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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)

71Outperform
Xero Limited shows strong financial performance and positive earnings call sentiment, driven by significant revenue and profitability growth. However, technical analysis indicates potential short-term weakness, and the stock's high valuation relative to earnings raises concerns about overvaluation. Monitoring debt levels and market conditions in Canada will be crucial for future performance.

Xero Limited (XRO) vs. S&P 500 (SPY)

Xero Limited Business Overview & Revenue Model

Company DescriptionXero Limited (XRO) is a leading global software company that specializes in providing cloud-based accounting software solutions for small and medium-sized businesses. Founded in 2006, Xero's platform is designed to simplify everyday business tasks, providing tools for invoicing, bank reconciliation, bookkeeping, and financial reporting. The company operates within the technology sector, focusing on delivering innovative solutions to enhance financial management and streamline business operations for its users worldwide.
How the Company Makes MoneyXero Limited primarily generates revenue through a subscription-based model, offering its accounting software services to businesses on a monthly or annual basis. The key revenue streams are the different tiers of subscription plans that cater to varying business needs, with features and pricing tailored to specific user requirements. Xero's earnings are also bolstered by its strategic partnerships with financial institutions and third-party application developers, which enhance the platform's functionality and integration capabilities. Additionally, Xero earns revenue through its ecosystem of add-ons and extensions, which allow users to customize their software experience with industry-specific tools and services.

Xero Limited Financial Statement Overview

Summary
Income Statement
Balance Sheet
Cash Flow
Breakdown
Mar 2024Mar 2023Mar 2022Mar 2021Mar 2020
Income StatementTotal Revenue
1.71B1.37B1.12B859.59M699.61M
Gross Profit
1.57B989.43M810.40M616.76M500.37M
EBIT
255.47M83.46M36.25M66.90M30.74M
EBITDA
510.98M183.23M220.83M189.50M153.37M
Net Income Common Stockholders
160.21M-110.93M19.69M
Balance SheetCash, Cash Equivalents and Short-Term Investments
1.53B1.12B937.17M1.11B532.32M
Total Assets
2.95B2.49B2.35B2.02B1.15B
Total Debt
1.22B1.15B1.02B948.60M493.73M
Net Debt
725.33M914.23M617.60M292.56M386.46M
Total Liabilities
1.56B1.44B1.31B1.27B726.19M
Stockholders Equity
1.39B1.06B1.04B743.90M419.40M
Cash FlowFree Cash Flow
346.54M102.22M57.90M27.06M
Operating Cash Flow
597.47M381.52M240.83M221.42M162.31M
Investing Cash Flow
-244.34M-297.92M-438.16M-200.49M-135.91M
Financing Cash Flow
-94.16M-296.16M-62.68M551.39M-50.33M

Xero Limited Technical Analysis

Technical Analysis Sentiment
Positive
Last Price173.86
Price Trends
50DMA
160.51
Positive
100DMA
167.77
Positive
200DMA
159.74
Positive
Market Momentum
MACD
3.96
Negative
RSI
65.79
Neutral
STOCH
84.85
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AU:XRO, the sentiment is Positive. The current price of 173.86 is above the 20-day moving average (MA) of 163.83, above the 50-day MA of 160.51, and above the 200-day MA of 159.74, indicating a bullish trend. The MACD of 3.96 indicates Negative momentum. The RSI at 65.79 is Neutral, neither overbought nor oversold. The STOCH value of 84.85 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AU:XRO.

Xero Limited Peers Comparison

Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
AUWTC
78
Outperform
AU$34.09B135.2514.13%0.20%-1.78%12.79%
AUCAR
74
Outperform
AU$13.80B53.758.51%2.23%17.01%-26.92%
AUXRO
71
Outperform
$26.78B132.7113.71%23.95%
AUTNE
70
Outperform
AU$10.57B89.1034.02%0.75%17.97%14.29%
AUREA
62
Neutral
$32.21B52.1937.91%0.89%20.28%118.95%
60
Neutral
$11.60B10.64-6.04%2.94%7.87%-11.74%
AUSEK
43
Neutral
$7.68B1,185.161.71%1.91%-14.38%-92.03%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
AU:XRO
Xero Limited
173.86
46.32
36.32%
AU:SEK
Seek Limited
22.30
-0.23
-1.03%
AU:TNE
Technology One Limited
32.40
16.25
100.62%
AU:CAR
CAR Group
37.19
1.87
5.28%
AU:REA
REA Group Ltd
247.98
57.76
30.37%
AU:WTC
Wisetech Global
101.88
0.33
0.33%

Xero Limited Earnings Call Summary

Earnings Call Date:May 14, 2025
(Q2-2025)
|
% Change Since: 0.00%|
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 Corporate Events

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.

Xero Limited Announces Sydney Registry Office Relocation
Apr 9, 2025

Xero Limited has announced a change in the address of its Sydney registry office, effective from 14 April 2025. The office will relocate to Liberty Place, Level 41, 161 Castlereagh St, Sydney NSW 2000, while telephone numbers and postal addresses remain the same. This change is part of the company’s operational updates and is authorized by the Company Secretary.

Xero Limited Announces Cessation of Restricted Stock Units
Apr 1, 2025

Xero Limited announced the cessation of 8,402 restricted stock units due to the lapse of conditional rights, as the conditions for these securities were not met or became incapable of being satisfied. This announcement may impact the company’s issued capital and reflects a strategic adjustment in its securities management.

Xero Limited Expands Capital Base with New Securities Quotation
Mar 28, 2025

Xero Limited announced the quotation of additional ordinary fully paid securities on the Australian Securities Exchange (ASX), with a total of 15,057 new securities issued on various dates in February and March 2025. This move reflects Xero’s ongoing efforts to strengthen its market presence and provide value to its stakeholders by expanding its capital base.

Xero Limited Announces New Quotation of Securities on ASX
Feb 24, 2025

Xero Limited has announced a new application for the quotation of its securities on the ASX. The company will have 27,678 newly quoted ordinary fully paid securities, issued following the exercise of options or conversion of other convertible securities. This move is part of Xero’s broader strategy to enhance its market presence and operational capabilities, potentially strengthening its position in the industry and offering benefits to its stakeholders.

Xero Limited Announces FY26 Key Financial Dates
Feb 17, 2025

Xero Limited has announced its key financial dates for FY26, ending on March 31, 2026. These dates include the board director nominations deadline on July 3, 2025, the annual meeting on August 21, 2025, and the release of half and full-year results on November 13, 2025, and May 14, 2026, respectively. This schedule provides stakeholders with a clear timeline for Xero’s financial reporting, reinforcing its commitment to transparency and strategic planning.

Xero Appoints Claire Bramley as New CFO
Feb 12, 2025

Xero Limited has appointed Claire Bramley as its new Chief Financial Officer, effective April 1, 2025. Bramley, who has a robust background in global finance and technology, previously served as CFO at Teradata and held leadership roles at HP Inc. Her appointment is expected to strengthen Xero’s executive team as they pursue their FY25-27 strategy. Xero’s CEO expressed confidence in Bramley’s ability to drive the company’s growth, given her expertise in financial transformation and her passion for purpose-driven leadership.

Xero Limited Advances Market Presence with New Securities Quotation
Feb 7, 2025

Xero Limited has announced the application for quotation of several batches of its fully paid ordinary securities on the Australian Securities Exchange (ASX). This move is part of ongoing financial strategies, potentially affecting the company’s market presence and investor relations by increasing its stock liquidity and accessibility.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.