Xero (XRO) H1 2025 earnings summary

Executive summary

• Revenue grew 25% year-over-year to NZD 996 million, with all major markets contributing and strong performance in Australia, UK, and US.

• Adjusted EBITDA rose 52% to NZD 312 million, and Rule of 40 outcome reached 43.9%, up 10.3 points year-over-year.

• Subscriber base reached 4.2 million, with 401,000 net additions (241,000 after removing 160,000 long idle subscriptions); ARPU increased 15% to $43.08.

• Net profit rose 76% to $95.1 million, and gross margin improved by 1.4pp to 88.9%.

• Strategic initiatives included the acquisition of Syft Analytics, launch of GenAI tool JAX, and product and subscription plan enhancements.

Financial highlights

• Free cash flow nearly doubled to NZD 209 million, with a margin of 21%.

• AMRR surpassed $2 billion, growing 22% year-over-year.

• LTV per subscriber increased to $4,063; LTV/CAC ratio at 6.3.

• Total available liquidity increased to $2.0 billion, supported by convertible note refinancing and strong cash generation.

• Net profit for H1 FY25 was $95.1 million, up 76% year-over-year.

Outlook and guidance

• Operating expenses as a percentage of revenue expected to be around 73% for FY25.

• Product design and development costs as a percentage of revenue anticipated to be similar to FY24.

• Strategic aspiration to double business size and maintain Rule of 40 or greater performance over FY25-27.