Intuit faces AI-driven growth pressure as BofA cuts rating to Neutral

Investing.com -- Intuit is heading into a transition year as artificial intelligence reshapes demand for its tax products and weaker customer growth raises concerns about the pace of expansion, BofA Securities said on Wednesday, cutting its rating on the financial software company to Neutral from Buy.

BofA lowered its price target to $360 from $400, saying Intuit's fiscal 2027 outlook points to slower growth and fewer near-term catalysts. The firm now expects fiscal 2027 revenue of $23.4 billion, down from its previous estimate of $23.9 billion, while adjusted earnings per share was cut to $23.02 from $27.23.

The main concern is TurboTax, where Intuit expects growth of just 2.2%, well below the 6.8% growth anticipated by the Street. BofA said the weakness suggests customers are shifting toward lower-cost, AI-based alternatives, while softness in new customer additions could also weigh on upgrades in 2027.

The company's business operations are also showing signs of moderation. Online customer growth was about 3%, and Intuit has reduced its long-term growth target for Global Business Solutions to 10%-15% from 15%-20%. The company plans to emphasize customer acquisition through lower-priced and free offerings and expand distribution, moves that BofA expects could weigh on profitability before producing meaningful benefits.

Still, BofA pointed to several areas of strength. Assisted Tax, Money and Mid-Market grew 34% collectively and accounted for 30% of revenue, while Credit Karma expanded 16%, ahead of the firm's expectations. Operating margin of 33.3% also exceeded the Street's 30.8% estimate.

BofA expects fiscal 2027 to be an investment year as Intuit works to rebuild customer acquisition and position users to move into higher-value products over time. Its estimates imply adjusted earnings will decline 5.2% in fiscal 2027 before returning to growth in subsequent years.

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