WELLINGTON, May 15, 2026, 06:09 NZST
Xero Limited shares tumbled 9.04% in Sydney trading, landing at A$73.68 by Thursday’s close. The Wellington-based accounting software company posted a 27% slide in annual net profit, which outweighed its 31% revenue jump. The board is moving ahead with plans to buy back as much as A$550 million in stock to counter staff-equity dilution.
The selloff stands out—FY26 was the first real gauge of how Xero’s $3 billion Melio acquisition would land with investors. Last year, Xero agreed to pick up the U.S.-Israeli payments outfit, aiming to bolt payments onto its accounting platform and ramp up its stateside expansion. At the time, Reuters put Xero’s U.S. sales at just 7%.
Investors shrugged off the headline revenue figure and zeroed in on profits instead. Citi’s Siraj Ahmed flagged that profit fell short of forecasts—higher interest and tax expenses weighed on the result. Still, adjusted earnings topped consensus by 2%. Ahmed described it as “a strong result,” highlighting gains in the U.S. and Melio’s standout showing. Capital Brief
Xero posted operating revenue of NZ$2.753 billion for the year ended March 31, and turned in adjusted EBITDA of NZ$757.4 million—a rise of 18%. That figure strips out interest, tax, depreciation, amortisation, plus certain non-cash and one-off items. Net profit after tax slid to NZ$167.4 million from NZ$227.8 million, as operating income slipped 13% following NZ$50.6 million in Melio-related transaction costs.
Sukhinder Singh Cassidy, the chief executive, called this year a milestone for Xero’s “3×3” push—shorthand for its focus on accounting, payments, and payroll in Australia, the UK, and the U.S. She pointed to the addition of 110,000 new U.S. customers, among them Melio direct payments users, and noted that Xero now links accounting and payments in one place stateside, leaving what she called “single-job workflows” behind. Brandfolder
The board’s buyback targets a single goal: offsetting dilution, not handing out excess cash. Xero plans to purchase as much as A$550 million worth of shares in FY27, aiming to counterbalance the impact from staff share-based pay—covering both recent and older grants that are expected to vest between FY27 and FY29.
Xero is forecasting group revenue between NZ$3.62 billion and NZ$3.73 billion for FY27, alongside adjusted EBITDA in a range of NZ$860 million to NZ$920 million. That outlook factors in as much as NZ$55 million in additional U.S. brand investment. The company noted adjusted EBITDA will likely tilt more toward the second half than it typically does.
Xero rolled out XeroForce, a new invite-only alpha tool aimed at small businesses and accountants. Users can build custom finance agents using natural-language prompts, no coding required. “End-to-end financial operations” is at the core, according to Diya Jolly, the company’s chief product and technology officer, who says the platform focuses on automating financial workflows. Xero
Xero’s move into the U.S. tightens its rivalry with Intuit’s QuickBooks, the dominant force in small-business accounting software. According to Forbes Advisor, both Xero and QuickBooks are top-tier players in this space, while Reuters noted last year that Intuit rolled out AI agents for its QuickBooks Online and Payroll products and hiked subscription fees.
The trouble for Xero: Melio’s revenue keeps climbing, but it’s dragging on group margins. Payments revenue from Melio comes in with thinner gross margins than Xero’s core subscription business. Group gross margin slid to 83.9% from 89.0%. The annual report flags strategic execution, AI, competition, M&A integration, and cyber security as major risk factors too.
So, the bigger question now isn’t if Xero can expand, but what price it’ll pay to do it. Xero maintains that Melio is on track to hit adjusted-EBITDA break-even, run-rate, in the back half of FY28. Still in play is the “Rule of 40” target: management insists the merged company can deliver, blending constant-currency revenue growth with its free-cash-flow margin.
