Xero Limited (AU:XRO)
ASX:XRO
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Xero Limited
(Sydney:XRO)
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Rating:70Outperform
Price Target:
AU$78.00
â–²(3.83% Upside)
Action:UpgradedDate:02/05/26
The score is primarily supported by strong financial performance (high margins and accelerating free cash flow) and a positive earnings update with healthy growth/Rule of 40. Offsetting this, technical indicators point to a pronounced downtrend with weak momentum, and the valuation remains high (P/E ~51.8), which increases downside risk if growth or profitability disappoint.
Positive Factors
Recurring subscription model & ecosystem
Xero's core subscription model and broad partner ecosystem create predictable recurring revenue and platform stickiness. Integrations with banks, payments and third-party apps increase retention and upsell potential, supporting durable ARR growth and lower customer acquisition payback over months to years.
Negative Factors
Rising churn
An uptick in monthly recurring revenue churn, driven by growth in higher-churn segments, can erode net revenue retention and force higher acquisition or retention spending. Persistently higher churn would reduce long-term ARR durability and require sustained marketing or product investment to maintain growth rates.
Read all positive and negative factors
Positive Factors
Negative Factors
Recurring subscription model & ecosystem
Xero's core subscription model and broad partner ecosystem create predictable recurring revenue and platform stickiness. Integrations with banks, payments and third-party apps increase retention and upsell potential, supporting durable ARR growth and lower customer acquisition payback over months to years.
Read all positive factors
Xero Limited (XRO) vs. iShares MSCI Australia ETF (EWA)
Market Cap
AU$12.81B
Dividend YieldN/A
Average Volume (3M)753.32K
Price to Earnings (P/E)51.3
Beta (1Y)1.14
Revenue Growth19.01%
EPS Growth19.06%
CountryAU
Employees4,356
SectorTechnology
Sector Strength88
IndustrySoftware - Application
Share Statistics
EPS (TTM)0.69
Shares Outstanding170,591,400
10 Day Avg. Volume611,423
30 Day Avg. Volume753,320
Financial Highlights & Ratios
PEG Ratio3.13
Price to Book (P/B)13.19
Price to Sales (P/S)13.77
P/FCF Ratio32.91
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
AU$157.28Price Target Upside109.37% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering7
EPS Forecast (FY)1.5
Revenue Forecast (FY)AU$3.58B
Xero Limited Business Overview & Revenue Model
Company Description
Xero Limited, together with its subsidiaries, operates as a software as a service company in New Zealand, Australia, the United Kingdom, and internationally. The company offers Xero, an open platform that connects small businesses to a range of so...
How the Company Makes Money
Xero primarily makes money by selling subscriptions to its cloud-based accounting software. Customers (typically small businesses) pay recurring fees to use Xero under different plans/tiers that vary by features and usage limits; this subscription...
Xero Limited Earnings Call Summary
Earnings Call Date:Nov 12, 2025
(Q2-2026)
| % Change Since: |
Next Earnings Date:May 14, 2026
Earnings Call Sentiment Positive
Xero's earnings call presented a generally positive outlook, with strong revenue growth across major regions and successful strategic initiatives like the Melio acquisition. However, challenges such as increased churn and specific regional issues in Canada were noted. Despite these, the overall financial health and strategic positioning of Xero appear robust.Positive Updates
Strong Revenue Growth
Operating revenue grew 20% year-over-year to $1.194 billion, or 18% in constant currency, demonstrating sustained growth despite tough prior comparisons.
Negative Updates
Churn Increase
MRR churn was 1.09%, slightly increasing from the last half, reflecting targeted growth in higher-churn segments.
Read all updates
Q2-2026 Updates
Positive
Negative
Strong Revenue Growth
Operating revenue grew 20% year-over-year to $1.194 billion, or 18% in constant currency, demonstrating sustained growth despite tough prior comparisons.
Read all positive updates
Company Guidance
In the Xero Limited 2026 Interim Results Conference Call, significant guidance and metrics were shared. The company reported a 20% year-over-year increase in operating revenue, reaching $1.194 billion, with adjusted EBITDA rising by 12% to $351 million. The Rule of 40 outcome improved to 44.5%, highlighting strong cash generation. The ANZ region, including Australia and New Zealand, saw robust revenue growth, with Australia achieving a 19% increase. International markets, notably the U.K. and North America, showed impressive revenue growth of 24% and 21% respectively, despite challenges such as the absence of Xerocon revenue. The acquisition of Melio was highlighted as a strategic move to bolster U.S. operations, with Melio achieving 68% revenue growth. The company also reported a free cash flow margin of 26.9% and a $3.2 billion net cash position, reflecting disciplined financial management. Anticipated impacts from the Melio acquisition include a shift to a net debt position, which may affect the Rule of 40 performance in the latter half of fiscal '26. Overall, Xero demonstrated a strategic balance of revenue growth and profitability, underscoring a positive outlook for sustained financial performance.Xero Limited Financial Statement Overview
Summary
Income Statement
85
Very Positive
Balance Sheet
78
Positive
Cash Flow
82
Very Positive
| Breakdown | TTM | Mar 2025 | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 2.34B | 1.91B | 1.57B | 1.40B | 1.12B | 848.78M |
| Gross Profit | 1.92B | 1.70B | 1.43B | 989.43M | 810.40M | 616.76M |
| EBITDA | 644.63M | 697.39M | 510.98M | 105.70M | 49.51M | 77.61M |
| Net Income | 272.41M | 207.03M | 160.21M | -113.53M | -9.11M | 19.69M |
Balance Sheet | ||||||
| Total Assets | 6.10B | 4.06B | 2.95B | 2.33B | 2.35B | 2.02B |
| Cash, Cash Equivalents and Short-Term Investments | 4.21B | 2.12B | 1.53B | 1.05B | 870.02M | 1.11B |
| Total Debt | 1.18B | 1.22B | 1.22B | 1.07B | 949.03M | 951.21M |
| Total Liabilities | 2.09B | 2.06B | 1.56B | 1.34B | 1.31B | 1.28B |
| Stockholders Equity | 4.01B | 2.00B | 1.39B | 986.53M | 1.04B | 745.95M |
Cash Flow | ||||||
| Free Cash Flow | 970.56M | 799.66M | 585.17M | 102.22M | -4.43M | 57.90M |
| Operating Cash Flow | 983.11M | 812.82M | 591.76M | 381.52M | 240.83M | 221.42M |
| Investing Cash Flow | -412.54M | -403.75M | -242.01M | -304.90M | -430.04M | -197.97M |
| Financing Cash Flow | 2.08B | -177.17M | -93.26M | -303.10M | -61.52M | 544.46M |
Xero Limited Technical Analysis
Negative
75.12
Price Trends
82.70
Negative
100.45
Negative
133.92
Negative
Market Momentum
-2.97
Positive
43.62
Neutral
34.48
Neutral
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 75.12 is below the 20-day moving average (MA) of 78.36, below the 50-day MA of 82.70, and below the 200-day MA of 133.92, indicating a bearish trend. The MACD of -2.97 indicates Positive momentum. The RSI at 43.62 is Neutral, neither overbought nor oversold. The STOCH value of 34.48 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AU:XRO.
Xero Limited Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | AU$914.53M | 11.05 | 42.94% | 10.16% | 25.67% | 744.90% | |
70 Outperform | AU$12.81B | 51.29 | 9.08% | ― | 19.01% | 19.06% | |
68 Neutral | AU$8.78B | 91.29 | 31.77% | 0.83% | 18.16% | 16.25% | |
66 Neutral | AU$1.13B | 21.16 | 25.65% | 1.27% | 5.11% | 12.91% | |
62 Neutral | AU$12.67B | 54.90 | 9.30% | 0.32% | 15.51% | 17.38% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
59 Neutral | AU$1.28B | 19.91 | 19.57% | 2.47% | -4.10% | 341.80% |
* Technology Sector Average
AU:XRO
Xero Limited
75.12
-75.30
-50.06%
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26.84
-0.80
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38.02
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-10.46%
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Xero Limited Corporate Events
Xero Seeks ASX Quotation for New Ordinary Shares
Mar 18, 2026
Xero Limited has applied for quotation on the ASX of 546,776 new ordinary fully paid shares, issued on 11 and 16 March 2026. The new securities arise from the exercise or conversion of existing options or other convertible securities, modestly inc...
Xero Seeks ASX Quotation for New Batch of Ordinary Shares
Mar 10, 2026
Xero Limited has applied for quotation on the ASX of a small batch of newly issued ordinary fully paid shares, totaling 19,434 securities. The shares, issued on several dates between mid-December 2025 and late February 2026, arise from the exercis...
Xero Sets Out Key FY27 Governance and Reporting Dates
Feb 22, 2026
Xero Limited has outlined its proposed key dates for the financial year ending 31 March 2027, giving investors and stakeholders a clear timetable for governance and reporting events. The schedule includes a 9 July 2026 deadline for director nomina...
Xero Issues 65,266 Unquoted Restricted Stock Units Under Employee Incentive Plan
Feb 3, 2026
Xero Limited has notified the market that it has issued 65,266 unquoted restricted stock units under its employee incentive scheme, with the securities coded XROAK and dated 28 January 2026. The new equity awards, which are subject to transfer res...
Xero Issues Investor Briefing with Guidance on Use of Financial and Forward-Looking Information
Feb 2, 2026
Xero Limited has released an investor briefing presentation dated 3 February 2026, led by Chief Executive Officer Sukhinder Singh Cassidy and senior executives including the Chief Financial Officer, US CEO and Chief Product and Technology Officer,...
Xero Seeks ASX Quotation for New Tranche of Ordinary Shares
Jan 30, 2026
Xero Limited has applied to the ASX for quotation of a small tranche of new fully paid ordinary shares, totaling 51,876 securities issued on various dates between December 2025 and January 2026. The additional shares, arising from the exercise or ...
Xero Reports Lapse of Restricted Stock Units and Options
Jan 28, 2026
Xero Limited has notified the market of the cessation of several equity-based instruments, including a total of 54,279 restricted stock units and 994 options, which have lapsed because their vesting or performance conditions were not met or became...
Xero Releases 1.26 Million Melio Acquisition Shares From Escrow
Jan 14, 2026
Xero Limited has announced that 1,255,936 securities issued on 21 November 2025 as part of its acquisition of Melio have been released from voluntary escrow and are now freely tradable, in line with the terms of the previously disclosed transactio...
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.