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Xero Limited (AU:XRO)
ASX:XRO

Xero Limited (XRO) AI Stock Analysis

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AU

Xero Limited

(Sydney:XRO)

Rating:63Neutral
Price Target:
AU$188.00
▲(6.57%Upside)
Xero Limited's overall stock score is primarily supported by strong financial performance, characterized by robust revenue growth and effective cost management. However, technical analysis indicates bearish market momentum, and the high P/E ratio suggests potential overvaluation, which weighs down the overall score.

Xero Limited (XRO) vs. iShares MSCI Australia ETF (EWA)

Xero Limited Business Overview & Revenue Model

Company DescriptionXero Limited is a leading global software company specializing in cloud-based accounting solutions for small and medium-sized businesses. Headquartered in Wellington, New Zealand, Xero provides a platform that offers a comprehensive suite of tools for managing invoicing, bank reconciliation, bookkeeping, and financial reporting. The company's intuitive and user-friendly software enables businesses to streamline their accounting processes, enhance collaboration, and gain real-time insights into their financial health.
How the Company Makes MoneyXero Limited generates revenue primarily through a subscription-based model. Businesses and accounting professionals pay recurring fees to access different tiers of Xero's cloud-based accounting software, which are priced based on the features and number of users. Xero offers a variety of subscription plans tailored to different business needs, ranging from basic accounting functions to more advanced features like multi-currency support and project tracking. Additionally, Xero derives income from its ecosystem of third-party applications and integrations, which enhance the functionality of its core platform. The company also benefits from strategic partnerships with financial institutions and technology providers, which help expand its customer base and enhance its service offerings. Xero's focus on continuous innovation and customer satisfaction contributes significantly to its recurring revenue and overall financial performance.

Xero Limited Earnings Call Summary

Earnings Call Date:May 14, 2025
(Q2-2025)
|
% Change Since: 1.47%|
Next Earnings Date:Nov 13, 2025
Earnings Call Sentiment Positive
The earnings call reflects a positive sentiment due to strong financial results, significant growth in revenue and profitability, and successful strategic initiatives. However, challenges remain in certain markets, such as Canada, and there are elevated costs associated with share-based payments. Overall, the highlights significantly outweigh the lowlights.
Q2-2025 Updates
Positive Updates
Strong Revenue and Profitability Growth
Revenue grew by 25% to $996 million, with adjusted EBITDA increasing by 52% to $312 million. This resulted in a Rule of 40 outcome of 43.9, which is up by 10.3 points year-over-year.
Significant Subscriber and ARPU Growth
Subscriber growth was up 10% year-over-year, with 401,000 new additions. ARPU expanded by 11%, driven by price changes, better payments revenue, and some mix benefits.
Regional Contributions to Revenue Growth
Australia saw a 27% revenue growth, while the U.K. and the U.S. contributed to a 25% revenue increase. Subscriber growth in these regions was 11% and ARPU grew by 12%.
Successful Strategic Execution
Completion of long idle subscriptions removal (160,000 subscriptions removed) and strategic investments in AI and mobile technologies to drive future growth.
Improved Payments and Platform Revenue
Payments revenue saw a 65% growth, and platform revenue grew by 28%, contributing 11% of operating revenues.
Negative Updates
Challenging Market Conditions in Canada
Subscriber growth in Canada remains limited due to a subdued market backdrop, and the restructuring efforts are ongoing.
High Share-Based Payments
Share-based payments increased to 9% of sales, reflecting higher costs associated with hiring domain experts, particularly in the U.S.
Company Guidance
During the Xero Limited Half Year 2025 Results Conference Call, significant financial metrics were highlighted, showcasing strong performance and strategic execution. Xero reported a 25% increase in revenue, reaching $996 million, with adjusted EBITDA rising by 52% to $312 million. This resulted in an impressive Rule of 40 outcome of 43.9%, up by 10.3 points year-over-year. The company experienced 10% subscriber growth, adding 401,000 new subscribers, and achieved an 11% expansion in ARPU. Regional contributions were strong, with Australia and New Zealand showing a 24% revenue increase, while the UK and US markets also contributed significantly to the 25% revenue growth. Additionally, Xero's platform revenue accelerated to 28%, driven by improved payments performance. The company maintained a free cash flow margin of 21% and improved its balance sheet with a $692 million increase in cash. Looking forward, Xero aims to maintain its operating expenses at around 73% of revenue for FY '25, focusing on strategic investments in product development and marketing to drive future growth.

Xero Limited Financial Statement Overview

Summary
Xero Limited shows strong financial health with robust revenue growth, effective cost management, and solid cash flow. The balance sheet is sound with moderate leverage, though increasing debt levels require cautious management. Overall, the company's financials support future growth opportunities.
Income Statement
85
Very Positive
Xero Limited demonstrates robust growth with a significant revenue increase from 2024 to 2025, reflecting a 21.56% growth rate. The gross profit margin is strong at 89.05% for 2025, indicating effective cost management. However, the net profit margin, while positive at 10.84% in 2025, shows room for improvement compared to industry leaders. EBIT and EBITDA margins are healthy, reflecting operational efficiency.
Balance Sheet
78
Positive
The company's balance sheet is solid, with a debt-to-equity ratio of 0.61 in 2025, indicating moderate leverage. Return on Equity (ROE) is impressive at 10.38%, suggesting effective use of equity capital. The equity ratio stands at 49.19%, providing a healthy buffer against liabilities. However, the increase in total debt over the years suggests a need for cautious leverage management.
Cash Flow
82
Very Positive
Xero Limited's cash flow is strong, with a significant increase in free cash flow by 37.85% from 2024 to 2025. The operating cash flow to net income ratio is robust at 3.56, indicating efficient cash generation relative to net income. The free cash flow to net income ratio is also healthy at 2.31. These metrics suggest strong cash flow management, providing flexibility for future investment and debt servicing.
BreakdownMar 2025Mar 2024Mar 2023Mar 2022Mar 2021
Income Statement
Total Revenue1.91B1.57B1.37B1.12B859.59M
Gross Profit1.70B1.43B989.43M810.40M616.76M
EBITDA697.39M510.98M183.23M220.83M189.50M
Net Income207.03M160.21M-110.93M19.69M
Balance Sheet
Total Assets4.06B2.95B2.33B2.35B2.02B
Cash, Cash Equivalents and Short-Term Investments2.12B1.53B1.05B937.17M1.11B
Total Debt1.22B1.22B1.07B1.02B951.21M
Total Liabilities2.06B1.56B1.34B1.31B1.28B
Stockholders Equity2.00B1.39B986.53M1.04B745.95M
Cash Flow
Free Cash Flow477.70M346.54M102.22M57.90M
Operating Cash Flow737.61M597.47M381.52M240.83M221.42M
Investing Cash Flow-366.39M-244.34M-297.92M-438.16M-200.49M
Financing Cash Flow-160.78M-94.16M-296.16M-62.68M551.39M

Xero Limited Technical Analysis

Technical Analysis Sentiment
Negative
Last Price176.41
Price Trends
50DMA
182.08
Negative
100DMA
172.34
Positive
200DMA
168.65
Positive
Market Momentum
MACD
-1.93
Positive
RSI
37.28
Neutral
STOCH
14.68
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AU:XRO, the sentiment is Negative. The current price of 176.41 is below the 20-day moving average (MA) of 185.23, below the 50-day MA of 182.08, and above the 200-day MA of 168.65, indicating a neutral trend. The MACD of -1.93 indicates Positive momentum. The RSI at 37.28 is Neutral, neither overbought nor oversold. The STOCH value of 14.68 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AU:XRO.

Xero Limited Peers Comparison

Overall Rating
UnderperformOutperform
Sector (69)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
AUWTC
78
Outperform
$37.39B121.8213.73%0.19%19.03%37.24%
AUOCL
76
Outperform
AU$1.72B53.7136.92%1.00%7.00%19.41%
69
Neutral
¥230.62B14.127.50%2.70%9.13%8.47%
AUBVS
65
Neutral
AU$937.06M13.2657.04%3.06%18.63%
AUTNE
65
Neutral
€13.21B99.4137.44%0.50%17.52%20.78%
AUXRO
63
Neutral
$29.36B130.9512.98%20.44%26.78%
AUIRE
55
Neutral
AU$1.41B16.0527.46%1.30%-3.98%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
AU:XRO
Xero Limited
176.41
33.92
23.81%
AU:TNE
Technology One Limited
40.50
21.66
114.97%
AU:IRE
IRESS Limited
7.70
-0.63
-7.53%
AU:WTC
Wisetech Global
112.32
14.88
15.27%
AU:BVS
Bravura Solutions Limited
2.12
1.14
116.33%
AU:OCL
Objective Corporation Limited
17.84
6.03
51.06%

Xero Limited Corporate Events

Xero Limited Launches Share Purchase Plan to Raise A$200 Million
Jul 1, 2025

Xero Limited has opened its Share Purchase Plan (SPP) to eligible shareholders, allowing them to acquire up to A$30,000 worth of new shares without incurring brokerage or transaction costs. The SPP aims to raise approximately A$200 million, with the funds intended for general corporate and working capital purposes. The offer is designed to provide shareholders who missed the previous placement an opportunity to invest, potentially enhancing Xero’s capital base and market positioning.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$158.20 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Announces Quotation of New Securities on ASX
Jun 30, 2025

Xero Limited announced the application for quotation of 10,511,364 ordinary fully paid securities on the Australian Securities Exchange (ASX), effective from July 1, 2025. This move is part of a previously announced transaction, potentially impacting the company’s market presence and providing additional capital for growth and expansion.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$225.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Completes A$1.85bn Institutional Placement to Fund Melio Acquisition
Jun 25, 2025

Xero Limited has successfully completed a fully underwritten institutional placement, raising A$1.85 billion to fund its acquisition of Melio Limited. This strategic move aims to enhance Xero’s accounting and payments offerings, aligning with its 3×3 strategy and US expansion goals. The placement involved issuing approximately 10.5 million new shares to institutional investors, with trading expected to resume soon. Additionally, Xero plans to offer a share purchase plan to eligible shareholders, targeting to raise A$200 million for general corporate purposes.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$170.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Announces Proposed Securities Issue to Strengthen Capital Structure
Jun 25, 2025

Xero Limited has announced a proposed issue of securities, comprising 4,848,042 ordinary fully paid shares and 558,929 restricted stock units, scheduled for issuance on December 31, 2025. This move is part of the company’s strategy to enhance its capital structure, potentially impacting its market positioning by providing additional resources for growth and operations, which could have implications for stakeholders including investors and market analysts.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$170.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Announces Proposed Securities Issue to Bolster Growth
Jun 25, 2025

Xero Limited has announced a proposed issue of securities, which includes an offer under a securities purchase plan and a placement. The company plans to issue a total of 11,647,728 ordinary fully paid securities, with the offer closing on July 21, 2025, and the issue date set for July 28, 2025. This move is likely aimed at raising capital to support business operations and growth, potentially strengthening Xero’s market position and providing value to stakeholders.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$170.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Acquires Melio and Launches Capital Raising
Jun 24, 2025

Xero Limited has announced the acquisition of Melio Limited through a merger, alongside a capital raising initiative. This strategic move aims to enhance Xero’s market position by expanding its financial service offerings and increasing its operational capabilities. The equity raising involves an institutional placement of new shares and a share purchase plan for eligible shareholders, which is expected to bolster the company’s financial resources and support its growth strategy.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$170.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Acquires Melio to Boost US Market Growth
Jun 24, 2025

Xero Limited has announced its acquisition of Melio, a leading US SMB bill pay platform, for $2.5 billion. This strategic move aligns with Xero’s 3×3 strategy, aiming to enhance its US market proposition and accelerate global growth. The acquisition is expected to significantly boost Xero’s revenue growth in the US by integrating Melio’s payment solutions with Xero’s accounting capabilities, offering a comprehensive platform for SMBs. The transaction is funded through a mix of cash, equity, and credit facilities, and is anticipated to maintain Xero’s financial stability while facilitating future growth.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$170.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Initiates Trading Halt Ahead of Major Announcement
Jun 24, 2025

Xero Limited has requested a trading halt on its securities pending an announcement related to a corporate transaction and an associated equity raising. This move is expected to impact the company’s operations and market positioning, potentially affecting stakeholders as the details of the transaction unfold.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$170.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Announces Cessation of Certain Securities
Jun 23, 2025

Xero Limited announced the cessation of certain securities, including restricted stock units and options, due to various reasons such as the lapse of conditional rights and other unspecified factors. This announcement may impact the company’s capital structure and could have implications for its market positioning and stakeholder interests, as it reflects adjustments in the company’s financial instruments and equity plans.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$170.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Announces Quotation of New Securities on ASX
Jun 12, 2025

Xero Limited has announced the quotation of a total of 487,896 ordinary fully paid securities on the Australian Securities Exchange (ASX). This move, resulting from the exercise of options or conversion of other convertible securities, is expected to enhance the company’s market presence and provide additional liquidity for stakeholders.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$170.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Announces Quotation of New Securities on ASX
May 26, 2025

Xero Limited has announced the quotation of new securities on the Australian Securities Exchange (ASX). The announcement includes the issuance of a total of 1,718 ordinary fully paid securities on various dates in April and May 2025. This move is part of the company’s ongoing efforts to manage its capital structure and enhance liquidity, potentially impacting its market positioning and offering new opportunities for stakeholders.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$170.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Announces Cessation of Certain Securities
May 20, 2025

Xero Limited announced the cessation of certain securities, specifically restricted stock units, due to the lapse of conditional rights that were not satisfied. This cessation reflects adjustments in the company’s issued capital and may impact stakeholders by altering the distribution of securities within the company.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$170.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Achieves Strong FY25 Revenue Growth and Strategic Milestones
May 14, 2025

Xero Limited reported a 23% increase in operating revenue for FY25, reaching $2.1 billion, and achieved a 44.3% Rule of 40 outcome, reflecting strong execution and strategic investments. The company saw significant growth in adjusted EBITDA, free cash flow, and subscriber base, driven by product enhancements and strategic acquisitions, positioning it well in the financial technology sector. Xero’s focus on its 3×3 strategy and product innovations, such as the launch of GenAI-powered Just Ask Xero, underscores its commitment to delivering value to SMBs and maintaining its competitive edge.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$170.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Reports Strong FY25 Financial Growth with 23% Revenue Increase
May 14, 2025

Xero Limited announced its FY25 financial results, reporting a 23% increase in revenues to NZ$2.1 billion and a 30% rise in net profit to NZ$227.8 million. Despite the strong financial performance, the company does not plan to pay dividends for this period. The significant increase in net tangible assets per share, from NZ$2.68 to NZ$6.62, is attributed to higher cash and short-term deposit balances. This financial growth underscores Xero’s strengthening position in the market, reflecting its successful strategy in enhancing its platform and expanding its customer base.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$170.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Announces Quotation of New Securities on ASX
Apr 29, 2025

Xero Limited has announced the application for the quotation of 497,878 ordinary fully paid securities on the Australian Securities Exchange (ASX), with an issue date of March 31, 2025. This move is part of the company’s strategy to enhance its financial flexibility and potentially expand its market presence, reflecting a positive outlook for stakeholders and aligning with its growth objectives.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jul 11, 2025