Xero (XRO) H1 2025 earnings summary

Executive summary

• Revenue grew 25% year-over-year to NZD 996 million ($995.9 million), with all major markets contributing and ARPU expansion driving growth.

• Adjusted EBITDA rose 52% to NZD 312 million ($311.7 million), and net profit increased 76% to $95.1 million.

• 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.

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

• Free cash flow nearly doubled to $208.7 million, supporting a Rule of 40 outcome of 43.9%.

Financial highlights

• Subscription revenue grew 23% to $941.1 million; other operating revenue rose 49% to $54.8 million.

• Gross profit increased 27% to $885 million, with gross margin improving 1.4pp to 88.9%.

• Adjusted EBITDA margin rose to 31.3%, and free cash flow margin improved to 21.0% from 13.3% year-over-year.

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

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

Outlook and guidance

• FY25 operating expenses expected to be around 73% of revenue; product design and development costs as a percentage of revenue to be similar to FY24.

• Aspires to double business size and maintain Rule of 40 or greater performance over FY25-27, balancing subscriber and ARPU growth.

• Continued disciplined investment in people, product, and marketing, with optionality to increase spend if growth opportunities arise.