Xero shares dive as FY26 profit misses estimates
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More news: Xero shares tumbled after the accounting software company reported a 27% slide in full-year net profit after tax.
Shares were down 7.6% to $74.86 at 12:30pm AEST, taking 12-month losses to 57%.
Citi analyst Siraj Ahmed said the profit result missed estimates due to higher-than-expected interest and higher taxes during the year.
He noted that Xero’s full-year adjusted earnings of NZD757 million ($619 million) edged out consensus forecasts by 2%, driven by lower operating expenditure, as revenue came in-line with average estimates.
What they said: “While FY26 result was essentially in-line when considering the higher R&D capitalisation, buy-side expectations was for a beat so that could weigh on the share price initially as well as the NPAT miss,” said Ahmed in a note to clients.
“However, we see this as a strong result when considering the US momentum, subscribers coming in ahead, Melio beating expectations as well as the FY27 guidance coming in ahead.”
Xero posts 31% jump in full-year revenue amid US growth
The news: Xero has reported a 24% year-on-year increase in its full-year EBITDA to NZD789 million ($645 million), citing strong growth momentum in its US-based Melio platform and positive revenue growth in Australia.
The numbers: For the year ended 31 March, operating revenue rose 31% to NZD2.8 billion, up from NZD2.1 billion a year ago. However, net profit after tax fell 27% to NZD167 million as a result of Melio-related acquisition costs.
Xero generated free cashflow of NZD554 million, a 9% year-on-year increase, and reported an 11% increase in subscribers, bringing the total to 4.9 million.
The company expects its FY27 EBIT guidance to be between NZD860 million and NZD920 million, with operating revenue projected in the range of NZD3.6 billion to NZD3.7 billion.
The context: Xero stated that the stronger year-on-year performance was mainly driven by US momentum following the acquisition of Melio, which contributed around 40% to the growth in average revenue per customer, adding NZD4.24 at a group level.
It also saw continued revenue growth in the Australian market, supported by adoption among small-to-medium sized enterprises.
What they said: “We are evolving into a system of action that fundamentally transforms how small businesses and advisers operate, and how much more they can accomplish each day,” CEO Sukhinder Cassidy said.
“AI is powering customer value and operational excellence today, and this underpins our confidence in delivering on our FY27 guidance and our FY28 aspirations,” she added.
