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Highlights:

  • Xero (XRO.AX) rebounds after early dip, closes at A$182.05 amid broker upgrades
  • U.S. subscriber growth outpaces expectations, with 35k organic additions in North America
  • Goldman Sachs, Macquarie, and Morgans raise price targets to A$204–A$215 range

Shares of Xero Ltd (ASX: XRO) recovered on Thursday, reversing early session losses to end higher after investors digested the company’s FY25 earnings results and forward guidance. While the initial market reaction was negative due to underwhelming earnings and expense guidance, sentiment shifted as brokers highlighted stronger-than-expected international performance, particularly in the United States.

The cloud-based accounting platform provider reported weaker near-term financial projections, with FY25 earnings and spending plans falling short of consensus estimates. However, analysts pointed to the company’s international growth — especially in North America — as a key offset. The U.S. business delivered its highest-ever organic subscriber growth, adding 35,000 users, despite ongoing challenges in the Canadian market.

Goldman Sachs noted that international revenue and profit exceeded expectations by 2% and 6%, respectively. It acknowledged the NZ$45 million in non-recurring costs but suggested future U.S. brand-building investment, estimated at NZ$100 million annually from FY27, could underpin growth once the product is go-to-market ready. The broker retained its buy rating and increased its price target to A$205, reflecting a 12.6% upside from the current share price of A$182.05.

Morgans upgraded its rating from hold to add, citing improved sales momentum and disciplined cost control. It lifted its price target to A$215, implying potential upside of 18%. Meanwhile, Macquarie maintained its outperform rating with a target of A$204, highlighting double-digit subscriber growth in the UK, South Africa, and continued U.S. product development.

Despite concerns around rising marketing and brand expenditure in the years ahead, broker commentary emphasized Xero’s ability to make data-driven investment decisions and allocate capital with discipline. The market will now watch how the company balances near-term cost pressures against longer-term international expansion.