delivering margins for the full year. I feel super confident in our guide for the full year. I feel super confident in my ability to deliver the margin expansion for the full year. And what you're seeing in Q3, a couple of things.

One is we overdelivered Q2. As Sasan mentioned, it was a slow season to the -- slow start to the tax season. So you had some cost, marketing and customer success costs that move from Q2 to Q3. And secondly, as the teams looked at some of the tests, we saw a meaningful opportunity to shift some spend to maximize ROI into Q3. So that's really all that you're seeing in the guide. So taking into account the Q2 over delivery and the fact of our long tradition of ensuring we deliver margin for the full year, and I feel pretty good about it.

We'll go next now to Brad Zelnick with Deutsche Bank.

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 it's customers stand to benefit the most from these models as they continue to advance?

Yes. Thanks for your question. Let me maybe break it apart into important segments of the company. First and foremost, our entire disruption in the assisted tax segment, by the way, both assisted consumer tax and assisted business tax is entirely driven by data, AI and HI.

We are winning based on our scale of the best experience, the best price and the fastest access to money. And as I said a moment ago, customers -- I mean, if you look at the size of the assisted category, it's more than 7x the do-it-yourself category. And the reason is that customers demand an expert to help them with their decisions and to help them with their liability. And so one area based on 7 years of investments that we've made that we're really benefiting from is disrupting the assisted tax segment, right?

This was a segment that grew 45% last year, well over $2 billion in size. And we are seeing incredible traction, not just through February 6, but we've got 2 months of tax season under our belt. We have about 6 weeks left, and we're seeing incredible traction with our assisted offering. So that's one significant area, where it's a tailwind for us.

And I think we're just scratching the surface of the disruption. The second area is we're actually winning in mid-market because our entire platform is based on AI and HI, where we are now fundamentally an AI-native ERP platform, where we're doing the work for customers. And when you look at some of the customer benefits that we are seeing from a reconciliation -- peak reconciliation being done 90% faster at month end to 17 hours a week of accounting work that our platform does with not just AI, but our HI that comes with it. Our platform is beyond self-funding.

It's actually digitizing and driving growth in mid-market, which is why we're seeing the acceleration. It's why we're seeing accountants actually embrace our platform. The third is I want to amplify what Sandeep already said, but it's just a really, really important point that Sandeep made. As you recall, last year, we rolled out a series of AI agents on our platform.

And those AI agents were accounting agent, payments agent, finance agent. The accounting agent is saving customers 12 hours a month. Our finance agent is delivering automated P&Ls and automated cash flow statements. It's saving customers 17 to 18 hours a week.

We're putting more money and faster money, I should say, into our customers' pockets, whether it's our payments AI agent and/or our tax agent, where it's actually helping our customers with reducing their reductions. And all of that is actually fueling QuickBooks Live. It's up 50% year-over-year. So that's where AI and HI is feeling the customer benefit, but it's actually completely self-funding, which gives us a lot of pricing power.

And that's really the point Sandeep was making is what we have learned beyond the benefits that we're delivering since last July and how it's actually fueling adoption and consumption of our HI services, which is QB Live. What we learned in test is that when we actually offer it as a combined experience, both technology and human expertise, customers are actually willing to pay more for it. Why? Because it comes down to helping them fuel their success, making sure that they're confident in their liability.

And so that's informing the future, which I want to just spend one more minute on the future. We're going to be -- we're assessing and we're going to be rolling out AI and HI now as part of our lineup with certain jobs that we will solve based on all the test results that we've seen, where we'll see over time, an increase in actually subscription prices where it's actually saving customers a lot of money. But two, we're actually seeing consumption. So there are certain things we're going to include in the lineup and then certain things that we are seeing in our test results that will actually drive consumption of payments, consumption of payroll and actually consumption of more expert services.

And so that's really sort of a primary example in assisted tax in mid-market and really across our business platform, how AI and HI is actually fueling the growth that we're experiencing, and that's what gives us confidence, not just for the rest of the year. We have a lot of confidence in the year, but just as we look at the next 2 to 5 years.

We'll go next now to Keith Weiss with Morgan Stanley.

Congratulations on a really solid quarter. I was going to ask about the new Anthropic deal that you guys signed in the quarter. Something that you guys are really excited about. We could see that excitement in the press release.

I would say investors are a little bit less excited because of the uncertainty that it brings. And I think the core of the uncertainty is the idea of you're letting the fox into the henhouse, right? Is Anthropic and the Anthropic model going to be able to get access to all your good proprietary data, access to all your customers to your workflows and therefore, be able to replicate your business. Can you talk about the -- one, the relationship itself what's so exciting from the Intuit part of the equation.

But maybe touch on the controls that you have? Like how do you keep that bear case scenario from happening? How can we help smooth maybe some of those concerns from investors?

Yes, Keith, thanks for your question. I want to just start with the why, why these partnerships. And Sandeep touched on this, but this is probably the most important premise that is important to be understood, which is, in this case, both OpenAI and Anthropic, one, they're wonderful partners. But two, they are very interested in this partnership because they actually see and understand the regulatory environment and the high-stake financial decisions that customers make and how important accuracy and compliance and safety is and the fact that customers actually demand the combination of technology and human expertise.

And that is not an easy thing to replicate. Frankly, in some ways, this addressable market is too small for them to even worry about, and that's why they rely on us. So the why is really, really important because they're heavily relying on us to provide the experience, which gets to the second question that you asked, and that is -- or the first question that you asked, and that is the way we -- the relationship is constructed and the way our platform is constructed is that customers are -- when they engage, they're using our platform. In essence, it's through APIs and MCPs where -- and it's in the contract.

This is beyond how the experience works is that the data doesn't leave our 4 walls, the AI capabilities, which are domain-specific that we've built doesn't leave our 4 walls. And it's about delivering the experience that the customer needs, whether it's within OpenAI or in this case, Anthropic. And from an economic perspective, we own the experience and the relationship, and we don't share in the economics, while at the same time, we've committed to continued use of external LLMs, which is part of the Anthropic deal. So the element of how the experience works is no customer data is shared, no domain expertise is shared.

And frankly, they have 0 interest in it because of where I started and the interest of the partnership with them. And I think the last thing I will just end with is our fundamental goal is to be where the eyeballs are. We want all of our platform capabilities to be where customers are. And we are working daily on improving the experiences.

It is yet to be determined whether or not customers actually will want to engage in their finances with us through these apps. So we're working on the experience. We're very excited about it. We believe the biggest opportunity is really new customer growth.

But we actually need to determine whether or not customers are willing to engage with their finances through the apps. But that's what gives us a lot of excitement around the deal.

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 sure that, that data is not leaving our 4 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.

We'll go next now to Steve Enders with Citi.

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?

Yes. I'd say that's a really great question and an element that I forgot to share in answering Keith's question. So we think about it in the realm of context versus core. And for us, core is what we talked about, which is we are all about delivering done-for-you experiences with AI, data and HI to help you from lead to cash and to help you from credit building to wealth building.

And so all of our investments over the years with the proprietary data, data models, our domain-specific AI models, which, by the way, to a lesser extent, is actually LLMs. The majority of our AI capabilities is actually knowledge engineering and machine learning. And of course, we've built out our Intuit financial large language models that really works in a very complementary way to deliver these experiences with confidence where there's a lot of liability for customers, which is why there's so much demand. And if you think about our category, demand is high and supply is short because there's not too many that do what we do end to end.

That's core. And when you think about what context is the part of the alignment that we have, like, for instance, with Anthropic, where for mid-market customers, if there is a customer like a construction company that is looking to look at their project plan, look at their lean waivers, look at their subcontractor payments -- and then they're looking to actually understand the combination of those and the impact it has to their cash flow. Our customer now on our platform, because remember, it's our AI models, data models and HI that drive the end experience can now -- they don't know what they're using, but they're using some of the capabilities with Claude, Cowork to actually be able to create a dashboard to see the long tail of things that, that construction company needs to see.

And by the way, every construction company wants to see different things. Every roofer wants to see different things. Every architect wants to see different things. That's context for us, right?

Because we don't want to go out and build the long tail of things, but it actually allows us to disrupt industry-specific verticals. That's an example of context. Another example of context is for Anthropic and OpenAI, context for them when a customer is in their app is what's the customer's intent. That's core to them.

And once they identify what the customer wants, then it becomes very much our skills, our experiences is what the customer use and they're in our platform. So this is back to where I started. This is very much about context versus core. And from our perspective and the LLM providers, it's actually a very clear cut how we are partnering to deliver experiences for customers.

So hopefully, that helps, but that's really the way we're executing the experiences and how the models actually work.

We go next now to Mark Murphy with JPMorgan.

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?

Yes. Mark, let me just take both of those and then see if Sasan has something to add on top of my answer. So on the first question, what we wanted to highlight with the fact that the IRS was down 5 points through February 6, that was simply -- we were highlighting the timing, but we wanted to showcase that, look, IRS is down 5 points through February 6 and our business, TurboTax revenue was up 12%. Now you can compare that to last year, Mark, you followed us for years.

Last year, IRS was down about 8 points through February 7, and our business was up 4%. So we're just highlighting what's giving us the confidence going into this tax season. So that's purely timing and more just giving a comparison to external versus our performance during the similar time period. Now getting to your to your second question, Mark, remind me of your second question, sorry, quickly blanked on it.

If you could just comment on some of the economic health indicators like cash balances, and hours worked and credit card. 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, very strong results. And I'm just wondering if that's continuing.

Of course, Mark. So there are 2 metrics that I look at as my own personal leading indicators when I look at the health of the business. One is -- and this is my Uber metrics, like what are the stats on the number of hours being worked by the employees of our customers. Those are up around 4% or thereabouts, which is actually stronger in January than it was in the October time frame.

So that I continue to feel good about, and it's actually improved from about the October time frame. The second thing I looked at is what are the cash reserves because cash on the balance sheet, cash in the bank matters so much, and that's stable. Mid-market and small businesses are actually up. The micro businesses are down a bit.

So -- but net-net, across the overall SMB space, it's very stable. The other metrics that we look at are more secondary, but still helpful is what's the business to revenue, and that's remained stable over the last 3 months. Mid-market is up kind of a little above -- around 6%. SMB is up low single digit and micro is down single digit, but generally, the health is good.

IT services, nondiscretionary is doing well. Advertising, retail, discretionary is seeing some declines. Ancillary on the profit side is up several points over the last 3 months through January. And on the profit side, we've seen good performance by IT services, manufacturing and wholesale trade.

So putting aside all the noise we might see in the press and everything else, when I look at the pure quantitative stats in the business, I continue to feel good about the health of the business. On top of that, I'll also remind you, Mark, and you followed us for years, so you know this, but just for everyone's benefit, we have a well-diverse base of customers across multiple customer sizes, multiple industries, multiple geographies. So that's also something additional to keep in mind as you think about our business and the health of the economy.

We go next now to Alex Zukin with Wolfe Research.

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?

Yes, Alex, thanks for your question. I'll jump in on the first one. Listen, the thing that is very exciting for us is AI and HI is foundational to our platform and fueling our growth. And we talked a lot about what those proof points are.

It's not a side project for us. We're not looking on the side to figure out how to monetize AI to make up for the core. It is fundamental to our platform. But that's juxtaposition against 3 growth vectors.

And so to answer your durability question, we feel very good about the durability of what we are seeing. One growth vector for us is how we're disrupting assisted tax, which is both for consumers and business. And you saw in the last several years, how our trajectory has fundamentally changed. And last year, it was a $2 billion-plus business growing 45%, and we're seeing incredible traction so far this year.

And by the way, we've seen enough of the tax season to know how it's going to play out and our confidence in tax season. So that's very, very durable. And in fact, every day that passes, we build momentum because of all the investments that we've made. Second, mid-market is very durable with all of our platform innovation, with our go-to-market motion that we're building, and you can see it in our results, right?

Contracts quarter-over-quarter continue to be up 50%. Our accountants are now starting to contribute to new customers to the franchise. It's up 10 points over the last quarter. New customers to the franchise is actually meaningful now.

It's not just our base, and we have a long ways to go in our base. And that's why we're expanding our sales force. So that's durable. And then third is, I think Sandeep said it really well, with all of our AI and HI innovation on the business platform, we've actually been beyond the significant savings, both time savings and money impact that it's having for businesses, which, by the way, makes our platform beyond self-funding that gives us a lot of pricing power.

We were very surprised to see in our testing that customers -- new customers and existing ones want the combination of both as part of the platform. And that will impact how we think about not just subscription pricing, but consumption. So what we are seeing is very durable and not just for the next couple of quarters. We've been focused on these 3 growth vectors for some time, and we're seeing the impact of our investments.

Last thing before I turn it over to Sandeep, you asked about economics. Both with OpenAI and Anthropic, we do not share in any of the economics. Whatever the usage is by our customers, it's the same economics, if the customers come to us directly. And we're just really focused on the experience.

And I think we have a lot to prove together as to whether or not customers actually want to engage through these LLM apps. But we enjoy all of the economics. There is no margin expansion. I think the thing you can expect from us, Sandeep said this earlier, is continued margin expansion at the company level.

Alex, let me build on that and also touch on your point around Mailchimp or a question 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 a 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 expert, 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 remains 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.

We'll go next now to Gabriela Borges with Goldman Sachs.

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, Gabriel, thank you for the question. It's really a fairly clean cut, which is the moat that we have, the advantage that we have to deliver for our customers is proprietary data, it's domain-specific AI models, which is knowledge engineering, machine learning and our Intuit financial large language models, coupled with human expertise, HI. And as I mentioned earlier, in an environment where it's a regulatory environment, it's about high-stakes financial decisions where the liability is high, compliance and accuracy and privacy and security is everything for customers. And it's important to note because facts are friendly that with our $300 billion in TAM, people, experts impact over half of the spend in that TAM because it's customer backed.

And that structurally has not changed in the last 10 years. It hasn't changed in the last 6 months. And in fact, based on our innovation on AI and HI, as we talked about earlier, we're actually seeing an acceleration of the need of combining both the technology and human expertise because of the notion of confidence and certainty in things done right. That's really the fine line back to specifically your question when we think about why an OpenAI and Anthropic is so interested in us because we do that very, very well.

And why we are interested in a partnership with them beyond being where the eyeballs are, the example that I would use when you look at our capabilities versus like Claude Cowork is we're actually very excited about the -- making the capabilities, the Claude Cowork capabilities available in Intuit Enterprise Suite. And why? Because there are things that Claude Cowork does that we don't need to go build. It's context for us because -- if you take the example that I used earlier, which is a construction company, I won't reuse that example, but I'll use the example -- a very real example of a restaurant that is located in the tourist area and wants to actually understand what are the tourist trends, how does it get impacted by weather?

And ultimately, how is that connected to taking their POS data, their Intuit platform data to get daily updates and forecast as to what their traffic into their restaurant could be. We don't need to go build an LLM for that, but we can integrate, which we are, Claude Cowork into our platform, and it's the brains of our platform is delivering the accuracy and the compliance, but the LLMs of Claude Cowork actually allows the customer to see the specifics of what they need to be able to better run their business. Now the customer doesn't know what they're doing, what they're using. All they care about is they're asking for this KPI to be present to them.

So that's where we're very clear in our partnership. And by the way, we both see the need of what's context versus core and vice versa. And that's just a real-life example of where the lines are.

And Gabriel, if I can add my lens to it, the way I think about it, any financial recommendation, any business -- core business recommendation, anything you could think of as the office of the CFO, office of the COO, office of the CEO is core to us. So when we talk about our financial agents saving 17 to 18 hours, a month, 69% reduction in the time to get analysis, that's core. Accounting agent, that's core. Payment agent getting people paid 5 days fast, that's core.

Payroll agent identifying anomaly, saving people multiple hours and getting the payroll, that's core. Now I'll give you an example from a recency bias, but it's a very good example to make it real. I recently visited with a winery in Napa. They give you free shipping when you buy a case.

But they have to decide, do I ship this bottles from Napa to Denver ground, which is the low cost to me better margin? Or do I ship it 2-day air because they don't want the wines to get frozen. Now they can use Claude on our platform, so on our real estate, right, to see what the weather pattern is and then the agent could pick what that shipping should be. That's something that we don't need to build because a thin sliver, as Sasan said a long tale.

So that is not -- that's more of the office of the shipping department. So that's not core to us. So that's kind of how I very simply think about what's core versus what's context for us.

And ladies and gentlemen, we have time for one more question today. We'll take that now from Daniel Jester with BMO Capital Markets.

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.

Thank you very much. And Mr. Goodarzi at this time, sir, I would like to turn the conference back to you for any closing comments.

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.

Thank you very much. Again, ladies and gentlemen, that will conclude today's Intuit Second Quarter Fiscal Year 2026 Conference Call. Again, thanks so much for joining us, everyone. We wish you all a great remainder of your day. Goodbye.