Intuit (INTU) FY2026 10-K: The $1.17B Gap Between Tax Charged and Paid
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A $1,451M tax provision. A $281M tax bill. Both are in the same 10-K, and the gap between them is most of what changed at Intuit this year.
RoboSystems initiating coverage · Prepackaged software · Source filing: FY2026 Form 10-K for the year ended July 31, 2026, filed September 9, 2026 (accession 0000896878-26-000037). Intuit's fiscal year ends July 31, not December, so every period label below is a July year. All figures verified live from the SEC XBRL graph via RoboSystems unless attributed otherwise. Not investment advice. No price target.
1. The Hook
Intuit $INTU just had the best year in its history and its stock is the worst performer in the S&P 500. Revenue rose 13.9% to $21.4B, operating margin expanded 129 bps to 27.4%, and net income rose 18% to $4.57B. The shares closed at $339.15 on September 14, 2026, down 51.9% from a 52-week high of $705.08 (price: Yahoo Finance and stockanalysis.com, close of September 14, 2026).
That contrast is the story everyone is telling. It is not the interesting one. The interesting one is four lines further down the income statement, where Intuit booked an income tax provision of $1,451M - and then, in the tax note, disclosed that cash income taxes paid net of refunds for the year were $281M. Four point seven percent of pretax income. U.S. federal cash tax was a net refund of $6M, against $1,105M paid the year before and $1,659M the year before that.
The same tax line moved in two opposite directions at once, and both moves are temporary. On the cash side, a tax-law change let Intuit deduct years of accumulated research spending in one go, which is why operating cash flow jumped 42% on 14% revenue growth and funded a buyback that nearly doubled. On the accrual side, the reported tax rate went up, to 24.1% from 20.0%, and the single largest reason is the share price itself. Bulls quoting Intuit's cash flow and bears quoting its earnings growth are both quoting the same tax line, and neither is adjusting for it.
2. Company Snapshot
Intuit is a prepackaged-software company headquartered in Mountain View, California, serving approximately 93 million consumers, small and mid-market businesses and accountants worldwide. It reports two segments. Global Business Solutions is QuickBooks, Mailchimp and the payments, payroll and capital services attached to them. Consumer is TurboTax, Credit Karma and ProTax. The fiscal year ends July 31, which matters: FY2026 covers August 1, 2025 to July 31, 2026, and the tax season that drives the Consumer segment sits inside the second and third fiscal quarters.
The growth is lopsided, and not in the direction the market narrative suggests.
| Revenue line | FY2026 | FY2025 | FY2024 | FY26 growth |
|---|---|---|---|---|
| QuickBooks Online Accounting | $5,051M | $4,120M | $3,379M | +22.6% |
| Online Services | $4,867M | $4,182M | $3,513M | +16.4% |
| Total Desktop Ecosystem | $2,946M | $2,775M | $2,641M | +6.2% |
| TurboTax | $5,296M | $4,933M | $4,508M | +7.4% |
| Credit Karma | $2,641M | $2,200M | $1,645M | +20.0% |
| Total net revenue | $21,448M | $18,831M | $16,285M | +13.9% |
TurboTax, the business the AI-disruption story is mostly about, grew 7.4% and is now 24.7% of revenue, down from 26.2%. QuickBooks Online grew 22.6%. The de-rating is being applied to the whole company on the strength of its slowest-growing quarter of it.
3. The Financial Story
Start with the part that is unambiguously good. Gross margin reached 80.2%, up from 79.6% and 78.7% in the two prior years. Operating income rose to $5,884M from $4,923M, a 19.5% increase on 13.9% revenue growth, which is operating leverage even after absorbing a $293M restructuring charge that the prior year did not carry. Below the line, interest and other income jumped to $389M from $158M, adding another $231M to pretax income. Pretax income grew 24.5%, to $6,017M.
Now watch what happened between pretax income and net income. Pretax grew 24.5%. Net income grew 18.0%. The six-and-a-half-point gap is entirely the tax rate, which went from 20.0% to 24.1%. Here is the reconciliation the filing provides, in percentage points of the effective rate:
| Effective rate reconciliation | FY2026 | FY2025 | FY2024 |
|---|---|---|---|
| Statutory federal | 21.0 | 21.0 | 21.0 |
| State, net of federal benefit | 3.4 | 2.7 | 2.3 |
| Federal research credits | (1.6) | (2.3) | (3.1) |
| Share-based comp shortfall (benefit) | 0.6 | (2.5) | (4.3) |
| Other items, net | 0.7 | 1.1 | 0.6 |
| Effective tax rate | 24.1 | 20.0 | 16.5 |
The bolded line is the share price. Under the accounting for stock compensation, when a restricted share unit vests, the difference between its value on the vesting date and its grant-date fair value runs through tax expense: above grant value it is an excess benefit that cuts the tax bill, below it is a shortfall that raises it. Intuit's line swung from a $120M benefit to a $36M charge, a $156M reversal worth 3.1 of the 4.1 points the rate rose. Employees' shares vested under water, and the company was charged tax for it.
Intuit's own MD&A concedes the point from the other side: "Our effective tax rate for fiscal 2025 was approximately 20%. Excluding certain tax benefits primarily related to share-based compensation, our effective tax rate was approximately 24%." The underlying rate was roughly 24% in both years. FY2025 was the flattered one. So part of the earnings deceleration the market is punishing is not a business event at all - it is the share price feeding back into reported earnings per share, and then being read as a reason the share price should be lower.
The cash side went the other way, and much harder. The $1,451M provision splits into only $179M of current tax and $1,272M of deferred - 88% of the charge was non-cash. Current federal tax expense was negative $59M. And the cash actually paid, from the filing's own jurisdiction table:
| Cash income taxes paid, net of refunds | FY2026 | FY2025 | FY2024 |
|---|---|---|---|
| U.S. federal | $(6)M | $1,105M | $1,659M |
| U.S. state and local | $256M | $260M | $191M |
| Foreign | $31M | $43M | $31M |
| Total cash paid, net of refunds | $281M | $1,408M | $1,881M |
These are genuinely different measures and the distinction matters here more than at almost any filer: us-gaap:IncomeTaxExpenseBenefit is what was charged, $1,451M; us-gaap:IncomeTaxesPaidNet is what went out the door, $281M. The gap is $1,170M.
The engine is one line on the deferred tax schedule. On July 4, 2025, the One Big Beautiful Bill Act reinstated immediate expensing of domestic research and development, effective for Intuit in fiscal 2026, and let filers elect to deduct the prior years' unamortized capitalized balance as well. Intuit spends $3.4B a year on research. It took the election.
| Deferred tax position | 2026-07-31 | 2025-07-31 |
|---|---|---|
| DTA: capitalized research and development | $673M | $1,895M |
| Total gross deferred tax assets | $1,477M | $2,670M |
| Total deferred tax liabilities | $1,287M | $1,178M |
| Net deferred tax asset (liability) | $(67)M | $1,202M |
The capitalized-research deferred tax asset drained by $1,222M in one year, and Intuit's net deferred position flipped from a $1.2B asset to a $67M liability. That drawdown is the $1,272M deferred charge, and it is the $1,170M gap between tax charged and tax paid. The company said this would happen a year in advance, in its fiscal Q1 10-Q: "we expect our fiscal 2026 cash tax payments and related deferred tax asset positions to decrease significantly."
What that bought, and what it cost. Operating cash flow went from $6,207M to $8,838M, up 42.4% in a year revenue grew 13.9%. The $1,127M reduction in cash taxes paid is 43% of that entire increase. The MD&A says so plainly: "we generated $8.8 billion in cash from operations, including the impact of lower cash tax payments." Management spent it. Buybacks went from $2,772M to $5,412M, dividends to $1,347M, and shares outstanding fell 3.85% to 268.4 million after falling 0.4% the year before. Buying back nearly 6% of the market cap into a 50% drawdown, funded by a tax windfall, is a defensible use of a one-time asset. It is still a one-time asset.
There is $673M of the shield left, against a $1,222M draw this year. The CFO guided a GAAP tax rate of approximately 27% for fiscal 2027 on the Q4 call, higher again (Intuit Q4 FY2026 earnings call, August 25, 2026). Separately, of the $293M restructuring charge, only $4M was paid in cash during FY2026; $277M is still accrued at July 31, 2026 and goes out in FY2027. Two known cash headwinds, both disclosed, neither discussed on the earnings call - the transcript contains no mention of cash taxes, the OBBBA, Section 174, deferred tax assets or free cash flow.
One thing that did not improve: deferred revenue grew 5.2%, to $1,072M from $1,019M, against revenue up 13.9%. It is a small balance for this filer because TurboTax revenue is recognized at point of use rather than deferred, so it is not the forward indicator it would be at a subscription peer, but it is not corroborating acceleration either.
4. Valuation: What It Is Worth as a Normal Business
Where it trades. At $339.15 the market capitalization is $90.6B, with net debt of only about $221M ($7,669M of debt against $7,448M of cash and investments), so enterprise value is effectively the equity value. That is 20.6 times trailing GAAP earnings of $16.46 a share, 4.2 times sales, 13.4 times EV to EBITDA and 10.3 times operating cash flow (multiples: stockanalysis.com and Yahoo Finance, September 14, 2026). Consensus across 34 analysts is a Buy with a $405.60 target.
The peer comparison does not say what bulls want it to say. The AI de-rating hit the whole incumbent-software group, so Intuit is not cheap relative to the names it is being lumped with - it is the most expensive of the three mature ones.
| Company | Trailing P/E | Source |
|---|---|---|
| Adobe (ADBE) | 14.6 | stockanalysis.com |
| Salesforce (CRM) | 18.0 | fullratio, Sept 10 2026 |
| Intuit (INTU) | 20.6 | Yahoo Finance |
| Workday (WDAY) | 40.9 | stockanalysis.com |
Re-rated to Adobe's 14.6 times on trailing earnings, Intuit is worth about $240. Re-rated to Workday's 40.9, about $673. The comp set is too dispersed to carry an argument, which is exactly why the cash flow deserves the work instead.
Scenario DCF, with the tax normalized. The honest starting point is not the $8,617M of reported free cash flow. It is free cash flow with cash taxes put back to the GAAP charge, and with share-based compensation deducted, because $2,056M a year of stock issuance is real dilution that a cash-flow multiple quietly ignores. That gives $5,391M: $8,838M of operating cash flow, less $221M of capital expenditure, less the $1,170M tax gap, less $2,056M of stock compensation.
| Case | FCF growth, years 1-5 | WACC | Terminal | Implied value |
|---|---|---|---|---|
| Bear | 6, 5, 4, 3, 3% | 10.0% | 2.0% | $283 |
| Base | 12, 10, 9, 8, 7% | 9.0% | 3.0% | $452 |
| Bull | 15, 13, 12, 10, 9% | 8.5% | 3.5% | $597 |
Implied value under stated assumptions, not a price target. Net debt of $221M deducted; 267.2 million shares.
Today's $339.15 sits between the bear and base cases, closer to bear. On the reported free cash flow the free-cash-flow yield is 9.5%; on the tax-normalized figure it is 8.2%; on the figure that also charges stock compensation it is 5.9%. All three are high for an 80-percent-gross-margin franchise, and the third is the one to argue from.
What the price implies. Intuit's own FY2027 guidance is revenue of $23,279M to $23,512M (9 to 10%) and GAAP diluted earnings per share of $20.12 to $20.36, up 22 to 24% (Intuit press release, August 25, 2026). At the midpoint, today's price is 16.8 times guided GAAP earnings. The market sold the stock down about 7% on the revenue line of a release whose earnings line guided to 22-plus percent growth and a 31.8% operating margin. Today's price embeds mid-single-digit cash flow growth in perpetuity from a business guiding to double that next year - which is either a genuine opportunity or the market's judgement that the guidance does not survive contact with AI-priced competition.
5. Risks
The cash flow does not repeat, and the market may be valuing the wrong number. FY2027 carries three known drags that FY2026 did not: cash taxes normalizing off a 4.7% base toward a guided 27% GAAP rate, only $673M of research shield remaining, and $277M of accrued severance still to be paid. A reader anchoring on 10.3 times operating cash flow is anchoring on a figure with $1.1B of one-time tax relief inside it. That is the single biggest risk in this brief, and it cuts against the bull case, not for it.
The competitive risk is in the filing in the company's own words. Item 1A names "increased competition from providers of free and low-cost offerings, particularly in our tax, accounting, payments and personal finance platform businesses," the risk that third parties "may deploy AI technologies in a manner that reduces customer demand for our products and services," and the public-sector threat that "federal and state governments are or could become publicly funded direct competitors." Management confirmed it landed: the CEO said on the Q4 call that "we lost quality DIY customers to lower-cost providers this year" and that "Price is now the #1 reason customers leave TurboTax." FY2027 TurboTax guidance is 2 to 3% growth.
Two more worth naming. Goodwill and intangibles of $18.6B are 51% of total assets and 98% of shareholders' equity, so a write-down would take most of the book value with it. And the filing flags a feedback loop between the share price and the workforce that the tax line has already demonstrated: "our equity awards may become less effective if our stock price decreases or increases at a slower rate than our talent competitors." Note also that the 10-K carries no headcount reduction figure at all - year-end headcount was approximately 18,600, up from 18,200 - because the plan announced in May 2026 completes in the first quarter of FY2027.
6. The Bottom Line
Intuit had a genuinely excellent operating year: 80% gross margins, 129 bps of operating margin expansion, 22.6% growth in QuickBooks Online, and a balance sheet with essentially no net debt. None of that is in dispute. What is in dispute is which of the two tax numbers the market should be capitalizing, and right now it is capitalizing neither correctly. The record $8.8B of operating cash flow contains about $1.1B of a tax deferral that is two-thirds spent. The disappointing 18% earnings growth is 24.5% before a tax rate that rose mainly because the shares fell.
Watch three things in the fiscal Q1 10-Q, due around late November. First, the capitalized research deferred tax asset: $673M is what remains of the shield, and the rate at which it drains sets FY2027 free cash flow. Second, cash taxes paid in the quarter, against the guided 27% GAAP rate - the two will diverge again, in the other direction. Third, the share-based compensation line in the rate reconciliation, which is the cleanest read available on where employee equity is vesting relative to grant. If the shares stay here, that line stays a charge.
Every figure above was pulled from Intuit's FY2026 Form 10-K and its underlying XBRL through the RoboSystems SEC Shared Repository, except where a market price, a multiple or a guidance figure is attributed to its source in the text.