The Xero earnings report 2025 has detailed how the company experienced a massive growth during the first half of FY26. Operating revenue increased by 20% on a year-to-year basis to NZ$1.19 billion, which was driven by strong demand across its ANZ, UK, and international markets.
The Adjusted EBITDA reached NZ$351 million, which is an increase of 12% and the free cash flow was NZ$321 million, which is a 65% rise compared to last year. The company’s Rule of 40 performance has been continuously above 40%, showing great execution and excellent cash generation.
Xero earnings report 2025 shows 20% revenue growth to NZ$1.19b.
What Were The Key Drivers Behind The FY26 Results?
For Xero FY26, which was the new revenue stream from Australia and New Zealand, the company reported growth in both regions. Australia made NZ$546 million, which is a 19% increase, and New Zealand made NZ$118 million, which is an 8% rise.
The revenue from international markets went up by 24% to NZ$530 million, where the UK contributed the most at NZ$339 million. The number of total subscribers went up to 4.59 million, which is a 10% increase from the previous year. The average revenue per user (ARPU) rose by 15% to NZ$49.63, which was mainly due to price changes and platform enhancements.
How Did The Melio Acquisition Impact Performance?
The Xero interim results 2025 indicate that the Melio acquisition was completed in October 2025. This merger will enhance Xero’s foothold in the US market through an amalgamation of payments and accounting solutions. Melio’s total payment value accounted for a yearly revenue growth of 68% with NZ$26 billion.
The pro-forma numbers indicate that the group revenue is NZ$1.38 billion and the Rule of 40 score is 39.8%. The acquisition has also resulted in a net cash increase of NZ$2.7 billion, which is why the company is able to maintain such a solid balance sheet with a 0.9x net debt-to-EBITDA ratio.
Pro-forma results show NZ$1.38b revenue, 39.8% Rule of 40 score.
Xero Expands AI And Product Innovation Initiatives
Xero is pushing forward its AI strategy by means of JAX, its financial super-agent platform. A partnership was formed with OpenAI to bring the financial insights powered by AI and the automated reconciliation features together.
Xero further widened the market of Syft Analytics tools and brought Xero Simple to the UK to help the Making Tax Digital compliance. All these technologies aim at enhancing user productivity as well as providing firms with better insights, thus solidifying Xero’s position as an honest small business platform.
Strong Operating Efficiency And Cash Flow Generation
Cost of operations continued to be a significant strength in the Xero FY26 results. Although the acquisition of Melio contributed to transaction costs, the operating expense ratio dropped to 70.5% of revenue. Product development and marketing costs increased slightly, giving priority to new products and digital marketing scaling.
The adjusted EBITDA margin of the company was 29.4%, while the free cash flow margin went up to 26.9%. The net profit was got to NZ$134.8 million, which was a 42% increase when compared to the previous year.
Xero’s adjusted EBITDA hit 29.4%, profit up 42% to NZ$134.8m.
What Is The Outlook For FY26 And Beyond?
Xero has an expectation that its financial performance will still be strong for the remainder of the FY26 fiscal year. The combination of Melio will fast-track the revenue hike in North America, while the ongoing digital transformation will be an enhancement of the customer mix and the maintenance of customers.
The company dreams to double group revenue of FY25 by FY28 and deliver always above the Rule of 40 benchmark. Investment in AI, payments, and payroll will be strategic and will thus support Xero’s long-term vision of being a world-class SaaS business.
Also Read: ASX Edges Up on Wall Street Rally as Xero Unveils $3.9bn Melio Acquisition
FAQs
- What was the total income of Xero in H1 FY26?
The total income Xero reported was NZ$1.19 billion, which was 20% more than H1 FY25.
- In FY26, how many users did Xero have?
The total number of Xero users globally reached 4.59 million, which is a growth rate of 10% year-on-year.
- How did Melio affect Xero’s FY26 performance?
Melio contributed to the pro-forma revenue increase of NZ$1.38 billion and thus helped Xero in gaining a stronger presence in the US market.
- What is Xero’s growth strategy for the future?
By FY28, Xero intends to broaden the use of AI solutions, enhance the payment ecosystem, and consistently attain the Rule of 40 target performance.
