H&R Block (HRB) To Report Earnings Tomorrow: Here’s What To Expect

H&R Block (NYSE: HRB) prepares to report its fiscal 2025 third-quarter results after the market close tomorrow, May 7, with investors focusing on two critical questions: Can the tax prep giant sustain revenue growth beyond its peak tax season, and will cost discipline improve margins? Analysts project an EPS of $5.17 for Q3, but execution on strategic initiatives like Spruce’s mobile banking and Wave’s small-business tools will be under the microscope.

Key Metrics and Guidance

H&R Block has reaffirmed its full-year outlook of $3.69–3.75 billion in revenue and $975–1.02 billion in EBITDA, relying on a 13% effective tax rate to boost profitability. The company’s forward P/E ratio of 15.34 lags behind the sector median of 20.8, signaling skepticism about its ability to deliver consistent growth.

Recent Performance: Progress and Pitfalls

In Q2 2025, H&R Block reported stagnant total revenue at $179 million, hampered by declining volumes in its Emerald Advance loans—a key interest-income source. However, small-business services and Wave subscriptions provided bright spots:
- Wave Revenue rose 15% to $26.4 million, driven by high-margin subscriptions.
- Spruce saw a 55% surge in sign-ups, with deposits doubling, signaling potential as a recurring revenue stream.
- AI Tax Assist improved client conversion rates, reflecting investments in digital tools.

Despite these positives, operating expenses jumped by $25.8 million year-on-year, squeezing margins. The company also repurchased $190 million in shares during Q2, leaving $1.1 billion remaining under its $1.5 billion buyback program.

Strategic Upside and Downside Risks

Upside Drivers:
- Small-Business and Wave Growth: Continued momentum in bookkeeping, payroll, and advisory services could exceed EPS estimates.
- Spruce’s Expansion: If the mobile banking app gains traction, it could diversify revenue beyond the tax season.

Downside Risks:
- Emerald Advance Weakness: Declining loan volumes threaten top-line growth unless offset by other services.
- Cost Pressures: Rising wage and healthcare expenses could further compress margins unless controlled.
- Revenue Concentration: ~70% of annual revenue comes from tax season, making diversification efforts critical.

Analyst and Institutional Sentiment

Investor sentiment is mixed. Buy-side firms like Boston Partners and UBS have increased holdings, betting on H&R Block’s tech-driven pivot. However, Fidelity (FMR LLC) reduced its stake by 23.9%, citing near-term risks. Notably, CEO Jeffrey J. Jones sold ~$3.4 million in shares over six months—a red flag for some investors.

What to Watch in Q3 Results

1. Post-Tax Season Resilience: Investors will scrutinize Q3 revenue for signs of diversification. A strong showing in Spruce, Wave, and advisory services could alleviate concerns about over-reliance on tax prep.
2. Margin Improvement: Management must clarify whether cost controls and higher-margin products can offset rising expenses.
3. Share Repurchase Clarity: The remaining $1.1 billion buyback program’s pace and impact on EPS will be critical to justify the stock’s valuation.

Conclusion: A Cautious “Hold” Until Q3 Proves Consistency

H&R Block faces a pivotal moment. Its small-business and tech initiatives (Wave, Spruce, AI Tax Assist) are promising, but the stock’s undervaluation hinges on proving sustainable growth beyond tax season. With a 15.34 P/E ratio and $1.1 billion remaining in buybacks, investors will reward clarity on these fronts.

However, risks linger: Emerald Advance’s decline and cost pressures could derail margins unless offset by higher-margin services. Analysts’ average price target of $59.50—below the current $61.50—suggests limited upside until execution is proven.

Tomorrow’s earnings call will reveal whether H&R Block can balance innovation with profitability. Until then, a “Hold” rating makes sense, with a potential upgrade if Q3 revenue and margins beat estimates by at least 5%–7%.

The verdict rests on whether the company can turn its operational pivots into consistent earnings growth—and not just tax-time optimism.