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Highlights

  • Annual net profit up 30% to NZ$227.8 million, driven by price increases and subscriber growth.

  • Revenue climbed 23% to NZ$2.10 billion, with average revenue per user up 15%.

  • Free cash flow jumped 48%, but no dividend declared as Xero eyes further U.S. expansion.

Cloud accounting software provider Xero (ASX:XRO) has reported a 30% increase in annual profit, buoyed by subscription growth and price rises, even as foreign exchange tailwinds gave the bottom line an added lift.

The New Zealand-based company announced a net profit of NZ$227.8 million (US$134.4 million) for the 12 months to March, up from NZ$174.6 million in the prior year. While the result was robust, it came in below analyst expectations of NZ$246 million, according to data from Visible Alpha.

Revenue for the year surged 23% to NZ$2.10 billion, matching analyst forecasts, as the company continued to expand its global footprint. Subscriber numbers rose 6% to 4.4 million, and Xero’s average revenue per user (ARPU) climbed 15% to NZ$45.08, reflecting successful price adjustments for its cloud-based software products.

When adjusted for currency fluctuations, group revenue growth was still significant at 20% year-over-year.

Xero also recorded a 28% rise in EBITDA to NZ$638.5 million, with its operating-expense-to-revenue ratio falling to 71.8%—better than its 73% guidance from the prior year. 

Free cash flow stood out with a 48% increase to NZ$506.7 million. However, the company opted not to declare a dividend.

Looking ahead, Xero forecasts an operating expense ratio of approximately 71.5% for fiscal 2026, with higher spending expected in the first half of the year. This reflects planned investments and the timing of business activities, including a renewed push into the competitive U.S. market.

Analysts had anticipated an uptick in marketing expenditure in the upcoming year, particularly as the company seeks to scale in North America.