Xero Limited (ASX:XRO) Shares Trail Over the Year - What Investors Should Know Now

Sonal Goyal

06 October 2026 06:41 PM AEDT

Xero Limited (ASX:XRO) Shares Trail Over the Year - What Investors Should Know Now

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Xero Limited (ASX:XRO), the cloud accounting platform provider, has seen its share price fall materially over the past year even as Operating Revenue grew. Xero Limited (ASX:XRO) shares were priced at $55.71, down 1.42% in today’s session, and are down 64.67% over the past year. The company reported full-year results to 31 March 2026 on 14 May 2026, including its first full period reflecting the Melio acquisition.

For context, the S&P/ASX 200 Info Tech [XIJ] (INDEXASX: XIJ) stood at 1,684.00, down 2.90% (−50.30 points) today as of 6 Oct, and is down 42.73% over the past year. Meanwhile, the S&P/ASX 200 stood at 8,735.70, up 0.57% (+49.30 points) today, and is down 2.74% over the past year.

Business Model and Operational Footprint

Xero is a global small Business platform that combines accounting, Payroll and payments. It earns subscription revenue from small businesses and from accountants and bookkeepers who use the platform. The company is headquartered in Wellington, New Zealand, and is listed on the ASX.

Its three largest markets are Australia, the United Kingdom and the United States, covered by what it calls the “Win the 3x3” strategy. At 31 March 2026 it had 4.92 million customers, including 2.8 million in Australia and New Zealand and 2.2 million in international markets. The Acquisition of Melio, a US small business bill-pay platform, extends the product into Accounts Payable and payments.

Sector Dynamics

The S&P/ASX 200 Info Tech index is down 42.73% over the past year, and several peers have fallen by similar or greater margins, including Objective Corporation Ltd (ASX:OCL) at 71.01% and Wisetech Global Ltd (ASX:WTC) at 63.87%.

Small business software providers face competition from other accounting platforms, payments providers and AI-native tools. Compliance requirements such as Making Tax Digital in the UK influence demand, while pricing models are shifting toward bundled AI features and usage-based charges.

FY26 Results Release

All figures below are in NZD. Operating revenue was $2.8 billion, up 31% (28% in constant currency). Customers rose 11% to 4.92 million, with 506,000 net additions. Annualised monthly Recurring Revenue rose 37% to $3.3 billion. Average revenue per customer was $55.44, up 23%, and monthly churn was 1.14%.

Adjusted EBITDA was $757.4 million, up 18%, and EBITDA was $789.5 million. Free Cash Flow was $554.0 million, up 9%. Operating Income fell 13% to $316.1 million and net profit after tax fell 27% to $167.4 million, reflecting Melio-related costs, including $50.6 million in transaction costs. Gross Margin was 83.9% against 89.0% a year earlier.

In the US, core revenue rose 240%, or 30% excluding Melio. The company announced XeroForce, a natural language AI agent builder in invite-only alpha, an agreement with Anthropic and a new Ultra plan in Beta in Australia. The Board authorised purchases of up to A$550 million of shares in FY27 to offset dilution from share-based compensation. FY27 guidance is operating revenue of $3,620 million to $3,730 million and adjusted EBITDA of $860 million to $920 million.

By region, Australia and New Zealand revenue rose 18% (17% in constant currency) to $1.4 billion, with 2.8 million customers and average revenue per customer of $48.89. International revenue rose 47% to $1.4 billion (25% organic excluding Melio), with 2.2 million customers and average revenue per customer of $63.74. UK revenue rose 26% and UK customers rose 14%, including early flow-through from Making Tax Digital for Income Tax.

On AI, Xero reports that JAX has reconciled more than 40 million transactions with reported accuracy of 97%, that adoption of new generative AI features reached 500,000 users, and that it has agreements with Anthropic and OpenAI. FY27 guidance also assumes product Capitalisation of 40% to 45% and Depreciation and Amortisation of around $465 million. Xero reports total customer lifetime value of $21.0 billion and expects Ultra to reach general availability in Australia in late June.

Growth Catalysts and Critical Operating Risks

Growth catalysts include Melio’s payments capabilities, US customer growth, AI products such as Just Ask Xero (JAX), Ultra for mid-sized businesses and the company’s FY28 aspiration to more than double FY25 revenue. The share buyback to offset dilution is a further capital management item.

Operating risks include lower net profit and gross margin after the Melio acquisition, a pro-forma Rule of 40 result of 36.0% that the company expects to remain below 40% before FY28, and a weighting of adjusted EBITDA to the second half of FY27. Incremental US Brand spend of up to about NZ$55 million is included in guidance. Exposure to AI-driven disruption, competitive pressure and currency movements across New Zealand, Australian, UK and US dollars are additional variables.

Where Things Stand

Xero’s reported revenue and customer figures rose in FY26, while profit measures and the share price moved lower. The next milestones are first-half FY27 results and progress against the stated FY27 guidance range.

FAQs

Q: What did Xero Limited (ASX:XRO) report for FY26?

A:Operating revenue of NZ$2.8 billion, up 31%, adjusted EBITDA of NZ$757.4 million, up 18%, free cash flow of NZ$554.0 million and net profit after tax of NZ$167.4 million, down 27%.

Q: What is the Melio acquisition?

A:Melio is a US small business bill-pay platform acquired by Xero, extending its product from accounting into accounts payable and payments.

Q: How have Xero (ASX:XRO) shares performed over the past year?

A:Shares are down 64.67% over twelve months and were down 1.42% today at $55.71, compared with a 42.73% one-year decline in the S&P/ASX 200 Info Tech index.

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