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 strong ARPU and subscriber gains; ARPU increased 15% to $43.08, and subscriber base reached 4.2 million after removing 160,000 long idle subscriptions.

• Adjusted EBITDA rose 52% to NZD 312 million ($311.7 million), and net profit increased 76% to $95.1 million, with free cash flow nearly doubling to $208.7 million.

• Rule of 40 outcome reached 43.9%, up 10.3 points year-over-year, and gross margin improved by 1.4pp to 88.9%.

• Strategic initiatives included the acquisition of Syft Analytics, launch of GenAI-powered JAX, new product ladders, and extended partnership with Gusto for US payroll.

• Completed removal of 160,000 long idle subscriptions, improving ARPU and focusing on higher-value customers.

Financial highlights

• Free cash flow nearly doubled to $208.7 million, with a margin of 21.0%.

• AMRR surpassed $2.2 billion, growing 22% year-over-year.

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

• 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.

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.