Xero Shares Jump as Much as 13% After Cloud Accounting Giant Unveils A$1 Billion Buyback and Raises Outlook

SYDNEY — Shares of Xero Ltd. jumped as much as 13% on Thursday after the cloud accounting software company reported strong first-half revenue growth, raised its full-year outlook and announced a share buyback of up to A$1 billion.

Xero shares closed up A$3.97, or 5.60%, at A$74.83, after rising as high as A$80.02 earlier in the session. About 1.63 million shares changed hands, and the company's market value stood at about A$13 billion.

The stock climbed to its highest level since early September during the session, according to AAP. Despite Thursday's gains, Xero shares remain down about 47% over the past year.

Revenue surges

Xero, based in Wellington, New Zealand, said revenue rose 46% to NZ$1.745 billion in the six months to Sept. 30. In constant currency, revenue grew 41%.

The company added 226,000 net new customers during the half and finished with 5.1 million customers, up 12% from a year earlier.

Profit, however, fell sharply. Net profit dropped to NZ$18.6 million from NZ$134.8 million a year earlier, the New Zealand Herald reported. RBC Capital Markets analyst Tom Beadle said the results were a net positive overall, despite a small miss on earnings.

Xero's operating expense to revenue ratio improved by 8.1 percentage points to 68.9%.

"We're continuing to do what we said we'd do, delivering strong macro-resilient growth at scale with momentum across every region," Chief Executive Sukhinder Singh Cassidy said at an earnings briefing.

Buyback and upgraded guidance

Xero's board approved an on-market share buyback of up to A$1 billion, to be completed over the next 12 months. The board said the current market valuation does not fully reflect the company's long-term value and growth potential.

The company upgraded its fiscal 2027 outlook. It now expects operating revenue of NZ$3.77 billion to NZ$3.83 billion and adjusted EBITDA of NZ$880 million to NZ$920 million.

Xero also raised its fiscal 2028 aspiration and now expects revenue above NZ$4.6 billion, excluding synergies.

"The buyback makes sense to us, given we already thought shares were undervalued, even before today's upgrade to guidance," Morningstar analyst Roy van Keulen told the New Zealand Herald. Morningstar had a fair value estimate of A$100 on Xero shares before the results.

Melio and AI

The results were Xero's first half-year report to include six months of Melio, the U.S. bill-pay platform it acquired. Xero said it expects Melio to break even by the second half of 2028.

The company said 1 million customers had used its generative artificial intelligence features over the past 12 months. It added that 97% of its engineers use at least one AI tool daily.

Xero shares have been hit hard this year amid investor concerns that AI tools could disrupt traditional software companies. Van Keulen said he believed fears of AI "vibe-coded" competitors were overblown.

The stock traded as high as A$157.41 over the past 52 weeks before falling to a low of A$55.09.

This article is for informational purposes only and does not constitute investment advice.