The Xero Ltd (ASX: XRO) share price is up 2% after the ASX tech share announced how it plans to take advantage of AI and grow in the US.
Xero is one of the largest technology businesses on the ASX. It provides accounting and taxation software globally, with major markets being Australia, New Zealand and UK.
AI and US growth opportunity
The business is hosting an investor briefing today and this will feature production demonstrations about both AI – with multiple AI agents operating under its JAX (just ask Xero) – and Melio’s multi-channel payment offerings.
Xero said it’s well-placed to capture the total addressable market (TAM) expansion opportunity that AI gives. The software business noted it’s a trusted system of record with deep data on key small business ‘jobs to be done’.
The ASX tech share said that more than 2 million subscribers are already benefiting from using its full AI features, with more than 300,000 using Xero’s newer GenAI features that were announced at Xerocon Brisbane.
What Xero wants to achieve with AI
The tech company says it has a critical role to play in helping small and medium businesses to realise the promise of AI by moving beyond a system of record keeping to a system of action and decision making.
This is made possible by Xero’s unique position of “strength and foundational advantages”.
Xero highlighted that its advantages are the data, its platform allowing subscribers to do tasks all in one place, its scale and domain expertise at delivering an AI-enabled platform experience for customers, and its strong and established partnership with accountants and bookkeepers.
There are four pillars that Xero is building its AI strategy around, which are already delivering benefits.
Getting help – more than 97% of help sessions are resolved using self-serve content without a ticket, which is partly AI-enabled.
Get time back – customers are saving on average approximately 22 hours per month using bank feeds and automated actions.
Manage their businesses – there has been a 61% increase in JAX messages (per user) in the last three months.
Unlock new business growth – more than 12% of eligible subscribers have used AI insights.
In FY27, Xero is aiming to increase AI usage by subscribers, which will deepen the value they get from their products and unlock monetisation of the new AI features.
US scaling growth plans
The business is aiming to bring together accounting and payments after the acquisition of Melio in the US.
This gives Xero the opportunity to win more US small and medium businesses, expand average revenue per user (ARPU), accelerate US growth and deliver stronger unit economics.
Xero has successfully embedded Melio’s basic bill payments functionality into the Xero platform, unifying the go-to-market (GTM) teams, and consolidating the Xero and Melio US offices with shared services migration underway to realise operational synergies.
The business has a few metrics on how it will track performance including total payments volume (TPV) processed and gross take rate, growth in US direct customer ARPU, and growth in absolute US gross dollar profit per customer, which will support US investment.
Is the Xero share price a buy?
Xero said Melio is expected to reach an adjusted-EBITDA breakeven on a run-rate basis in the second half of FY28.
It also re-iterated its existing FY26 guidance, with total operating expenses as a percentage of revenue expected to be around 70.5%, including Xero. This ratio is expected to be lower in the second half of FY26 compared to the first half of FY26.
The Xero share price looks attractive to me after dropping by almost half in the past year, yet it’s still growing at a strong pace. I think it looks like a great long-term opportunity, particularly with how its profit and cashflow are soaring. I think the market is undervaluing one of the most appealing ASX growth shares.
