Xero jumps 13% on US$647.1M buyback, US$1.13B revenue
What's the deal? Xero shares jumped as much as 13% on Thursday after the cloud accounting company reported 46% first-half revenue growth, raised its outlook and announced a share buyback of up to US$647.1M. The stock closed up 5.6% at US$48.4, valuing the Wellington-based company at about US$8.41B.
By the numbers: Revenue rose 46% to US$1.13B in the six months to September 30, or 41% in constant currency. Customer numbers grew 12% to 5.1 million, with 226,000 net additions in the half.
Yes, but: Net profit crashed 86% to US$12M from US$87.2M a year earlier, weighed down by Melio, the US bill-pay platform Xero acquired. This was the first half-year to include a full six months of Melio, which the company expects to break even by the second half of fiscal 2028.
Why now? Xero shares remain down about 47% over the past year amid investor concerns that AI tools could disrupt traditional software firms. The board said the current valuation does not fully reflect the company's long-term value and growth potential.
What's the endgame? Xero lifted its fiscal 2027 outlook to operating revenue of US$2.44B to US$2.48B and adjusted EBITDA of US$569.4M to US$595.3M. It also raised its fiscal 2028 ambition to revenue above US$2.98B, excluding synergies.
What they're saying: "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 officer Sukhinder Singh Cassidy said at an earnings briefing. Morningstar analyst Roy van Keulen called the buyback sensible, saying he already thought the shares were undervalued before the guidance upgrade.
The signal: The buyback and upgraded outlook are confidence signals after a steep slide in Xero's stock. But investors will judge their durability by Melio's path to profitability and whether growth translates into stronger operating leverage.
Read more: ibtimes.com.au
Image credit: In Memoriam: PhillipC
