Intuit (NASDAQ:INTU) Misses Q2 Revenue Estimates, Stock Drops

Adam Hejl /
2022/02/24 4:12 pm EST

Tax and accounting software provider, Intuit (NASDAQ:INTU) fell short of analyst expectations in Q2 FY2022 quarter, with revenue up 69.6% year on year to $2.67 billion. Intuit made a GAAP profit of $100 million, improving on its profit of $20 million, in the same quarter last year.

Is now the time to buy Intuit? Access our full analysis of the earnings results here, it's free.

Intuit (INTU) Q2 FY2022 Highlights:

  • Revenue: $2.67 billion vs analyst estimates of $2.71 billion (1.65% miss)
  • EPS (non-GAAP): $1.55 vs analyst expectations of $1.82 (14.9% miss)
  • The company reconfirmed revenue guidance for the full year, at $12.2 billion at the midpoint
  • Free cash flow of $20 million, down 80.5% from previous quarter
  • Gross Margin (GAAP): 80.4%, up from 77.6% same quarter last year

“We see continued strong momentum across the company as we focus on our mission to power prosperity and solve our customers’ biggest financial problems," said Sasan Goodarzi, Intuit's chief executive officer.

Created in 1983 when founder Scott Cook watched his wife struggle to reconcile the family's checkbook, Intuit provides tax and accounting software for small and medium-sized businesses.

The demand for easy to use, integrated cloud based finance software that integrates tax and accounting operations continues to rise in tandem with the difficulty workers find trying to use existing accounting tools like spreadsheets given the growing volume of finance data littered across a multitude of enterprise applications. A related demand driver is the secular increase of e-commerce and rising adoption of modern point of sales and payments platforms which easily integrate with backend financial software.

Sales Growth

As you can see below, Intuit's revenue growth has been exceptional over the last year, growing from quarterly revenue of $1.57 billion, to $2.67 billion.

Intuit Total Revenue

And while this quarter Intuit fell short of the high analyst expectations, the revenue growth was still very strong; up a rather splendid 69.6% year on year. On top of that, revenue increased $666 million quarter on quarter, a strong improvement on the $554 million decrease in Q1 2022, and a sign of re-acceleration of growth, which is very nice to see indeed.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 14.7% over the next twelve months.

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What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Intuit's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 80.4% in Q2.

Intuit Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.80 left to spend on developing new products, marketing & sales and the general administrative overhead. Trending up over the last year this is a great gross margin, that allows companies like Intuit to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from Intuit's Q2 Results

With a market capitalization of $132 billion, more than $1.41 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by the exceptional revenue growth Intuit delivered this quarter. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that Intuit missed analysts' revenue expectations and the revenue guidance for the full year missed expectations. Overall, this quarter's results were not the best we've seen from Intuit. The company is down 7.32% on the results and currently trades at $460.12 per share.

Intuit may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.