Xero Limited (ASX:XRO): FY27 Outlook Lift Follows Revenue Expansion and Melio Integration

Aditi Sarkar

12 November 2026 06:33 PM AEDT

Xero Limited (ASX:XRO): FY27 Outlook Lift Follows Revenue Expansion and Melio Integration

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Highlights

H1 FY27 Revenue rose 46% to NZD 1.75 billion.
Adjusted EBITDA increased 3% to NZD 361.6 million.
FY27 revenue guidance increased to NZD 3.77–3.83 billion.
The board approved an on-market buyback of up to AUD 1 billion.

Xero Limited (ASX:XRO) supplies cloud-based accounting, Payroll and payments software to small businesses and their advisers. Its half-year report for the six months ended 30 September 2026 combined customer growth with the incorporation of payments company Melio. The results also included updated full-year guidance and a capital-management decision, making reported and pro-forma comparisons important to understanding performance.

Revenue Growth and Different Profit Measures

Xero Limited (ASX:XRO) reported H1 FY27 Operating Revenue of NZD 1.745 billion, an increase of 46% from NZD 1.194 billion in H1 FY26. Revenue rose 41% in constant currency. On a pro-forma basis, incorporating Melio into the preceding comparison period, growth was 27%. These measures answer different questions: the statutory comparison captures the acquisition’s effect, while pro-forma figures improve comparability of the combined business.

Adjusted Earnings before interest, tax, Depreciation and Amortisation reached NZD 361.6 million, up 3% on a reported basis and 23% pro-forma. Reported Operating Income declined 9% to NZD 124.5 million, and statutory net profit after tax decreased to NZD 18.5 million. The inclusion of Melio, which remains loss-making, affected reported profits despite increasing revenue scale. It is therefore important not to treat the revenue growth rate as a corresponding earnings growth rate.

Customers, Payments and Cash Generation

Xero Limited (ASX:XRO) added 226,000 net customers in H1 FY27, bringing its total to approximately 5.146 million. Average revenue per customer rose 25% to NZD 62.21. Annualised monthly Recurring Revenue reached NZD 3.841 billion, a 41% increase. Customer additions, retention and higher average revenue all contributed to the company’s operating results.

Free Cash Flow was NZD 238.1 million. That represents a 26% decline on the reported H1 FY26 comparison, but a 32% increase on a pro-forma basis. The distinction matters because the comparative period did not contain an equivalent contribution from Melio. Xero’s Australia and New Zealand revenue increased 20% to NZD 795 million, while international revenue rose 79% to NZD 950 million, with Acquisition effects influencing the latter figure.

Upgraded FY27 Guidance and Capital Allocation

Xero Limited (ASX:XRO) raised FY27 revenue guidance to NZD 3.77 billion–3.83 billion from NZD 3.62 billion–3.73 billion. It also revised adjusted EBITDA guidance to NZD 880 million–920 million, compared with NZD 860 million–920 million previously. Management attributed the revenue revision principally to Melio payments performance and a foreign-exchange benefit, while noting expectations for continued operating efficiencies.

The board separately approved an on-market share buyback of up to AUD 1 billion over approximately 12 months. This is a capital-allocation programme, not a statement that the full amount has already been spent. At 30 September 2026, Xero held NZD 1.15 billion in cash and short-term deposits. The company said execution of the programme would be discretionary and subject to market conditions.

AI Development and Execution Risks

Xero Limited (ASX:XRO) also announced Xforce, which pairs engineering and consulting support with tools intended to help accounting practices automate workflows. The service was in Beta with selected design partners in Australia, New Zealand and the United Kingdom. This is an announced product-development initiative, not evidence of completed mass-market adoption.

The group’s FY28 aspiration is revenue above NZD 4.6 billion, excluding revenue synergies, while Melio is expected to reach adjusted EBITDA run-rate breakeven in H2 FY28. These are management expectations rather than achieved financial results. Integration, payment-volume growth, product adoption and profitability remain key execution variables.

Key Insights

Xero Limited (ASX:XRO) reported H1 FY27 customer and revenue expansion alongside lower statutory profit and acquisition-related comparison effects. Updated FY27 guidance, a proposed AUD 1 billion buyback and AI workflow initiatives frame the next phase, while Melio profitability and integration remain outstanding considerations.

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