The moat runs deeper than the software

Intuit provides financial software and services in the US that help consumers and small businesses manage taxes, accounting, and payments. Their main two segments are Quickbooks and TurboTax, which we delve into below. The company is analogous to Xero used here in Australia. 

The market tends to value the technology, while overlooking the harder-to-replicate foundation beneath it: trust, networks, and mission-critical workflows.

When a wave of fear sweeps through software investors, the instinct is to sell anything that looks like a subscription business sitting on top of a workflow that a machine could theoretically replicate. Intuit was not immune to this shift in sentiment, becoming caught up in the broader “SaaSpocalypse” narrative in early 2026 — a period of time where all software businesses sold off indiscriminately due to AI disruption fears.

This is a company that processes close to a trillion dollars of small-business financial activity each year, holds roughly 70% of the U.S. small-business accounting market, and has spent decades embedding itself in the tax and bookkeeping habits of more than 100 million consumers and businesses. Yet this year, the market priced it as though AI would commoditise its software and erode the value proposition built on decades of trust, embedded workflows, and customer relationships.

For investors focused on long-term fundamentals, as we are, the gap between perception and reality has created an opportunity.

A business of the highest quality caught in the SaaSpocalypse

Few companies have built a software franchise as durable as Intuit. QuickBooks is not simply an accounting application; it has become the financial operating system through which millions of small businesses run their payroll, invoicing, bill payments, and tax obligations, embedded in regulated workflows spanning payroll tax, multi‑state compliance, and audit exposure. Its position is reinforced by deep integrations with more than 700 third-party applications (such as Shopify, PayPal) and an ecosystem of accountants and advisors who actively recommend the platform to their clients. TurboTax, similarly, is far more than a digital form-filler; it is a trusted tax platform that millions of Americans rely on each year to navigate one of their most important financial obligations, particularly when accuracy, compliance, and confidence matter most.

That combination, dominant share, high switching costs, and recurring, mission-critical usage, has historically earned Intuit a premium valuation. Reflected in the average P/E multiple of approximately 32.0x over the past decade. The market no longer assigns Intuit the same valuation it once did.

2026 has been devasting for the share price. Intuit became one of the worst-performing large-cap software names of the year, down roughly 61% year-to-date at its lows in mid-June, with the crystallising moment being the Q3 FY2026 earnings report on May 20, when the stock fell roughly 20% in a single session. As of late July 2026, the share trades as a forward P/E of just 10.8x FY28 earnings, near its all time low.

Why we invested amid the panic

The “SaaSpocalypse” narrative that hit Intuit was simple, and on the surface, plausible: generic AI would commoditise subscription software broadly, eroding pricing power across the sector as free or near-free large language models replicated much of the functionality that software companies had historically been able to monetise. Applied to Intuit specifically, the fear was that a free AI assistant could walk a taxpayer through a W-2 as competently as TurboTax, or that an AI-native accounting startup could ingest a small business’s historical data and replace QuickBooks at a fraction of the price.

Our view, even at the height of that fear, was that this framing misunderstood where Intuit’s value actually lies. The technology itself was never the primary source of value. The real moat lies in the networks, deeply integrated workflows, industry relationships and trust built over decades. The same qualities have allowed dominant online classifieds platforms, such as Rightmove and Auto Trader, to remain resilient amid fears of AI-driven disruption.

This distinction matters most in the parts of Intuit’s business that involve compliance and liability.

QuickBooks is entrenched in payroll tax, multi-state compliance, and audit exposure, areas where an error carries a real financial and legal cost, not just an inconvenience. TurboTax carries an accuracy guarantee; Intuit pays penalties if it makes a mistake and backs its ‘Live’ customers with licensed tax professionals in the event of an IRS audit. A generic AI chatbot offers neither of those protections. Given the complexity of payroll, deductions, multi-entity compliance, and financial reporting, a cheaper AI alternative alone is unlikely to be sufficient to pull consumers or businesses away from a platform where years of financial history, bank connections, and regulatory filings are already embedded.

For most businesses, trusting an unproven AI platform with their financial records and compliance obligations is a far higher hurdle than simply adopting a cheaper piece of software. That is precisely why churn for both products has remained extremely low, even as investor sentiment reached its most negative.  

What caused the stock price to collapse?

The May 2026 sell-off was the result of three developments unfolding simultaneously.

Management cut the TurboTax revenue outlook for FY2026 to $5.277–$5.282 billion, down from a prior range of $5.305–$5.330 billion. On a $5‑plus billion base, a $23–48 million reduction is immaterial in dollar terms, but it mattered symbolically: it was the first explicit downgrade to the segment investors were already viewing through an AI‑disruption lens.

The reaction was amplified after CEO Sasan Goodarzi acknowledged some pressure among the most price-sensitive DIY filers earning under $50,000, a segment where lower-cost and free alternatives are gaining traction. Crucially, this cohort contributes very little to Intuit’s earnings and primarily serves as an entry point into the broader Intuit ecosystem. Even if some of these low-income DIY customers leave the platform today for free alternatives, many are likely to return as their tax situations become more complex or their financial circumstances improve, at which point they can adopt higher-value products and services.

Layered on top of that came a 17% workforce reduction, roughly 3,000 jobs, with $320 million of restructuring charges. Management initially framed the cuts as an efficiency and AI-driven restructuring, a natural enough explanation on its own. But when a question came directly on whether AI played a role in the decision, the CEO pushed back defensively, insisting the cuts had nothing to do with AI. That framing created unnecessary scepticism rather than resolving it. It invited the obvious question — if growth is intact, why cut so much headcount — and left the market to fill in the gap with its own, more negative interpretation of what management was reluctant to say directly: AI is disrupting our business, and we need to cut costs to remain competitive. However, the more constructive interpretation is that Intuit is proactively simplifying its cost base and reallocating resources towards AI and higher-growth priorities.

This was poor optics and mishandled messaging, not imminent AI disruption.

The Competitive Advantages remain

Importantly, the competitive advantages that underpin the investment thesis remain as strong as ever.

QuickBooks remains considerably more insulated than the headlines suggested. The Global ‘Business Solutions’ segment, which houses QuickBooks and Mailchimp, generated $11.1 billion in FY2025, growing 16% year over year, with ‘Online Ecosystem’ revenue of $8.3 billion growing 20%. AI inside the platform has so far behaved as an enhancer rather than a disruptor. Intuit’s own accounting agents categorised 237 million transactions in a single month, and QuickBooks Live, its bookkeeping-as-a-service offering, grew more than 50% in Q2 FY2026. The fastest-growing part of the QuickBooks base is customers graduating from basic bookkeeping plans into QuickBooks Advanced and the Intuit Enterprise Suite, where they pay several times more per month for additional users, automation, and mid-market features. A $90 billion addressable market Intuit is only beginning to penetrate.

TurboTax is the more actively contested part of the story, and it’s better to acknowledge that than pretend otherwise. The pressure has been concentrated among low-income, highly price-sensitive DIY filers earning under $50,000, with TurboTax shedding around 1 million free-tier users during the 2026 season as some simple returns shifted toward cheaper or free alternatives. The key nuance is that this cohort is also Intuit’s least profitable segment, as mentioned above, and management has been clear it is prepared to let those customers go for now. Although we expect a meaningful proportion of these individuals to return in the years ahead as their tax situations become more complex.

The growth engine within TurboTax is a very different product. Specifically, this refers to TurboTax Live. This is Intuit’s AI-enabled assisted-tax offering, combining its self-preparation software with access to tax experts who can provide advice, review a return, or prepare and file it on the customer’s behalf. Pleasingly, this grew 47% in FY2025 and is guided to grow a further 36% in FY2026 to roughly $2.8 billion, representing more than half of total TurboTax revenue. Structurally, this is the part of the franchise best insulated from pure AI commoditisation, as it combines software with licensed expertise, an accuracy guarantee, and audit support. The kind of professional accountability a chatbot cannot provide.

From AI Anxiety to Fundamental Reality

Two things are turning in Intuit’s favour, and both point toward the same conclusion. Firstly, the market overreacted to a segment-specific pricing problem as though it were an existential threat to the entire platform.

As the narrative that “generic AI will eat all software” has evolved, investors have become more discerning, increasingly distinguishing between businesses built on easily replicated products and those with durable competitive advantages rooted in proprietary data, deeply embedded workflows, and regulatory complexity. Intuit falls firmly into the latter category. As this distinction has become more widely appreciated, the market has increasingly viewed the company as a beneficiary of the AI transition rather than a victim of it.

The second is a simple correction in how investors are reading the TurboTax commentary itself. The initial interpretation of the May earnings call was that AI is starting to commoditise the platform, full stop. The more measured read, and the one gaining traction as the dust settles, is that Intuit lost a low-margin, price-sensitive cohort it was willing to lose, while its highest-value, most defensible product line kept compounding at a rate most software companies would envy. That distinction is exactly what a market recovering from an overreaction typically re-prices.

Valuation: The Market Is Pricing the Risk, Not the Earnings Power

The deeply discounted valuation is what makes this investment most compelling.

Intuit currently trades at around $335, on a current P/E of roughly 13.2x, and a forward multiple in the 10x-12x range depending on the fiscal year used. This is against a five-year average closer to 32x. Consensus still points to earnings growth around 18% FY2026, alongside an expected 30% return on equity, gross margins above 80%, and roughly $3.5 billion of buybacks planned for 2026, a figure management has signalled it intends to increase further in 2027.

Our base case does not require aggressive assumptions. It requires QuickBooks to keep compounding at its current mid-teens growth rate, TurboTax Live to continue taking share of TurboTax’s mix as guided, and Intuit’s earnings multiple to normalise around 17.5x. In our view, this is extremely conservative, given that it implies only a partial reversion towards Intuit’s historical valuation range. Under those conditions, we see roughly 60%+ upside over a two-year horizon, without assuming any recovery among the lower-value, price-sensitive DIY filers.

We anticipate that, in the not-too-distant future, Intuit will be priced to reflect its high-quality, deeply entrenched business that will continue to compound earnings over time.

This is among one of the highest quality businesses that the Fund currently owns. With the company’s moat built on trust, integration, and regulatory complexity rather than the underlying technology, this firmly remains intact. The company’s current deeply discounted valuation provides investors with a meaningful margin of safety while the market’s perception catches up with its underlying fundamentals.

Intuit Inc. remains a core holding for the Collins St Global Fund.