TurboTax losing customers as Thomson Reuters builds proprietary tax AI

Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding! David Leary: [00:00:04] I want dumb AI like AI that only knows accounting. I don't want it to know the history of the world and every possible thing, because the odds of it hallucinating are trying to outsmart itself are just way higher. But if it only knows this tax law and case law and tax code, it's likely to hallucinate less. Coming to you weakly from the OnPay Recording Studio. Blake Oliver: [00:00:29] Hello, everyone, and welcome back to the Accounting Podcast, your weekly roundup of news in the profession. I'm Blake Oliver. David Leary: [00:00:35] And I'm David Leary. Blake Oliver: [00:00:37] And David, today we are welcoming Hector Garcia to the show as our co-host to talk about the Intuit earnings call. Turbotax looks like it's in trouble. They're losing customers to cheaper alternatives and the market did not like that. Wall Street did not like that. We're going to dig into it with him. We've also got a story here about Thomson Reuters building its own AI model from its own proprietary data. Really interesting implications from that for Thomson Reuters in the future of of tax. We've also got an interview with Britton Ratcliff, the youngest person to ever sit on a board of accountancy. He's on the New Mexico Board of Accountancy, and he got there as a teenager and he's still in school. We're going to talk with him toward the end of the show. Uh, and first, let's thank our sponsors. David Leary: [00:01:35] Our sponsors. This week we have cloud accountants staffing Thomson Reuters on pay and Savant Labs. Blake Oliver: [00:01:41] Are you tired of the endless search for qualified accounting talent? You're not alone. Growing accounting firms are struggling to find available and affordable team members when they need them most. 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That's The Accounting Podcast dot io forward slash CAS. David Leary: [00:02:47] Will you add Hector here to the show? I'll just kind of cover the high level Intuit fourth quarter earnings. So the full year revenue was 21.4 billion. That's 14% growth with Q4 being 4.4 billion. The first time breaking 20 billion annually. So into its numbers revenue wise are way up, right? Turbotax live revenue surged 37% and now represents 53% of all TurboTax revenue. So that's the live service where it's, you know, you get the software and the human doing the taxes with you. And then but where the street freaked out, I think is their fiscal 2027 guidance calls for about 23 to 23.5 billion in revenue, only 9 to 10% growth versus this year's 14% growth. And the street's freaking out a little bit for I think there's lots of opinions, right? You have people like AI is killing Intuit over here. On one hand, you have those people. And then the other weird thing is Intuit's reacting to that. On the other hand, where they're saying, oh, look at all this AI we have. That's why our numbers are so good. It's so brilliant to me, like Hector on, let's get some perspective and chat this out. Blake Oliver: [00:03:52] Thank you for joining us. Welcome to the show. Great to have you here. If you don't know Hector, you should. He is one of the biggest QuickBooks and accounting YouTubers. He's got one of the largest QuickBooks channels on YouTube. Uh, he has been the host of the unofficial QuickBooks accountants podcast in the past, and he runs a conference called reframe, which I am eager to get to at some point soon. And he's basically an expert on all things into it and QuickBooks. So Hector, great to great to have you here. We'd love to get your take on Intuit's earnings call and what's the future of QuickBooks and TurboTax and all this stuff. Hector Garcia, CPA: [00:04:31] Awesome. Well, thanks for inviting me. I'll take away the expert being an expert in all things into it, to being highly opinionated in all things into it. Let's just say that, um, so what is interesting about what's happening with Intuit is that if you go back to like July of 2025, and I know this very, very intimately because I, every year that I've been in practice for the past 18 years, I buy a percentage of my earnings in Intuit stock. And there's a specific philosophy on why I do that is because my brand as an educator in accounting and user of the product and a reseller of the product is very tied to Intuit. And when I see the sales go up because I see my sales go up as a reseller, I'm I'm seeing I'm bullish about it, right? So I'm buying into a stock every single year. And I have bought stock at $30 when it first started. And I have bought stock at $700, you know, last year. So I have had the lows and highs of into a stock going up and down. So right now into a stock is trading in the mid three hundreds. At its peak it was close to eight or at 800 in July of 2025. So the story is that Intuit's revenue is not going down. The profits are not going down into. It is an extremely profitable company. Their margins are crazy. So we're talking about $21,000,000 billion in revenue, $4.5 billion in profit. It's a profitable company. Blake Oliver: [00:06:00] 14% fiscal 2026 revenue growth. That's not bad for a massive public company. That's pretty darn great. Hector Garcia, CPA: [00:06:07] Public company in business for 40 plus years. I mean, you gotta take that into consideration. The sister company, not not sister company. I would say the company that the that the market that the market uses to compare Intuit with a lot is Adobe because Adobe has a very similar story. It was born in the 80s. There are software, mostly application business. They felt AI can threaten, you know, graphic design and all this stuff that they did. Um, and Intuit came a little bit later just because I guess people hadn't noticed, you know, whether or not AI could disrupt accounting until maybe three years later. They're around $100 billion in, in, in, uh, in market cap. They're somewhere in the 20s in the billion dollar annual revenue. So they're very similar companies. And you look at the two companies and the two companies have had very similar fates. Uh, when Adobe was at its peak, it was trading at 60 times its earnings. That's a p e ratio when Intuit was at its peak. This is July of 2025. It was trading at 56 times earnings. And now both companies are in the teens and the 20s and they go back and forth. So there's a broader story here, which is the market is reacting to, um, the impact that AI has on SaaS. But most accountants, I don't think look at it that way. I think most accountants look at Intuit stock and they have more like personal grievances. And they're saying, see, this is what's happening. And I think I can also tell you that story from my perspective and what the community is saying. But I think the market really, really, really is reacting, in my opinion, to just the impact of AI on companies that only do apps that are not platforms or hardware makers because Microsoft and Apple don't have the same fate. Blake Oliver: [00:07:58] So I want to talk to you, Hector, first about this TurboTax question, because TurboTax has always been a huge revenue driver and growth driver for Intuit, and Intuit acknowledged in this earnings call that they are losing DIY tax customers to cheaper competitors, and that price is now the number one reason that customers leave TurboTax. They are expecting only 2 to 3% TurboTax revenue growth in 2027, and that's because they are having to lower their entry level pricing in order to acquire and retain those DIY users. So I want to get your take on that. And you, David as well. Is, is TurboTax done? Is AI going to automate the DIY tax prep so that Intuit can't charge, you know, 100 to $200 for a return. David Leary: [00:08:50] I don't think so. If you think about how many returns Intuit does versus how many returns detector as a firm, you do a portion of your firm does tax work, right? Factor. Right. You probably charge a lot more than what I'm paying for TurboTax, more than I'm probably paying for TurboTax live. I think AI is going to disrupt that layer, not so much into it. There's always been cheaper and free alternatives to TurboTax. They've been around for 20 years. They've always been there. This option to use something cheaper has always been there just because now it's what in a chatbot format and a text box that's supposed to completely blow up into it. I just don't completely buy it. Like it just doesn't. I don't buy that and I don't buy. Also, the fear of like, AI is going to disrupt QuickBooks entirely. Like, so the street has this opinion that that's going to happen. But historically speaking, like 40, what, 45 million people use TurboTax for their taxes. Now, how many are really going to walk away? Like how many are going to be like, I'm going to use AI to do my taxes this year. That's a pretty like, think about that. You go to your spouse be like, hey, I'm not going to, I'm going to use AI to