Xero (XRO) H2 2025 earnings summary

Executive summary

• Achieved 23% year-over-year revenue growth to NZD 2.103 billion for FY25, with strong, macro-resilient growth and disciplined capital allocation supporting profitability and a Rule of 40 outcome of 44.3, up 3.3 points year-over-year.

• Subscriber base grew 6% to 4.41 million, with underlying growth of 10% excluding the removal of 160,000 long idle subscriptions; ARPU increased 15% to $45.08.

• All major markets (Australia, UK, US, International) contributed robustly to revenue and subscriber growth.

• Strategic focus on product innovation, AI, and platform expansion, including the launch of Jax AI companion, SIFT/Syft Analytics integration, and expanded payroll and payments solutions.

• Leadership changes included new CFO, CPO, CRO, and CMO to drive growth and execution.

Financial highlights

• Operating revenue grew 23% year-over-year to NZD 2.103 billion (20% in constant currency); adjusted EBITDA rose 22% to NZD 641 million.

• Free cash flow increased 48% to $507 million, with a margin of 24.1%; net profit after tax grew 30% to $227.8 million.

• Gross profit reached $1,872 million (+24% YoY), with gross margin improving to 89.0%.

• AMRR surpassed $2.39 billion, up 22% year-over-year.

• Platform revenue grew 29% year-over-year, now 11% of total operating revenue.

Outlook and guidance

• FY26 operating expense ratio expected around 71.5%, with a higher ratio in H1 due to non-recurring remuneration impacts and seasonality.

• Continued focus on Rule of 40 performance, balancing subscriber and ARPU growth, and aiming to double business size.

• Strategic priorities for FY26 include accelerating AI delivery, deepening customer value, and investing in international growth.