Xero Limited

Xero reported operating revenue of $2.75 billion for FY26, up 31% year over year, and adjusted EBITDA of $757 million, up 18%, at a 27.5% margin. Gross profit was $2.31 billion, up 23% year over year, and free cash flow was $554 million. Customers ended the year at 4.90 million with 506,000 net additions; ARPC was $55.44, up 23%; and MRR churn was 1.14%. On an organic basis, revenue grew 21% (19% in constant currency) and adjusted EBITDA grew 30%; organic gross margin was 89%. For FY27, management guided to revenue of $3.62 billion to $3.73 billion and adjusted EBITDA of $860 million to $920 million, with higher H2 weighting and up to AUD 55 million of incremental U.S. brand spend.

Sukhinder Cassidy framed FY26 as a milestone year marked by strong execution across the core business, accelerating U.S. growth, and rapid scaling in payments and AI. She emphasized that Xero is becoming more than a subscription company, with payments and AI expanding customer value, ARPC, and long-term monetization options. Her tone was confident and strategic, especially around the company's position for the agentic AI era and the decision to invest further in U.S. brand building.

Claire Bramley highlighted strong top-line growth, improved monetization, and operating leverage, pointing to $2.75 billion in revenue, $757 million of adjusted EBITDA, $2.31 billion of gross profit, and $554 million of free cash flow. She noted headline gross margin fell to 83.9% because of Melio, while organic gross margin stayed at 89%, and said operating expenses excluding transaction costs were 70.5% of revenue, down from 71.7% in FY25. She also discussed the balance sheet, saying the company ended with $1.9 billion of sources and a net debt position of just under $400 million, versus about 2.3x pro forma net debt-to-EBITDA at the Melio announcement, and announced up to AUD 550 million of share-based compensation dilution offset. On outlook, she said FY27 revenue guidance includes only a small amount of AI monetization and that the company expects continued progress toward Melio breakeven in H2 FY28.

Analysts focused on how FY27 guidance translates into Rule of 40, free cash flow, and EBITDA in FY28, and management said the path to getting back above Rule of 40 by FY28 remains intact, but without giving exact FY28 numbers. Questions also probed AI monetization and the Anthropic/Claude partnership; management said AI monetization in FY27 is expected to be modest, while the Claude connector is intended to expand distribution and be complementary to building workflows on Xero. On payments and Melio, management said growth is being driven by multiple levers, including take rate and integrated go-to-market efforts, and noted U.S. Bank went live in syndication in the second half.