WELLINGTON, May 15, 2026, 06:09 NZST
Xero Limited’s shares closed 9.04% lower in Sydney after the Wellington-based accounting software firm reported a 27% drop in annual net profit, overshadowing a 31% revenue gain and a board plan to buy up to A$550 million of shares to offset staff-equity dilution. The stock ended Thursday at A$73.68.
The selloff matters because FY26 was an early market test of Xero’s Melio bet. Xero agreed last year to buy the U.S.-Israeli payments provider for up to $3 billion, a deal meant to add payments to accounting software and speed its push into the U.S., where Reuters reported Xero then made about 7% of sales.
Investors looked past the top-line number and focused on the profit line. Citi analyst Siraj Ahmed said the profit result missed estimates because of higher interest and tax costs, while adjusted earnings beat consensus by 2%; he still called it “a strong result” given U.S. momentum and Melio’s performance. Capital Brief
Xero reported NZ$2.753 billion in operating revenue for the year to March 31 and adjusted EBITDA of NZ$757.4 million, up 18%. Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation with some non-cash and one-off items removed. Net profit after tax fell to NZ$167.4 million from NZ$227.8 million, while operating income dropped 13% after NZ$50.6 million in Melio-related transaction costs.
Chief Executive Sukhinder Singh Cassidy framed the year as a step-up in the company’s “3×3” strategy, which targets accounting, payments and payroll across Australia, the United Kingdom and the United States. She cited 110,000 new U.S. customers, including Melio direct payments customers, and said Xero had moved “beyond single-job workflows” in the U.S. by joining accounting and payments on one platform. Brandfolder
The board’s buyback is narrow in purpose, not a broad capital return. Xero said it would buy up to A$550 million of shares in FY27 to offset dilution tied to staff share-based compensation, including historical share issuance expected to vest over FY27 to FY29.
For FY27, Xero guided to group revenue of NZ$3.62 billion to NZ$3.73 billion and adjusted EBITDA of NZ$860 million to NZ$920 million. The company said that includes up to about NZ$55 million of extra U.S. brand spending, with adjusted EBITDA expected to be more weighted than usual to the second half.
Xero also launched XeroForce, an invite-only alpha product that lets small businesses and accountants build custom finance agents with natural-language prompts. Diya Jolly, Xero’s chief product and technology officer, said the tool is built for “end-to-end financial operations” and designed to automate financial workflows without code. Xero
The U.S. push puts Xero deeper into a market where Intuit’s QuickBooks is the closest yardstick for small-business accounting software. Forbes Advisor describes Xero and QuickBooks as two of the biggest names in accounting software, and Reuters reported last year that Intuit had launched AI agents for QuickBooks Online and Payroll while raising subscription prices.
But the risk is that Melio keeps lifting revenue while weighing on margins. Xero said Melio’s payments revenue has a lower gross-margin profile than Xero’s subscription revenue, and group gross margin fell to 83.9% from 89.0%; its annual report also listed strategic execution, AI, competition, M&A integration and cyber security among key risks.
That leaves the next phase less about whether Xero can grow and more about the cost of that growth. The company still says Melio should reach adjusted-EBITDA break-even on a run-rate basis in the second half of FY28, and that the combined business can support its “Rule of 40” target — a software measure that adds constant-currency revenue growth to free-cash-flow margin.
