Xero (XRO) H1 2026 earnings summary

Executive summary

• Achieved strong H1 FY26 results with 20% year-over-year revenue growth to $1.19 billion, robust free cash flow, and Rule of 40 outcome at 44.5%, driven by disciplined capital allocation and execution of strategic priorities.

• Completed Melio acquisition in October 2025, immediately scaling U.S. operations, accelerating growth opportunities, and expanding bill pay capabilities.

• Subscriber base grew 10% to nearly 4.6 million, with international markets contributing 54% of net new additions.

• Strategic focus on product innovation, AI integration (including JAX rollout), and disciplined investment to drive sustainable growth.

Financial highlights

• Operating revenue rose 20% year-over-year to $1,194 million, with strong contributions from Australia, U.K., and U.S.

• Adjusted EBITDA increased 12% to $351 million; EBITDA up 21% to $378 million.

• Free cash flow surged 54% to $321 million, margin expanding to 26.9%.

• Net profit after tax grew 42% to $135 million; basic EPS rose to $0.84.

• Gross margin slightly decreased by 0.4pp to 88.5% due to continued investment in customer experience.

Outlook and guidance

• FY26 operating expense to revenue ratio expected at ~70.5%, improved from prior 71.5% guidance, with further efficiency gains expected in H2.

• Combined business aims to more than double FY25 group revenue by FY28, targeting Rule of 40 outcomes.

• Continued disciplined investment in AI, product development, and go-to-market capabilities.