The Xero Ltd (ASX: XRO) share price is down 5% after the accounting software business announced its FY26 half-year result.
FY26 half-year result
Here are some of the main highlights from the result for the six months to September 2025:
- Subscribers grew by 10% to 4.6 million
- Operating income grew by 20% to $1.2 billion
- Annualised monthly recurring revenue (AMRR) rose 26% to $2.7 billion
- Gross profit margin declined 0.4 percentage points to 88.5%
- EBITDA (EBITDA explained) increased by 21% to $378 million
- Net profit after tax (NPAT) jumped 42% to $135 million
- Free cashflow rocketed 54% higher to $321 million
A sizeable portion of the improvement in the financials was thanks to a 15% increase of the average revenue per user (ARPU) to $49.63, which benefited from price rises.
Australia and New Zealand revenue rose 17% to $663.7 million, with 12% growth in ARPU. Total subscribers reached 2.7 million.
International revenue climbed 24% to $530.5 million, with ARPU climbing 19% and subscribers reaching 1.9 million.
The business said it continues to build on its AI vision to help small businesses and advisors “work smarter” with new ways for subscribers to interact with Xero, automated actions & workflows, actionable insights and being a trusted partner of data.
It is also releasing new software and features for subscribers and accountants in different markets to help them get more out of the software for different purposes.
Melio acquisition
During the period the company acquired Melio, a leading small and medium business platform to pay bills. Melio helps customers manage their cashflow easy-to-use accounts payable workflows and a wide choice of payment methods.
Melio traded in line with Xero’s expectations during the first half of FY26, with underlying revenue growth of 68% to NZ$183 million.
Xero plans to roll out Melio’s bill pay offering to all US customers in December 2025, in addition to continuing to support Melio’s direct and syndicated offerings.
Long-term aspiration
The company said that is part of its FY28 goals, it wants to significantly accelerate its US revenue growth, which could mean the business is able to double its FY25 revenue by FY28, excluding expected revenue synergies.
Outlook for the Xero share price
The company said it expects total operating expenses as a percentage of revenue to be around 70.5% in FY26. It previously expected this ratio to be around 71.5% this financial year.
This outlook now includes Melio, which provides a small benefit to the operating expenditure ratio, while other drivers such as improved efficiencies also help.
Xero is one of the most impressive ASX growth shares, in my opinion. This lower valuation could be an attractive longer-term buy for the business, particularly if it’s able to capture more market share in the US.
However, it’s not the only one of the ASX growth shares that I’d want to buy right now.
