Xero Limited (XRO) AI Stock Analysis

• Market Cap: $17.60B
• Dividend Yield: N/A
• Average Volume (3M): 753.32K
• Price to Earnings (P/E): 66.4
• Beta (1Y): 1.10
• Revenue Growth: 19.01%
• EPS Growth: 19.06%
• Country: AU
• Employees: 4,356
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 0.72
• Shares Outstanding: 169,911,870
• 10 Day Avg. Volume: 611,423
• 30 Day Avg. Volume: 753,320
• PEG Ratio: 2.85
• Price to Book (P/B): 11.99
• Price to Sales (P/S): 12.52
• P/FCF Ratio: 50.09
• Enterprise Value/Market Cap: 1.32
• Enterprise Value/Revenue: 9.91
• Enterprise Value/Gross Profit: 12.11
• Enterprise Value/Ebitda: 36.05
• 1Y Price Target: $192.09
• Price Target Upside: 85.36% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 10
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 69 Neutral
• Price Target: AU$113.00 ▲(9.04% Upside)

Xero Limited's overall stock score reflects strong financial performance and positive earnings call sentiment, offset by bearish technical indicators and high valuation concerns. The company's strategic initiatives and robust revenue growth are significant strengths, but technical and valuation metrics suggest caution.

Positive Factors

Sustained Revenue Growth

Consistent ~20% top-line growth reflects durable demand for Xero's subscription-based accounting platform across markets. Recurring SaaS revenue supports predictable cash flows, funds product investment, and enables scale advantages in its advisor and app ecosystem over the medium term.

Strong Cash Generation

Robust operating and free cash flow metrics indicate high cash-conversion efficiency for a high-margin SaaS business. Strong FCF provides flexibility to fund acquisitions, product development, and debt service, cushioning the company through cycles and supporting long-term strategic moves.

Healthy SaaS Profitability Metrics

A Rule of 40 above 40% demonstrates a favorable balance of growth and profitability, signaling resilient unit economics. High gross margins and improving EBITDA imply sustainable operating leverage as Xero scales, supporting durable margin expansion over the medium term.

Negative Factors

Rising Leverage from M&A

The move toward net debt following Melio increases financial leverage and reduces balance sheet flexibility. Elevated debt can constrain capital allocation, raise interest obligations, and limit the firm's ability to invest or weather downturns, a lasting governance and risk consideration.

Increasing Customer Churn

Rising churn, especially as Xero pursues higher-churn segments, weakens lifetime value and forces higher acquisition spend to sustain net subscriber growth. Persistently elevated churn would erode unit economics and pressure long-term margin and cash-flow sustainability.

Regional Execution Risk

Underperformance in specific markets like Canada highlights geographic execution and go-to-market risks. Combined with cross-border integration of acquisitions such as Melio, this can increase operational complexity, slow international scaling, and strain management bandwidth over the medium term.

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 solutions, which helps to manage their finances. It also provides Xero mobile app; and accountant/bookkeeper tools, including Xero HQ, Xero Practice Manager, Xero Workpapers, and Xero Cashbook or Xero Ledger. Xero Limited was incorporated in 2006 and is headquartered in Wellington, New Zealand.

How the Company Makes Money

Xero generates revenue primarily through subscription fees for its cloud-based accounting software. The company offers various pricing tiers based on the features and services included, catering to businesses of different sizes and needs. Additionally, Xero earns revenue through add-on services and integrations with third-party applications, as well as through partnerships with financial institutions and accountants who promote its platform to their clients. Continuous investment in product development and marketing also play a significant role in driving customer acquisition and retention, thereby contributing to its overall earnings.

Xero Limited Financial Statement Overview

Summary

Xero Limited shows strong financial health with robust revenue growth and effective cost management. The company has a solid balance sheet with moderate leverage, although increasing debt levels require careful management. Cash flow is strong, providing flexibility for future investments.

Income Statement

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

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

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.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 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

• Technical Analysis Sentiment: Negative
• Last Price: 103.63
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Positive
• STOCH: 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 103.63 is below the 20-day moving average (MA) of 110.11, below the 50-day MA of 119.11, and below the 200-day MA of 156.48, indicating a bearish trend. The MACD of -4.16 indicates Positive momentum. The RSI at 25.91 is Positive, neither overbought nor oversold. The STOCH value of 13.63 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

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
WTC	72 Outperform	$22.39B	71.84	12.61%	0.32%	15.51%	17.38%
BVS	71 Outperform	AU$1.08B	14.61	65.33%	10.16%	25.67%	744.90%
XRO	69 Neutral	$17.60B	66.44	8.14%	―	19.01%	19.06%
OCL	65 Neutral	AU$1.61B	45.09	35.71%	1.27%	5.11%	12.91%
IRE	65 Neutral	€1.57B	17.80	26.73%	2.47%	-4.10%	341.80%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
TNE	61 Neutral	AU$8.92B	64.70	32.67%	0.83%	18.16%	16.25%

Xero Limited Corporate Events

Xero Releases 1.26 Million Melio Acquisition Shares From Escrow

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 transaction. The company noted that this regulatory notice was lodged later than required under ASX Listing Rules due to an administrative oversight, highlighting a compliance lapse even as the post-acquisition integration phase sees these shares move into the market, potentially increasing Xero’s free float and liquidity for investors.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$194.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Issues New Shares to Finalise Melio Acquisition

Xero Limited has issued 49,032 fully paid ordinary shares to complete the previously announced acquisition of Melio Ltd, marking the share-based component of the transaction’s consideration. The company confirmed that the new shares were issued without a prospectus under the relevant Australian Corporations Act provisions, that it remains compliant with its financial reporting and continuous disclosure obligations, and that there is no excluded information that would affect the market, signalling a routine, regulatorily compliant equity issuance to support its expansion in small-business payments.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$194.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Seeks ASX Quotation for Additional 49,032 Ordinary Shares

Xero Limited has applied for quotation on the ASX of 49,032 new ordinary fully paid shares, to be issued on 31 December 2025. The additional securities, which stem from previously disclosed transactions, will modestly increase the company’s free float and share capital, potentially enhancing liquidity for investors while signalling ongoing use of equity-related arrangements within its capital management strategy.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$194.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero and Melio Announce Virtual Product Demonstration Session

Xero Limited has announced a virtual briefing session in collaboration with Melio, scheduled for February 3, 2026. The session will feature product demonstrations and educational segments aimed at investors and analysts, followed by a live Q&A. This initiative underscores Xero’s commitment to engaging with stakeholders and showcasing its product capabilities, potentially enhancing its market positioning and stakeholder relations.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$200.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Expands Capital Base with New Securities Quotation

Xero Limited has announced the quotation of additional securities on the Australian Securities Exchange (ASX), with a total of 97,478 ordinary fully paid shares to be quoted. This move is part of the company’s ongoing efforts to enhance its financial flexibility and support its growth strategy, potentially impacting its market positioning by increasing its capital base.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$200.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Limited Issues New Restricted Stock Units

Xero Limited has announced the issuance of 898,723 restricted stock units as part of a previously disclosed transaction. This move, which involves unquoted securities not intended for ASX listing, reflects the company’s ongoing strategy to manage its equity and incentivize stakeholders, potentially impacting its financial structure and market positioning.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$194.00 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 Restricted Stock Units

Xero Limited announced the cessation of 91,229 restricted stock units due to the lapse of conditional rights, as the conditions were not met or became incapable of being satisfied. This cessation of securities may impact the company’s capital structure and could have implications for stakeholders, reflecting on Xero’s operational adjustments and strategic focus within the competitive software industry.

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 Expands with Acquisition of Melio Ltd

Xero Limited has issued over 4.3 million fully paid ordinary shares as part of its acquisition of Melio Ltd, a move announced in October 2025. This strategic acquisition aims to enhance Xero’s offerings and market position in the small business platform industry, with the shares being issued without disclosure under specific provisions of the Corporations Act.

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 Limited Announces Quotation of New Securities on ASX

Xero Limited has announced the quotation of 4,304,407 fully paid ordinary securities on the Australian Securities Exchange (ASX) as part of a previously announced transaction. This move is expected to enhance the company’s market presence and provide additional liquidity for stakeholders, reflecting Xero’s ongoing commitment to expanding its financial capabilities and market reach.

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 Limited Director Increases Shareholding

Xero Limited announced a change in the director’s interest, with David Thodey acquiring 833 ordinary shares through an on-market trade, increasing his total holdings to 11,005 shares. This acquisition reflects a continued investment in the company by its leadership, potentially signaling confidence in Xero’s future performance and stability in the market.

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 Limited Director Increases Shareholding

Xero Limited announced a change in the director’s interest notice, specifically concerning Mark Cross, a director and shareholder of Alpha Investment Partners Limited. On November 18, 2025, Cross acquired 820 ordinary shares at a price of AU$120.01 per share, increasing his total holdings to 5,292 shares. This transaction was conducted as an on-market trade, reflecting ongoing engagement and investment by company leadership, which could influence stakeholder perceptions and market confidence.

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 Limited Announces Quotation of New Securities on ASX

Xero Limited has announced the application for the quotation of additional securities on the Australian Securities Exchange (ASX). The issuance of these securities, resulting from the exercise of options or conversion of convertible securities, reflects the company’s ongoing efforts to enhance its financial structure and market presence. This move is likely to impact Xero’s operational capabilities and strengthen its position in the competitive financial software market.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$210.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.

Xero Releases FY26 Interim Results Presentation

Xero Limited has released its FY26 Interim Results Investor Presentation, which is available for viewing through a webcast. This announcement is part of Xero’s ongoing efforts to keep investors informed about its financial performance and strategic direction. The presentation may provide insights into the company’s operational progress and market positioning, potentially impacting stakeholders’ perceptions and decisions.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$235.00 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 Revenue Growth and Strategic Milestones in H1 FY26

Xero Limited reported a 20% increase in revenue for the first half of fiscal year 2026, reaching $1.2 billion, and maintained a Rule of 40 outcome of 44.5%. The company demonstrated strong growth in both its domestic and international markets, with significant subscriber additions and increased average revenue per user. The acquisition of Melio, a US SMB bill pay platform, is expected to accelerate growth and enhance value for US customers. Xero’s strategic focus on AI innovation, particularly through its JAX financial superagent, positions it to continue delivering value and maintaining its competitive edge in the SaaS industry.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$235.00 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 Financial Growth in FY26 Interim Results

Xero Limited reported a significant financial performance improvement for the six months ending September 2025, with a 20% increase in revenues to NZ$1,194,193,000 and a 42% rise in net profit to NZ$134,784,000. Despite the strong financial results, the company decided not to declare or pay any dividends for the period, attributing the increase in net tangible assets per share to higher cash and short-term deposit balances.

The most recent analyst rating on (AU:XRO) stock is a Buy with a A$235.00 price target. To see the full list of analyst forecasts on Xero Limited stock, see the AU:XRO Stock Forecast page.